Will The Unemployment Rate Fall to 7% In 2013?

By: Angelo Airaghi | Sun, Jan 6, 2013
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The US Dollar Indexhould decline to 77.00/75.00 while the S&P 500 Index can target 1500/1550 this year.

Slow growth in the US

Buy the rumor and sell the news? Yes, but only temporarily. In fact, the US economy is not yet running, but it is at least walking again. In December, despite the "fiscal cliff" struggle, the private economy added 181,000 new positions, which were the best numbers since March 2012. Non-farm payrolls increased instead by 155,000 after having risen by 161,000 in November.n the contrary, the government lost 13,000 jobs. However, the economic conditions of local and state entities are improving.

There are two numbers that stand out in December's report. First, the number of weekly hours worked climbed from 33.6 in October to 33.8 in December. Second, the year-on-year pace of growth in average hourly earnings is growing at 2.1%, which is the fastest increase since December 2011. As a result, the unemployment ate held up at 7.8%, and it is expected to decline this year as well since firms have lots of cash to invest and while corporate taxes will not be increased. According to the study of cycles, the unemployment rate could decline to 7-6.5% before resuming the long-term uptrend for the final peak.

Rates unchanged in Europe

Risk is fading and bond prices can decline for three to six months. The S&P 500 Index should climb to 1500/1550. Historically, the first half of the year has been supportive for stocks. It is true that taxes are still expanding for most Americans, and Congress must approve a new spending reduction by March 1 to replace the sequestered cuts. Also, the Department of the Treasury could run out of options if the debt ceiling is not increased. However, the worst is over for now. Housing prices have bottomed and, if history repeats itself, should test new highs between 2014 and 2015.

Auto sales are still rising, and the manufacturing sector is improving. The Institute for Supply Management (ISM) manufacturing index rose above the key level of 50, and the non-manufacturing ISM increased to 56.1. Other key players are moving out of the bottom as well. The Eurozone is in recession, but key economic indicators are signaling a turnaround. According to the Eurostat's flash estimate, inflation stayed at 2.2% in December, and the ECBill leave rates unchanged for now. EUR/USD should find good support at 1.29/1.28 and will rise to 1.36/1.44 in the coming months.



Angelo Airaghi

Author: Angelo Airaghi

Angelo Airaghi

Angelo Airaghi is a Commodity Trading Advisor (C.T.A.), registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.

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