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Farrell: No Double Dip

At least I'm hoping there is no double dip.

Data on capital investment and personal incomehas been encouraging but I think we are in a bearish frame of mind so that gets somewhat ignored.

The negative gets emphasized when your mind set is that way.

The ADP (Automatic Data Processing) employment guess was released Wednesday morning and showed a meager gain of 13,000 jobs. The hope was for closer to 60,000, or about last months (disappointing) number of 57,000.

This Friday's Bureau of Labor Statistics totals will be watched even more nervously. The call is for private sector full time jobs to be up a bit more than 100,000. Even if that comes to be it seems that the momentum in job creation that was trying to build through the Spring has evaporated.

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It still looks like second quarter GDPwill be better than the first quarters 2.7% rate, but I have been expecting a softer second half and I won't be disappointed.

The lapse of the government stimulus program will act as a form of tightening.

By the second half any uplift from inventory rebuilding will also have passed.

I do think hours worked and length of workweek will lead to higher incomes and that will carry the day.

But the risk is on the downside.

No enlightenment regarding the odds of a double dip comes from Europe. The London Telegraph said in a article that "Warning lights of a double dip recession flash brightly across the world."Nice headline.

But the Financial Times (my favorite) warns against "jumping on the double dip bandwagon just yet". Further analysis is not really helpful. The headlines say it all and the conclusion is who knows/time will tell. The bond market yields, the 2 year at .6% and the 10 year below 3%, are troubling and aren't predicting a whole lot of growth.

Some good news came out of Europe overnight.

When the crisis hit, the European Central Bank did the right thing and provided credit lines for their banks. Some EU442 billion was borrowed and is due to be paid back Thursday. Believe it or not that was a year ago and now the ECB will loan only three month paper. The market was anxious that the banks would roll the whole thing with the ECB and none with each other which would show there was no confidence within the system. If banks won't lend to one another on an overnight basis normal businesses have no access to credit at all. Thankfully, EU132 was rolled with the ECB and the rest inter-bank. These results are better than had been hoped for and indicates some improvement in the European credit markets.

The European Debt Crisis - See Complete Coverage
The European Debt Crisis - See Complete Coverage

Also, German unemployment fell for the twelfth month in a row.

Unemployment held steady at 7.7%.

Being heavily dependent on exports and having a weaker euro clearly hasn't hurt them. I don't think the numbers are big enough to spur renewed consumer spending and satisfy those in the Eurozone that want Germany to spend enough to bail everyone else out. But back in the US it turns out that homes sold in the foreclosure process accounted for about one third of all sales in the first quarter. And the price those properties were sold at was a discount of about 25% to the rest. Normal markets would have about 2% of all sales from foreclosures. These are anything but normal times. Lenders do seem to be very careful about timing their foreclosures so as to not flood the market with houses that can't be sold.

The consumer sentiment survey yesterday was viewed as a big disappointment when it fell from 63 to 53. That is in the range that has prevailed all year and if it was the only number you knew, consumption growth would be about 2% on an annual basis. None of us figured the consumer was going to drive the recovery anyway and this number verifies that. Consumption, however, is by no means showing signs of imploding either.

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Vincent Farrell, Jr. is chief investment officer at Soleil Securities Group and a regular contributor to CNBC.

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