Saturday, December 3, 2011
Santa comes early?
The labor department just released its November jobs number and the rate fell to 8.6% while 120,000 total jobs were created and 140,000 private sector jobs were added as well. Expectations have been moving higher as the ADP private employer number released on Wednesday showed a 206,000 increase in November. The futures were strong before the news on constructive debt talks in Europe over night and then stalled as the internals show the work week stayed the same at 34.3 hours worked but hourly earnings dropped 0.1% vs. an expectation of 0.2% gain. The participation rate on the survey dropped which probably explains the unemployment rate drop down to 8.6% so don’t be surprised if the rate is revised back up next month to close to 9%. The job revisions added some positive data points as October was revised to 100k from 80k and September went to 210k from 158k so a net gain from revisions of 72k. You add 72k to the headline number of 120k and you end with 192k,000 jobs created which is good for those people who got jobs and comes close to the 200k needed monthly to keep up with population growth. I have been saying for months that the US was not headed for a double dip recession and today’s number adds to that thesis, however I also don’t extrapolate one month’s number into a trend so while today’s number is welcome it doesn’t mean we have a blockbuster economy because we don’t. Job creation has been lagging while the recent economic data is good as indicated by data below. The argument put forth by most CEO’s who do speak on record is that they are afraid to hire because of all the added regulation and the specter of higher taxes rates down the road so it seems as if we may move back and forth while not going anywhere over the next year until the next election decides who is going to be in charge of the US economy. The Dems want to tax the rich and anything that moves in order to pay down the debt and the GOP wants to lower corporate tax rates and make permanent the Bush tax cuts while raising revenue from closing loop hole deductions and subsidies. Each side in intractable and not likely to give any room in concessions therefore it is up to the President to decide if he is willing to let the country and economy stall for the next 11 months hoping to get 4 more years for state controlled redistributionist schemes.
Friday, November 4, 2011
Warm Glass of Coke
The Labor department just released the October nonfarm jobs report and it was okay, kind of like a glass of warm coke which is now lost its zest. Total payrolls added 80,000 and September was revised from 103k to 158k and August went from 57k to 104k so when taken in unison it was 187,000 higher which lowered the unemployment rate to 9.0% from 9.1%. We need to be adding over 200k a month just to keep up with employment trends and closer to 400k a month to dig us out the hole we are in. The average workweek was flat at 34.3 hours and earnings were also flat at 0.2% so employers were neither working their employees longer nor paying them more and both need to happen in consecutive months to create a trend you can believe in. Private payrolls added another 104k but 117k was expected so put this in a bowl and stir it all up what you get is a rather thin cake batter or weak uninspiring job market. I have been saying for months that the data doesn’t indicate we are headed for a double dip recession but rather a long protracted slog until the tone and rhetoric from Washington DC changes to a more business friendly song. One confusing area in the report was the drop in unemployment from 9.1% to 9.0% when only 80k jobs were created, this could be explained by the very high birth/death rate of about 500k. The labor department uses this rate to estimate the opening and closing of new businesses, this is a controversial number as it is completely unpredictable and varies widely. The trend is the most important thing and therefore looking at the weekly jobless number that has been dropping below 400k for the last month is indicative of an economy that is trying to gain traction. Despite what Washington may spin on this, it is a warm coke report that has lost its zest.
Monday, October 31, 2011
Friday, October 14, 2011
Friday, October 7, 2011
Glass half full report
The September non-farm jobs number was just released and it appears very good. I have saying for months that the economy was stronger than the market was implying and the second half of the year should be much better than the 1st half. Today’s jobs number is making that case as 103,000 total jobs were created vs. the expected 60,000. Adding to that rosy picture was the private sector with private payrolls adding 137,000 vs. the expected 83,000. Looking at the internals, it was an even better report with August being revised from zero jobs to 57k and July revised from 20k to 127k. With revisions like this, it adds weight to my thesis that the economy is stronger than previously thought. In addition the work week increased from 34.2 expected to 34.3 hours worked with hourly earnings coming in 0.2 vs. 0.2%. This implies that employers worked their employees slightly more but didn’t pay them more. When we see the work week increase and hourly earnings increase as well for several months then we can look at better hiring picture for a sustained period of time. As it currently stands, American corporations are very strong and flush with cash but not hiring, if you listen to the CEOs talk they say it is because they fear the anti business rhetoric coming out of Washington DC regarding taxes and regulation. As much as the President tries to bash and shame them into hiring, they don’t seem to be listening to him, rather focusing on running their business the best way they know how. The less than positive aspects of the jobs report are that the unemployment rate stayed at 9.1% and the broader unemployment rate which includes discouraged and marginally employed rate increased to 16.5%. Teenage unemployment is at 24.6%. We are also at 31 months at unemployment above 8.5% compared to 24 weeks for the early ‘80s when the US was in an equally or worse economic environment. Watching the weekly jobless number that is released every Thursday morning at 6:30 EST will be key to the October jobs number as that number moved far below 400k last week and only bounced up to slightly above 400k this week.
