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

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Thursday, May 10, 2012

FW: World News!

South Korea
  • A car bomb exploded near an office of the Palestine Branch (one of the 20 Syrian secret police organizations) in Damascus, killing 55 and wounding 372.  The Syrian government blames "terrorists", and the opposition says the government set the bombs off to discredit them.
United States
  • James Anaya, the UN special Rapporteur on the Rights of Indigenous Peoples, called on the United States to return some of the land stolen from American Indian tribes as part of a program of ending "systemic and also specific instances of ongoing discrimination".
  • In "maybe there is a such thing as bad publicity" news, ten alleged members of the white supremacist group "The American Front" were arrested near Disney World.
  • The Florida Supreme Court is set to hear oral arguments in Roman Pino v Bank of New York Mellon.  The case revolves around "robo-signing" - the process of banks hiring low-wage workers to sign legal documents without checking them for accuracy - and could result in tens of thousands of mortgages becoming unenforceable.

International Trade

International Trade is the shorthand for the U.S. International Trade Deficit[1], a measure of how much we import vs. how much we export.  If the number is positive, that means we're exporting more than we're importing.  If it's negative, then it's the other way around.  The report is lagging, looking at the balance from two months in the past.
This metric is huge, mostly because it directly influences that biggest of all economic big dogs, Gross Domestic Product.  GDP is, by definition, private consumption plus private sector investments plus government spending plus (exports minus imports).  So, if we're exporting more than we're importing, that's a boost for the economy.
Again, we haven't had a trade surplus since 1975. So our trade balance has been a drain on the U.S. economy for 37 years.  By definition.
February saw a trade balance level of $-46.0 billion.  The Econoday-surveyed analysts are bearish for March, expecting to see the trade deficit expand to $-49.5 billion.  And to find out if they are right, we turn to the US Census Bureau.
The title of the article, Goods and services Deficit Increases in March 2012 is, at best, an inauspicious beginning.  But hey, the analysts were expecting that.  What they weren't expecting was for the trade deficit to increase to not $-49.5 billion but to $-51.8 billion.  We did see a $5.3 billion increase in overall exports (which is good), driven primarily by exports of industrial supplies and materials ($2.4 billion increase) and capital goods ($1.2 billion increase).  Imports increased by $11.7 billion, driven by capital goods ($3.5 billion increase), consumer goods ($3.3 billion increase), and industrial supplies and materials ($2.5 billion).
[1]  Technically, that should be U.S. International Trade Balance.  But we haven't had a trade surplus since 1975.

Unemployment Insurance Weekly Claims Report

It is, of course, Thursday.  And if it's Thursday, it's time for unemployment!
If you recall from last week, we had an advance figure for seasonally adjusted initial claims for the week of April 28 come in at 365,000, beating expectations.  The advance figure for seasonally adjusted insured unemployment also declined to 3,276,000.  Even the unadjusted numbers were good:  the advance figure for actual initial claims came in at 330,476, and the total number of people claiming benefits in all programs (as of April 14) was 6,597,492.
For the week ending May 5, the Econoday-surveyed analysts are bearish.  But they're so mildly bearish that it hardly counts, expecting the new claims level to rise to 366,000.  Are they right?  Only the Department of Labor knows for sure.
Speaking of the DoL, let's have a look at the Unemployment Insurance Weekly Claims Report for May 5.  The advance figure for seasonally adjusted initial claims came in at 367,000.  Technically, that misses expectations.  But it missed by so little that I think we can give it to them;  it certainly won't crush anybody's spirits.  The initial claims figure for April 28 was also adjusted upwards to 368,000;  again, not as bad as it could have been.
The advance figure for for seasonally adjusted insured unemployment comes in at 3,229,000, a decline from last week.  Even if you ignore the upward revision of last week's level to 3,290,500.
Looking at unadjusted numbers, the actual initial claims for May 5 came in at 338,418 and the total number of people claiming benefits in all programs for the week ending April 21 came in at 6,423,383.
So, overall, a week that met expectations.

