The markets continue to slowly recover. The stock market recovery this winter was anything but slow, until late March. Meanwhile, the labor market finally delivered some new jobs, and yet unemployment claims started to rise just before the Passover/Easter period. The housing market saw an uptick in sales, but that can be partially attributed to the tax credits which are about to sunset. Finally, vehicle sales strengthened, as dealers offered significant incentives. The question that remains: what pace will the economy achieve when the stimulus programs end, and discounts and incentives are scaled back?

Home building remains very weak, though March likely saw a gain after weather held back activity in February. The pace has hovered at or just under 600,000 units (annualized) and that is likely to be where it recovers in March. With home prices starting to stabilize, but a big overhang of unoccupied homes still remaining, plus continued problems obtaining new mortgage approval albeit at historically very low rates, the rate of homebuilding is unlikely to move away from 600,00 until this summer at the earliest. Also keep in mind that the first-time buyer credit ends in April.

THE SITUATION ABROAD

The Euro-zone economy was basically flat over the fourth quarter of 2009. That hasn't dampened spirits. Expectations of at least moderate growth remain firmly in place, as evidenced in the latest numbers from the Economic Sentiment Index and from the Markit Purchasing Managers' Index. Even the stock markets suggest growth is coming. After a relatively flat winter, stocks in Europe rebounded a bit in March. Still, consumer demand, business investment, the housing market, and overall pricing power remain stumbling blocks. And yes, the problems in public finance, especially in Greece, remain troublesome.

FACT OF THE WEEK

17.2 percent. That's the vacancy rate for office space in the United States in the first quarter of this year. While that is the highest amount of unoccupied space since 1994, it also might mark the bottom for this market. The price for which this space can be rented fell 0.8 percent in the quarter. That compares with declines of as much as 7 percent for the same quarter one year earlier. Detroit, for obvious reasons, has the highest vacancy rate in the country. Washington DC and New York City have the lowest. If this is the bottom or close to it, the slide in vacancies and rents this time around will have turned out to be less severe than in 2001 when vacancy rates continued to slide for three years.

QUESTION OF THE WEEK

There have been several earthquakes in recent weeks. And the new hurricane season in the North Atlantic will start in a few weeks. Aside from economic problems (like a sudden sharp change in exchange rates), do companies worry about disasters potentially interrupting a smooth supply chain?

Well, of course. And all the outsourcing in recent decades has stretched the supply chain. Therefore, even a short, relatively inconsequential interruption in one part of the supply chain has the potential to snowball into a major disruption down the line. Hence, major events like an earthquake, tsunami, or hurricane could result in major delays in terms of delivering products to final customers. The collateral impacts can include higher costs of insurance and potentially even interest charges, not to mention penalties written into contracts for failure to fulfill them on time. In short, even minor events have the potential to result in major headaches.

The key word, though, could be "potential." Most of the impact of earthquakes or hurricanes is felt locally and for a limited duration. The losses in income and output, along with structural damages, generally do not lead to broader economic declines. And finally, the clean up and rebuilding efforts can offset the damage incurred. Thus, while Haiti stands at one of the spectrum, the recent earthquake in Chile could represent the other end.