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

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Thursday, May 3, 2012

Breaking News, Again

Facebook has filed Amendment No. 5 with the Securities and Exchange Commission to take its stock public with an offering price between $28 and $35.  the form still does not state an official date.
Looks like the "source familiar with" was pretty familiar.

Breaking News! It's Coming!

According to "a source familiar with the IPO", Facebook, Inc plans to price its IPO at a range with a mid-point of $31.50.  That would give the company a valuation around $90 billion.  The final pricing is expected in about two weeks, and "people familiar with the matter" say that the company will begin pitching its stock to investors on Monday.
So far, though, this is all "source familiar with" and "people familiar with", without any official announcement.  Take it all with a grain of salt, until the actual announcement happens.

Social Secuirty To Run Dry By 2035

Challenger Job Cut Report

More properly, this is the Challenger, Gray & Christmas Job Cut Report.
Challenger, Gray & Christmas is an outplacement consulting firm.  They are brought in when a company is laying employees off, to assist those employees in looking for new jobs.  they primarily cater to executives and middle management, but they - rather like ADP - have access to a great deal of information about layoffs as a result.  And, like ADP, they use this information to compile a report about the state of employment in the US.
This report has a rather unique feature as well.  It focuses on the number of layoffs announced in a given month, without regard for when those layoffs will actually occur.  As a result, this report isn't as hotly anticipated as the ADP Employment Situation Report.  Not that it's worthless, but it just doesn't provide a clear lagging or leading indicator.
So, let's turn to the report and see what it does tell us.  US-based employers announced 40,559 job cuts in April, up from the 37,880 announced in March.  Texas is the big "winner", accounting for 29,324 of those planned layoffs.  By Industry, Education has the most planned layoffs (9,027) - nearly as many as the second, third, and fourth place figures combined.

Unemployment Insurance Weekly Claims Report

Also known as "jobless claims", this is the Department of Labor's weekly report on... wait for it... how many people are applying for unemployment insurance.
I'll bet you would never have guessed that, from the name.  Right?
thats a joke son
Anyway, back to being serious about this.  The Unemployment Insurance Weekly Claims Report is a lagging report, providing information for the previous week.  It discusses both new claims and continuing claims, on a raw data and a seasonally adjusted level.  Analysts love this report (when they don't hate it), because it's another snapshot of the health of the economy.  Declining new jobless claims imply fewer layoffs, and declining continuing jobless claims imply people getting back to work[1].
And what are the analysts thinking of this week.  Well, last week there were 388,000 claims for the week ending April 21.  This week, the Econoday-surveyed analysts are looking at the initial claims to fall to 378,000.  So, they're feeling optimistic.  But are they justified in this feeling?  Let's find out.
Looking at the report, we find that the advance figure for seasonally adjusted initial claims for April 28 is 365,000 - substantially beating estimates.  On the downside, the seasonally adjusted claims for April 21 have been revised upwards to 392,000[2].  The advance figure for seasonally adjusted insured unemployment for April 21 was 3,276,000, down 53,000 from April 21's revised level of 3,329,250.
Turning to the unadjusted numbers[3], the advance figure for actual initial claims for April 28 came in at 330,475, a drop of 40,158 from April 21.  And the total number of people claiming benefits in all programs for the week ending April 14[4] is 6,597,492, down 85,523 from April 7.
So really, except for the upwards revision of April 21's figures, this was a heaping helping of good news to start the morning out.
[1]  Or running out of benefits.  But we'll look at that when we cover the Employment Situation tomorrow.
[2]  This happens frequently.  Why anyone gets excited about the initial figures is beyond me, really.
[3]  A quick word about "seasonal adjustment" vs.. "unadjusted numbers":  The unadjusted numbers are the raw numbers.  The total number of actual claims.  Seasonal adjustment is "a statistical method for removing the seasonal component of a time series that is used when analyzing non-seasonal trends" (to quote Wikipedia).  the idea is that, if you remove spikes and dips created by seasonal events (such as the massive increase in employment around Thanksgiving, when the seasonal employees get hired), you can get a more accurate idea of trends.  I'm not certain I agree, but I'm also not a statistician.  So take my skepticism with a degree of skepticism.
[4]  Yeah.  This particular component is on a two-week delay.

