"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

The Required Disclosures

The information presented in this blog and its individual articles is provided for informational use only and should not be considered investment advice or an offer for a particular security. The contents reflect the views and opinions of the individual writer as of the date the article was written and do not necessarily represent the views of the individual writer on the current date. They also do not in any way, shape, or form represent the views of the Firm Never-To-Be-Named. Any such views are subject to change at any time based upon market or other conditions and The Great Redoubt and its individual writers disclaim any responsibility to update such views. These views should not be relied on as investment advice, and because investment decisions for any security are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any contributor to The Great Redoubt. Neither The Great Redoubt nor any individual author can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or financial advisor for additional information concerning your specific situation.

Friday, April 1, 2011

Employment Situation

This came out three and a half hours ago, so this is probably not news to any of you at this point.
Anyway, this is the Employment Situation report from the US Bureau of Labor Statistics.  This is considered the definitive look at employment levels and the unemployment rate in this country.  The Challenger Report,, the Monster Index, ADP, all of these are pale shadows of this ultimate report.
In February, a seasonally-adjusted 192,000 jobs were added to nonfarm payroll lists.  The official unemployment rate was 8.9%, average hourly earnings were unchanged, and the average workweek was 34.2 hours.
For March, the Econoday-surveyed analysts called for the following:  200,000 new nonfarm jobs (seasonally adjusted), no change in the unemployment rate, a 0.2% increase in average hourly earnings, and an increase in the average workweek to 34.3 hours.
We turn now to the BLS for the official summary of the results for March.  Nonfarm payroll employment increased by 216,000 (beating expectations) and the unemployment rate fell slightly to 8.8% (also beating expectations).  The average workweek hit 34.3 hours, and average hourly earnings remained unchanged.
Now, that 8.8% unemployment rate represents 13.5 million people out of work.  6.1 million of those persons are long-term unemployed (meaning they have been jobless for 27 weeks or more).  The long-term unemployed now represent 45.5% of the total number of people unemployed (up from last month's 43.9%).
There are two categories of people who are not counted as unemployed, but whom a number of economists believe should be counted:  involuntary part-time workers (people who would take permanent full-time jobs if they could find them), and individuals marginally attached to the labor force (people who are not working, who want jobs, and who are available for work, but who have not searched for work in the last 4 weeks).  There are 8.4 million involuntary part-time workers , and 2.4 million marginally attached individuals.  Including them, the effective unemployment rate is more like 14.4%.

Thursday, March 31, 2011

Factory Orders

More formally, this is the Full Report on Manufacturers' Shipments, Inventories, and Orders.  It's information collected and released by the US Census Bureau's Department of Commerce, and it tracks the rate of change in new orders for manufactured goods, manufacturer inventories, and manufactured goods shipped from the factory.  Analysts and investors love this report, because increasing factory orders represent increasing economic growth.
In January, factory orders were up 3.1%.  The Econoday-surveyed analysts aren't as optimistic about February, and are anticipating only a 0.5% increase in new orders.  With that in mind, let us turn to the February 2011 report to find out how things worked out.
New orders for manufactured goods declined 0.1%, substantially missing expectations.  Shipments increased for the sixth consecutive month, however, up 0.3% for February.  Unfilled orders increased 0.5%, and inventories increased 0.8%.

Chicago PMI

The Chicago Purchasing Managers Index report is a report from the Chicago Institute for Supply Management that examines business conditions in the Windy City.  It's a report of modest importance, but investors and analysts like it as a strong regional indicator of general business activity.  It is also typically viewed as being representative of the overall economic health of the nation.
The core component of the Chicago PMI report is the Business Barometer Index.  In February, it came in at a seasonally adjusted 71.2, and the Econoday-surveyed analysts are expecting it to cool off a little.  They're looking for a level of 70.0.  The March report shows that the index did decline, coming in at a seasonally-adjusted level of 70.6 (which still beats expectations).

World News

The Ivory Coast
  • Forces loyal to Alassane Ouattara have seized San Pedro, a major cocoa port, as part of an ongoing rebellion aimed at ousting President Laurent Gbagbo (who refused to step down after he lost the presidential election last November).  Cocoa bean exports, which have been disrupted since the rebellion began, may resume within days.
United States
[1]  Apparently, the fact that 26 nations have a debt to GDP ratio higher than Spain (the most stable of the PIIGS nations as of 2010), is not the main flaw.

Gross Assails US Debt as Greek-Like

If you actually click on the link to read Bill Gross' article, it's even more scathing than this summary makes it sound.

