Jeremy Hobson: The interest rate on 10 year government bonds is back up — if you can call it that — above 1.5 percent. It hit a record low of 1.45 percent on Friday as investors jumped to the safety of U.S. government bonds. And Oil is down to $82 a barrel in New York trading.
For some analysis, let’s bring in Julia Coronado. She is chief economist with the investment bank BNP Paribas, and she’s with us live as she is every Monday. Good morning.
Julia Coronado: Good morning.
Hobson: So Julia, let’s start with the problems in the global economy that are causing so many jitters around the world. The United States, we found out on Friday of course that just 69,000 jobs were added to the U.S. economy last month. Does that change the dynamic as far as how we think about the U.S. economy right now?
Coronado: I think with the U.S., we need to be careful about interpreting the data that way. We knew that a record-warm winter had pulled forward some of the hiring into the winter months at the expense of spring. Now we’re seeing those week numbers materialize. I think if we look through those numbers, the picture is: the U.S. economy’s not in fantastic shape, but it’s still kind of muddling along.
Hobson: What about China? A lot of worries about a slowdown of manufacturing there.
Coronado: Right. The Chinese state has been consistently weaker than expected over the last few months. And I think both with China and other emerging markets, the worry is that we’re sort of reaching the limits of expansion. These countries have been booming over the last few years and it just may be that we’re reaching the limits of that growth in some areas.
Hobson: All right, well what about Europe? We’ve talked a lot about that with you and there are lots of worries about whether the euro can stay together.
Coronado: Oh yes, and we will worry – we will worry on and on and on. There is no rabbit to pull out of the hat here; this is going to be a difficult circumstance; the recession is deepening making the choices that much harder. But ultimately these countries need to decide whether they want to hang together and tough it out or break apart. And neither scenario is easy.
Hobosn: Finally, Julia, let me just ask you about oil prices – I mentioned they’re down to $82 a barrel. Is that something that could provide a sort of stimulative effect?
Coronado: Yeah, I mean, this is a factor that helps cushion the blow of some of the bad news. We are going to see falling gasoline prices in the coming months, and we’re going to see record low interest rates. On the other hand, we have less support from the global economy; we have lower stock prices; probably again still in the muddle-through territory for the U.S.
Hobson: Julia Coronado, chief economist with the investment bank BNP Paribas, thanks as always.
Coronado: It’s a pleasure.