Cisco Joins Many Others: Recovery Is Gaining Momentum

John Chambers ignited markets on Thursday. The Cisco CEO joined other leading firms like Apple, Amazon, Alcoa, Intel, and others by stating that, “the quarter was very strong. The recovery is gaining momentum.” Earlier in the week, the institute for supply management speculated that the US GDP is likely now growing at an annualized rate of 4.5%.

Chambers continued, “what we saw is a clear tipping point as our business continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times.”

Elsewhere on Thursday the US Labor Department said the output per hour of nonfarm workers rose at an annual rate of 9.5% in the quarter, more than four times the average productivity growth rate of the past quarter-century. When taken together with the second quarter’s 6.9% rise, it was the strongest productivity growth rate over a six-month period since 1961.

While unemployment remains high, initial claims for unemployment continue to fall and corporate profits have bounced back significantly from the strong downturn in Q1. As output keeps climbing, employment gains will follow shortly.

Such large productivity gains are quite common at the end of deep recessions and the beginning of recoveries. A healthy pattern is that productivity grows first, then employment rises, and finally wages increase.

It continues to be clear that this recovery will not be a jobless one. In fact on Thursday the government also reported that jobless claims dropped to a 10-month low raising speculation that the national unemployment rate has peaked will begin to fall as soon as next month.

Employment gains have already sparked reasons for optimism in many states.
As jobless rates continue to decrease nationally, almost all economic indicators will have turned positive: leading, coincident and lagging.

And as we’ve published here since February (and as was witnessed on Thursday), the stock market will continue its move — swift and steep.

1 comment to Cisco Joins Many Others: Recovery Is Gaining Momentum

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