View this article on our website: Gross Assails U.S. Debt as Greek-Like

Gross Assails U.S. Debt as Greek-Like

Pimco's Bill Gross has ratcheted up his criticism of federal budget policy, implying he will not favor Treasurys until Congress tackles entitlement spending.

In his monthly investment commentary posted to Pimco's website, Gross calculates the country's unrecorded debt burden at close to 500% of gross domestic product, warning "we are out-Greeking the Greeks."

The comments shed light on Gross's decision, revealed earlier this month, to dump Total Return's entire holdings in U.S. government–related debt, including Treasury debt. A disclosure on the firm's website reveals that as of Feb. 28 the $236.93 billion fund's government-related debt portion was zero, compared with 12% a month earlier. No update has since been posted.

Gross does not reference the Total Return move specifically in his latest commentary but does muster an argument against holding Treasurys. Without congressional cutbacks to Medicare, Medicaid and Social Security, he contends, the country will effectively default through rising inflation, currency devaluation and low to negative real interest rates.

Pimco "has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden," he writes. "Our clients... do not want to be shortchanged or have their pockets picked."

Jobless Claims

Continuing the countdown to tomorrow's Employment Situation report, we turn now to First Time Jobless Claims.
If you recall last week's data, the advance figure for seasonally adjusted initial claims for the week ending 3/19 was 382,000 (which beat expectations by 3000), with the unadjusted advance number at 351,204.  The seasonally adjusted state program insured unemployment level was 3,721,000, and the unadjusted level was 4,260,519.  Finally, as of 3/5, the total number of people claiming benefits in all programs was 8,766,062.
This week, the Econoday-surveyed analysts are expecting to see the number of first time claims decrease, falling to a level of 380,000.
We turn now to the US Department of Labor for the Weekly Claims Report for the week ending 3/26.  First off, they have revised the number of seasonally adjusted initial claims for the week ending 3/19 upwards to 394,000, an inauspicious start.  Then, they report the advance figure for seasonally adjusted initial claims for 3/26 at 388,000.  The good news is that this is a decline from last week's revised figure;  the bad news is that this is 6000 higher than last week's advance number (which is the number everyone gets excited about), and it has missed expectations by 8000.
The unadjusted advance number came in at 354,301.  The seasonally adjusted state program insured unemployment level was revised upwards for the week ending 3/19 to a level of 3,765,000, and the advance number for the week ending 3/26 came in at 3,714,000.  That is still an improvement from last week's initial numbers, but it's not as dramatic as the DoL is claiming based on the revised numbers.
As of 3/12, the total number of people claiming benefits in all programs was 8,770,443.

Monster Employment Index

What is the Monster Employment Index? It is, according to the index's web site, "a broad and comprehensive monthly analysis of US online job demand conducted by Monster Worldwide, Inc. Based on a real-time review of employer job opportunities culled from a large, representative selection of corporate career sites and job boards, including Monster, the Monster employment Index presents a snapshot of employer online recruitment activity nationwide."
In other words, it is an index created by Monster.com to track private sector hiring. This particular index is not considered as significant as the ADP Employment Report - it actually falls in with the Challenger Jobs Report in terms of importance - mostly because it doesn't track either employment or unemployment. It only tracks job openings, and then only those posted online. So its focus is a little tight.
Last month, the index hit a level of 129 (October 2003 is 100). Looking at the March report, we see that the index climbed 7 points to a level of 136 in March (an increase of 5%), with the annual growth rate in hiring increasing to 9%.

Wednesday, March 30, 2011

Farm Products Price Index

This report comes from the USDA, and tracks changes in the prices received by farmers and in prices paid by farmers. It doesn't get a lot of respect from the equity markets - the contents of this report are typically the things getting excluded from the "core" inflation measures so beloved by various analysts and agencies - but this has a significant impact on GDP. Let's face it, even if food prices aren't being tracked in inflation costs, rising food prices will limit disposable income for other purchases.
So, let's have a look at the March report. The All Farm Products Index of Prices Received by Farmers hit 174%, up 400 bps (2.4%) from February and 3300 bps (23%) from March 2010. The Crop Index is up 100 bps (0.5%) from February, and the Livestock Index is up 700 bps (4.9% from February). Meanwhile, the Index of Prices Paid for Commodities and Services, Interest, Taxes, and Farm Wage Rates hit a level of 199%, up 200 bps (1%) from February and 1900 bps (11%) from March 2010.
That level, by the way, is essentially looking at how much each of those indices has increased since the base period of 1990-1992. So yes, that means that farmers are earning 174% more than they did 20 years ago, and they're paying 199% more on their expenses. On average.
The actual report is 43 pages long, with a lot of detail about changes in crop prices, livestock prices, and food commodities. Have a look at it. It's... educational.

