Week of July 6, 2015
Greeks Vote NoThe Greek people took to the voting booth on Sunday to overwhelmingly vote “no” to the recent round to austerity demands of the European Union and International Monetary Fund necessary for the next round of bailout funds. Shortly after the results of the election, Greek Finance Minister, Yanis Varoufakis resigned. This move is seen as extending an olive branch to the leaders of the European Union since many had grown tired of the confrontational style of Mr. Varoufakis. World markets collapsed immediately following the results of the election but clawed back some losses following the announcement of the finance minister’s departure. This makes a “Grexit” less likely.
No Early Fireworks From Jobs ReportThe Labor Department released underwhelming figures on Thursday showing steady job additions but pockets of weakness in the labor market. U.S. employers added a seasonally-adjusted 223,000 jobs in June and the unemployment rate fell to 5.3%, its lowest rate since early 2008. However, the number of new jobs was slightly below consensus estimates of 230,000 and strong figures from previously reported months were revised lower. May’s gain of 280,000 jobs was reduced to 254,000 and April’s report of 221,000 was clipped by nearly 35,000 positions. Additionally, the decline in the unemployment rate largely reflects a drop in the participation rate as more than 430,000 people stopped looking for work. This pushed the participation rate to 62.6%, the lowest level since 1977. Wage gains stagnated as well. The average hourly earnings remained unchanged from last month at just under $25. This is 2% higher than the same month last year, but far below the 3-4% experienced during periods of healthy economic expansion. Source: https://money.cnn.com/2015/07/02/news/economy/us-jobs-report-june-223000/index.html
Growing Inventory Pressures Oil PricesOn Wednesday, the Energy Information Administration released data showing an increase in domestic crude oil stockpiles, the first in nine weeks. Commercial inventories jumped by 2.4 million barrels, much more than the decline of over one million barrels expected by industry analysts. This represents the fastest pace of output since 1971. The news sent oil prices 4.2% lower to less than $57 a barrel. This is the lowest price in more than two months. The news of increasing supply could continue to pressure oil prices that have risen more than 25% over the past couple of months as investors got comfortable with the belief that lower rig counts would support the near 60% price drops experienced between June 2014 and March 2015. Source: http://www.wsj.com/articles/oil-declines-on-bearish-u-s-inventory-data-1435742944
Fun Story of the Week
Y2K is a distant memory, but the potential hysteria that can be caused by computers and clocks lives on every few years thanks to the “leap second.” The gravitational pull of the moon, earthquakes and volcano eruptions continually slow the Earth’s rotation. To compensate, every few years we add a second to the clock on either June 30th or December 31st. Last Tuesday, at 8 pm Eastern Time, we did this for the 26th time since 1972. The last time this occurred (in 2012) it took down several websites including Reddit, Yelp, LinkedIn, FourSquare and Gawker. There was extra concern this year in the financial community given this would be the first time since 1997 when the leap second occurred during active trading hours. This year’s event appears to have passed without a hitch, now that computer programmers have largely solved the issue by adding a couple of milliseconds to server clocks throughout the day when the leap second occurs. This means the only headache should come from deciding how to spend the extra second. Astrophysicist Neil deGrasse Tyson has a suggestion: “as always, I celebrate my leap seconds with very tiny bottles of champagne.”
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CNN, July 2015, https://money.cnn.com/2015/07/02/news/economy/us-jobs-report-june-223000/index.html
Wall Street Journal, June 2015 (subscription required), http://www.wsj.com/articles/jobs-report-u-s-payrolls-climb-by-223-000-1435840430
Wall Street Journal, June 2015 (subscription required), http://www.wsj.com/articles/oil-declines-on-bearish-u-s-inventory-data-1435742944
Wall Street Journal, June 2015 (subscription required), http://www.wsj.com/articles/extra-leap-secondworries-markets-1435616584
CNN, June 2015, https://money.cnn.com/2015/06/30/technology/leap-second/
Salon, June 2015, https://www.salon.com/2015/06/29/let_neil_degrasse_tyson_and_nasa_explain_why_june_30_will_be_one_second_longer_than_every_other_day/
Barron’s, July 2015 (subscription required), http://online.barrons.com/articles/stocks-fall-1-2-on-worries-about-greece-1435894759
Wall Street Journal, July 2015, http://www.wsj.com/articles/polls-close-in-greek-referendum-1436113280
Wall Street Journal, July 2015 (subscription required), http://www.wsj.com/articles/greek-finance-minister-yanis-varoufakis-resigns-after-referendum-1436162284