Friday, September 30, 2011
Saturday, September 3, 2011
Friday, September 2, 2011
Now that's going to leave a mark
Good morning everyone, the Department of Labor just released
the non-farm payrolls number for August and it was ugly. The unemployment
rate stayed at an already high 9.1% and zero jobs were created but the last two
months were revised for the worse by 56k so we actually lost a total of 56k not
zero. The private sector created only 17,000 jobs when 110k was expected
and the average workweek stayed the same at 34.3 and hourly earnings fell 0.1%
vs. an expected rise of 0.2%. This all means that employers were not
working their employees any more hours and paying them less which leads to
lower consumption down the road. In a consumer driven economy like we
have this adds bricks to the wall of worry the market has to climb. In
reaction to these numbers stock futures sold off hard as did the US dollar
while gold and bonds rallied. The internals of the jobs numbers needs
some context so about 50k of Verizon workers became unemployed because of their
strike and a similar number of government works went back to work so it was a
wash. I don’t see how Washington can spin this in a positive way as much
as they may try, there is even more talk of the Fed doing a 3rd
round of quantitative easing to try and stimulate the economy. Employers
are on strike and are not going to hire as long as there is so much anti
business rhetoric coming from Washington. The last round of Fed
quantitative easing (QE3) goosed stock and commodity prices but when the
QE3 ended prices have come right back down and employment is worse than
before. We are out of money and have been for some time so it seems as if
it is time to try something different. The President should read the Wall
Street Journal’s assessment of Jon Huntsman’s economic plan that was just
announced, he could do worse.
Sunday, August 7, 2011
A plague on both their houses
Mercutio says this to Romeo as he gives a frustrated curse on the Montagues and Capulets because of his confusion over their hatred and feuding one to another. I am feeling some of the same frustration as I and most serious financial observers saw this well telegraphed action of a downgrade of US debt by Standard and Poors more than two weeks ago. S&P, the rating agency that totally blew the ratings of financial companies and their mortgage products that greatly contributed to the “Great financial recession” of ’07-’09, is now trying to get ahead of the game by downgrading US debt from AAA to AA+. This is the first such downgrade of US debt in the history of this great nation and is being hysterically fought back by the White house to no avail. The ramifications of this are not completely known because it is a first, the futures markets are down about 2.5% or 270 points down on the Dow Jones average on Sunday night. This is off the lows but leaves a stock market that is very oversold and a treasury bond and gold market that are equally overbought. All of this volatility causes small investors to flee and hunker down, exactly what this consumer driven economy does not need. If this ratings downgrade was as well telegraphed as I am saying it is, how can the politicians in both houses and the president have acted with such obvious lack of concern for policy and public good and instead acted out political desire to hurt the other side. Don’t’ get me wrong, I am a free market conservative independent thinker who leans to the right and believes the GOP had the better side of this argument, but also control only ½ of 1/3 of the government. I didn’t like the debt ceiling deal because S&P said they were going to downgrade if $4 Trillion was not cut from the US debt load over the next 10 years and are now just fulfilling their obligation to follow through on a promise to do just this; why was the GOP not out saying this was the ramification of not cutting more. The president plans on blaming the House GOP reps and may succeed, but who cares now, the American public is going to have to deal with higher interest rates on credit cards, mortgages, student loans etc. This says nothing of the $14.3 trillion of debt we have and China has already signaled that the US needs to get its act together now, this is code for we want more interest on the US debt we buy and they will get it. Monday morning will really tell how the world deals with this watershed event
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