World News

  • In the wake of last week's protests, which forced President Hosni Mubarak out of office, the Egyptian cabinet approved a law yesterday that criminalises strikes, protests, demonstrations, and sit-ins that interrupt private or state owned businesses or affect the economy in any way. Individuals who call for or incite action can be sentenced to up to one year in prison and fined up to half a million pounds. The law has to be approved by the Supreme council of the Armed Forces, and would be in force as long as Egypt is in a state of emergency (currently, 30 years and counting).
European Union
  • The Telegraph is reporting that the European Commission has released plans to create a "single European transport area" intended to create "a profound shift in transport patterns for passengers" by 2050. Goals include getting 50% of all travel over 186 miles to be made by rail, and reducing the number of gasoline and diesel-driven cars and trucks within cities by half by 2031 and to 0 by 2050. Opposition to the plan is already beginning to be heard.
United States
  • President Obama is preparing a speech in which he will outline his strategy to reach an announced goal of cutting US oil imports by a third over 10 years. The plan is expected to focus on increasing domestic energy production, encouraging the use of more natural gas in public transit, making vehicles more fuel efficient, and encouraging the use of biofuels and other alternative energies.
  • Al Jazeera is reporting an increase in illnesses and deaths along the Gulf Coast due to the chemical dispersants used by BP.

ADP Employment Report

ADP, also known as Automatic Data Processing, is "one of the world's largest providers of business outsourcing solutions. Leveraging over 60 years of experience, ADP offers a wide range of HR, payroll, tax and benefit administration solutions from a single source."[1] These services give them vast insight into national employment, and changes in national employment.
Much like Challenger, Gray, & Christmas, they collate this information into a monthly snapshot of the US employment situation. ADP focuses entirely on the private sector, however, because that's what they work with.
In February, they reported a seasonally adjusted employment increase of 217,000 jobs. Looking at the March report, we see two things right away: First of all, private-sector non-farm employment increased by 201,000 in March on a seasonally adjusted basis. Secondly, February's job growth was revised downwards to 208,000.
164,000 (75.57%) of those new jobs came from the service-providing sector and 37,000 (18.4%) came from the goods-producing sector. Large businesses were responsible for 17,000 (8.45%) of the new jobs, medium-size businesses for 82,000 (40.8%), and small businesses for 102,000 (50.7%).
[1] From ADP's web site.

The Challenger Job Cut Report

Challenger, Gray, and Christmas is, according to their web site, "the nation's first, oldest and premier outplacement consulting organization. Our firm has a proven track record of successfully providing top quality outplacement programs for executives, middle managers and long-term or highly valued employees." They work with companies that are laying off employees to assist those employees in finding new positions. As a result, they have some insight into current plans to cut jobs.
One of the things they do with this data is release a monthly Job Cuts report. Traditionally, this report is not considered as significant as some of the other employment reports (ADP Employment, first time jobless claims, and employment situation), but it is still an additional resource that can be used to gauge what the national employment situation looks like.
The February report indicated that employers had announced plans to cut 50,702 jobs. In the report for March, we learn that the rate of downsizing is slowing. Employers announced plans to reduce payrolls by 41,528 jobs, bringing the Q1 job cut total to 130,749. That sounds like a lot, but Q1 2010 saw 181,183 planned layoffs. In fact, this is the lowest Q1 layoff total since 1995.
Of those 41,528 job cuts, 19,099 (46%) are public sector, up 17% from February's 16,380 planned layoffs. The telecommunications industry was the second largest source of job cuts, but they only had 2,378 announced for March. Interestingly enough, the insurance industry had no job cuts planned for March. 12,791 (30.8%) of the job cuts are from restructuring, 10,247 (24.7%) are from cost cutting, and 5,75313.9%) are from businesses closing.