Wednesday, May 2, 2012

World News

  • Eleven people were killed and more than 160 wounded after armed men[1] attacked protesters demanding an end to army rule in Egypt.
  • A court in Mannheim ruled that Microsoft has infringed Motorola Mobility's patents and has ordered that the Xbox 360 and Window 7 OS be removed from the German market.  A US district court has granted an injunction preventing Motorola from enforcing the court order, though, and the ruling is not expected to have a significant impact on Microsoft's European sales.
  • Standard and Poor's has upgraded Greece's credit rating from "selective default" to "CCC".  That still leaves them on a scale between "garbage" and "why are you buying this?", but it is an improvement.
North Korea
  • Lee Kyung-woo, deputy director of the Korea Communications Commission, has charged North Korea with jamming the GPS navigation systems on at least 250 domestic South Korean flights.
United States
  • A "source familiar with the process" reports that the roadshow for Facebook, Inc's initial public offering is scheduled to start on May 7.  If true, this means that the company could be going public as soon as May 18.  Facebook has declined to comment.
  • Charles "Skip" Pitts died in a Memphis hospital at the age of 65.  You know him as the blues guitarist that played the the theme music for Shaft.
  • Five men have been charged in an alleged plot to blow up a bridge 15 miles from Cleveland.
  • The SEC has charged Kevin Sepe and ten associates with having conducted "pump and dump" schemes with two microcap securities.  Six of the individuals involved have already agreed to approximately $3.2 million in settlements - about three times the alleged earnings.
[1] And the Egyptian government wants to assure you that they were "unidentified thugs", not soldiers.

Employment Week and the ADP Employment Report

It's the first week of the month, which means that the market is looking with bated breath towards Friday and the Employment Situation report.  Analysts will be scrutinizing the preliminary information in an effort to gauge which way the news will swing, and that preliminary information comes in three flavors:
  • The ADP Employment Report (and more on that in a moment)
  • The Challenger Job-Cut Report (out tomorrow)
  • The Department of Labor's Unemployment Insurance Weekly Claims Report (also due out tomorrow)
Of the three reports, the Department of Labor is the biggest.  But people still pay attention to the others, because every scrap of information has its place.
So.  the ADP Employment Report.  ADP, in case you're wondering who they are and why anyone would care, is also known as Automatic Data Processers, Inc.  They are, according to their web site, "one of the world's largest providers of business outsourcing solutions," and they offer "a wide range of human resource, payroll, tax and business administration solutions".  This gives them an enormous amount of information about private sector employment trends, and they use it to compile a monthly report about job gains and/or losses by sector.
The Econoday-surveyed analysts that follow this report are mildly bearish on the subject.  The March report shoed a gain of 209,000 private sector jobs, but the consensus is for only 183,000 new jobs in April.  That's not great because, while employment growth is a sign of a healthy economy, slowing employment growth is an indicator that the economy may be slowing down as well.  After all, businesses don't hire if they don't have a need for the workers.
Let us now turn to the April 2012 ADP National Employment Report and see if the analysts will be correct and happy.  According to the report, employment in the US nonfarm private business sector increased by 119,000 in April, missing expectations by 64,000.  Not great news.  Also, the March job growth figures have been revised downwards to only 201,000 new jobs.  The service-providing sector saw a gain of 123,000 jobs, while the good-producing sector lost 4,000 jobs and the manufacturing sector lost 5,000 jobs[1].  Large payroll companies saw a gain of 4,000 jobs, medium payroll companies saw a gain of 57,000 jobs, and small payroll companies saw a gain of 58,000 jobs[2].
So, our buildup to the Employment Situation starts out mixed.  Not great news, but a far cry from terrible.
[1]  I'm not entirely certain what the difference between "manufacturing" and "goods-producing" is.  Sounds like a topic to research for later.
[2]  Large payroll is defined as 500+ employees, medium payroll is defined as 50 to 499 employees, and small payroll is defined as up to 49 employees.