This week, corporate and economic reports reflected the fact that the U.S. has recovered from the winter storms. The ISI's Company Surveys rose four ticks to 54.4, the highest level since July 2006. Factset reported that so far in this earnings season, 74 percent of the S&P companies reported positive earnings surprises for the first quarter. Even though first -uarter U.S. GDP was almost flat, other, more recent economic releases reported better than expectations. Stock markets rose around the globe; bond markets, responding to increased geopolitical risks, also rose on the week. The U.S. dollar, oil and metals commodity prices fell on the week.

Perspective:

The economic data releases indicate that we are in a synchronized global expansion. Job creation has accelerated as the U.S. moved out from under the cloud of the severe winter weather. April's Non-Farm Payrolls were just 110,000 short of restoring the 8.7 million jobs lost since January 2008; Private sector jobs have now exceeded its prior high of 2008. The Dow Jones Industrial Index is up 150 percent from its trough; the S&P 500 and the Nasdaq are up 175 percent and 218 percent respectively. Investors demanded 656 basis points over Treasuries to assume investment grade corporate bond risk in 2008, now only require 114 basis points. Purchasing Managers Indices around the globe are in the expansion zone. Europe's sovereign debt problems have shifted to the back burner.

So, why does the economy not feel better? Why is it that the Sunday talk show journalists say that the economy is weighing heavily on this mid-term election prospects of the party in power, the Democrats. There are a number of explanations that have contributed to the feeling that the economy is doing poorly when the data says that it is doing better. Without going into detail here are a few that have come to mind:

• Lagged effect of the statistics to capture and report the conditions,
• The extended length of the recovery,
• The number of people who have left the labor force out of discouragement, and
• The unevenness of the depth and breadth of the recovery.

Economic Releases:

The headlines of the U.S. Employment Report were even better than the range of expectations. The low participation rate was a sour note to an otherwise excellent report song. Non-farm Payrolls (blue in the chart) gained 288,000 in April; net revisions to the two prior months added another 36,000 to NFP. Private Payrolls (red in the chart) added 273,000 jobs. Manufacturing (green in the chart) contributed 12,000 to the NFP. The low participation rate, a labor force decline of 806,000, led to a four-tick decline in the Unemployment rate to 6.3 percent. Average Hourly Earnings were flat and the Workweek was unchanged at 34.5 hours. In other employment news, Initial Claims for Unemployment benefits rose to 344,000 in the week of April 26th; the four-week average of Claims rose to 320,000; Continuing Claims (reported on a one-week lag) rose 97,000, to 2.771 million.

Other Economic Releases

The U.S. Federal Open Market Committee met and, as expected, kept policy rates unchanged and dropped the monthly purchases of bond another $10 billion to $45 billion; further tapering remains data dependent. The Fed statement noted improvements in economic activity in the aftermath of the severe winter. First-quarter U.S. GDP growth was almost flat, up just +0.1 percent, due to adverse weather. Personal Income and Spending rose +0.5 percent and +0.9 percent respectively in March; both measures were on the top end of the range of expectations. The Institute of Supply Management's Purchasing Managers' Index for Manufacturing rose a point to 54.9 in April. The Markit PMI for Manufacturing slipped a tick to 55.4; both the Markit and ISM measures place U.S. Manufacturing well into the expansion zone, above 50.

In the European Union, Economic Sentiment slipped two ticks to 102.0 in April, but Markit's PMI for Manufacturing rose to 53.4. Germany's PMI rose to 54.1; France's PMI fell a point to 51.2; UK's CIPS/PMI for Manufacturing rose to 57.3. The UK's 1st quarter GDP rose +0.8 percent from the previous quarter.

China's CFLP PMI for Manufacturing rose a tick to 50.4. Japan's Markit PMI fell into the contraction zone to 49.4 in April. The Bank of Japan met and, as expected, maintained its benchmark rates near zero and asset purchases unchanged. Industrial Production in Japan increased +0.3 percent (two ticks below expectations) in March.

Equities Markets:

Equity markets rose across the globe in the face of better earnings and economic data, and despite the heightened geopolitical risks in the Ukraine. Somewhat surprising, in a period of rising stock prices, was the positive returns in the credit markets due to falling government bond yields.

Bond Markets:

In an environment of stronger equity earnings and higher equity prices, bond yields fell. One explanation is the bond markets benefited from the flight to safety instigated by the rising geopolitical risks coming out of the Ukraine. Credit spreads also widened as investors sought out the lower risk of government securities over those the also carry credit risk.

Currencies & Commodities:

The U.S. dollar fell against the Pound, Euro, and Looney this week. Oil and commodity metals prices also declined on the week.