Tuesday, March 29, 2011

Consumer Confidence

Consumer Confidence is one of the big movers and shakers amongst economic measures. It's current to forward-looking, so it's one of the leading indicators of consumer spending. And since consumer spending is a huge chunk of GDP, good consumer confidence figures fill analysts and traders with hope for the future.
February's figures may be a hard act to follow. The Consumer Confidence Index hit a level of 70.4, which was a three-year high. The Present Situation Index increased 2.3 points to 33.4, and the Expectations Index increased 7.8 to a level of 95.1. And the Econoday-surveyed analysts aren't expecting march to follow last month's act. Instead, they're expecting to see the Consumer Confidence Index fall to a level of 64.0.
So, how do the actual numbers look? According to The Conference Board, the Consumer Confidence Index fell to 63.4 (falling below expectations). The Present situation Index improved, rising to 36.9, and the Expectations Index fell to 81.1. The Conference Board fully credits the decline in consumer confidence to the decline in future expectations: "Consumers' inflation expectations rose significantly in march and their income expectations soured, a combination that will likely impact spending decisions," said Lynn Franco, Director of The conference Board consumer Research Center.

World News

  • A study of international scientific output - as defined by the total number of peer-reviewed papers published by scientists in various nations - indicates that China is on course to overtake the US in scientific output by 2013. Over the 12 year period covered by The Royal Society's study, US scientific output increased by 8%. In the same period of time, Chinese scientific output increased by 722%.
  • Traces of plutonium-238, plutonium-239, and plutonium-240 have been found in the soil around the Fukushima nuclear complex. Japan's Nuclear and Industrial Safety Agency has said that the plutonium levels are not harmful to human health, but it could mean that reactor No. 3's containment mechanism has been breached. "Plutonium is a substance that's emitted when the temperature is high, and it's also heavy and so does not leak out easily," said agency deputy director Hidehiko Nishiyama. "So if plutonium has emerged from the reactor, that tells us something about the damage to the fuel. And if it has breached the original containment system, it underlines the gravity and seriousness of this accident." Opposition leaders in the Japanese Parliament are now demanding that the evacuation zone around the plant be widened.
United States

Store Sales

I'm just going to cover the ICSC-Goldman Store Sales and the Redbook in a single article this morning.
Last week, the ICSC-Goldman Store Sales survey showed week-over-week sales down 0.1%, and year-over-year sales up 3.0%. The Redbook, on the other hand, showed year-over-year sales up 2.4% for the same period.
Econoday shows a nice little rally in both figures. The ICSC-Goldman Store Sales are being reported as up 0.2% week over week fro the week ending 3/26, and up 2.6% for the year. For the week ending 3/26, the Redbook is being reported as showing year-over-year sales up 2.6% as well.

Monday, March 28, 2011

Personal Income and Outlays

Personal Income and Outlays is a report tracking (brace yourselves) personal income. And outlays.
No, really, that's pretty much it. What do you want? It's very much a "truth in advertising" report.
All right, technically, it tracks the month over month rate of change in personal income, consumer spending, and a price index (which is a fixed basket[1] of goods and services that is purchased by the average consumer)[2]. The report is a lagging report, giving data for the previous month. That still puts it ahead of the curve for GDP releases though. And since consumer spending represents roughly one-third of GDP, this is an important number to watch.
In January, personal income was 1.2%, consumer spending was up 0.3%, and the core PCE price index was up 0.2%. Looking to February, the Econoday-surveyed analysts are expecting to see personal income up 0.4%, consumer spending up 0.6%, and the core PCE price index up 0.2%.
The official report comes to us courtesy of the Bureau of Economic Analysis. From it we learn that personal income was up 0.3% in February (missing expectations), consumer spending was up 0.7% (beating expectations) and the core PCE price index was up 0.2% (meeting expectations). Other interesting data points include:
  • Disposable personal income[3] was up 0.3%. However, in chained (2005) dollars[4], it was down 0.1%.
  • Real DPI, which is DPI adjusted to remove price changes, decreased 0.1% in February (compared to a 0.3% increase in January).
  • Personal current taxes increased $2.2 billion in February, compared to a $55.4 billion increase in January.
  • Personal savings as a percentage of disposable personal income was 5.8% in February, down from January's 6.1%.
  • The PCE price index increased 0.4% in February, if you add food and energy costs back in.
The key takeaway from this, the part that will probably get people excited, is the better than expected consumer spending. That is the part that will be seen as pointing towards Q1 2011 GDP growth.
[1] For certain values of "fixed".
[2] In other words, it's yet another inflation measure. And, like all inflation measures, it has a "core" component as well.
[3] Defined by Barron's Dictionary of Finance and Investment Terms as "personal income remaining after personal taxes and noncommercial government fees have been paid. This money can be spent on essentials or nonessentials or it can be saved."
[4] Chained dollars is a method of adjusting real dollar amounts for inflation over time.