U.S. Import and Export Price Indexes News Release

Bureau of Labor Statistics
The latest U.S. Import and Export Price Indexes news release has been posted on the BLS website at http://www.bls.gov/news.release/pdf/ximpim.pdf and also archived at http://www.bls.gov/news.release/archives/ximpim_05102012.pdf. Highlights are below.

U.S. import prices fall 0.5 percent in April while export prices rise 0.4 percent


U.S. import prices declined 0.5 percent in April, following a 1.5 percent increase in March. The April decrease was driven by lower fuel prices which more than offset a small increase in nonfuel prices. The price index for overall exports rose 0.4 percent in April after a 0.8 percent increase...


Import and Export Prices

Import and Export Prices is exactly what it looks like.  A measure of the change in the prices we receive for exporting goods and services, and and a measure in the change in prices for goods and services we import.  It's a separate report from International Trade (go figure), and it is a one month lagging indicator.
March saw a 0.8% increase in export prices, and a 1.3% increase in import prices.  The Econoday-surveyed analysts are mildly bullish on this one, expecting a 0.2% increase in export prices for April, and a 0.2% decrease in import prices.  But are they right?  Let's go check the Bureau of Labor Statistics and find out.
Looking at the U.S. Import and Export Price Indexes - April 2012 report, it actually turns out they weren't bearish enough.  U.S. import prices declined 0.5% in April, and export prices increased 0.4%.  That's good news for domestic companies, at least[1].
The decline in import costs was led by a 2.1% drop in fuel import prices, which breaks down to a 1.8% decline in imported petroleum prices and a 14.1% decline in imported natural gas prices.    The increase in export costs was driven by a 2.0% increase in agricultural prices, led by a 7.4% increase in soybean prices.
[1]  The ones that don't import everything from overseas to resell in the US markets, that is.

Monday, May 7, 2012

Employment Situation

This is clearly a few days late, but I don't work on Fridays anymore.
Well, more accurately, I don't come in to the office on Fridays.  Having a 19-month-old means I still work on Fridays.  But that's neither here nor there.  The point is, this is a few days late.
The Employment Situation Report is one of the big reports.  It's put out by the U.S. Department of Labor's Bureau of Labor Statistics, and it is the official word on how - wait for it, you may not guess from the name - non-farm employment looks in the United States[1].  It's a lagging report, looking at the previous, and it has the power to shake the heavens.  Or to, at least, shake the markets for the day.  It is, after all, a look at the health of the economy.
The Econoday-surveyed analysts were pretty optimistic before the report came out on Friday.  They were looking to see 165,000 new nonfarm jobs added in April, to see the unemployment rate remain steady at 8.2%[2], to see average hourly earnings increase 0.2%, and for the average workweek for employees to remain at 34.5 hours.
I won't try to build any suspense out of this, because the data came out something like 72 hours ago.  Instead, let's just go ahead and jump right into the optimism-crushing news delivered by The Employment situation - April 2012 Report.  Nonfarm payroll employment rose by 115,000 (missing expectations terribly), and unemployment shrank mildly to 8.1%.  The average workweek remained steady at 34.5 hours, and average hourly wages rose $0.01 (or about 0.04%).
Now, let's have a look at that 8.1% unemployment rate.  That represents about 12.342 million people (5.1 million of whom have been out of work for 27 weeks or longer), and constitutes people that are not currently working but who have looked for work in the past 4 weeks.  That number decreased by 0.159 million from March.  But here's something interesting.
There are two categories of people that are not considered unemployed, that many economists believe should be.  These are people "marginally attached to the labor force" and people who work "part time for economic reasons".  "Marginally attached to the labor force" means that you are out of work, that you want to work and can work, and that you have not looked for work for at least 4 weeks.  There are 2.363 million people in this category (an increase of 0.011 million from March), 1 million of whom have given up hope of finding work.  "Part time for economic reasons" means people who are working a part-time job, who want full time employment but can't find it.  There are 7.853 million of these people (up 0.181 million from March, handily absorbing the entire decline in the official unemployment rate).  Factoring these people in, you get an unemployment rate of 14.8%.
So anyway, in a "better late than never" sort of way, you now have a little more insight into what happened to the markets last week.
[1]  No, I don't know why they don't consider farm employment to be employment.
[2]  And we'll be looking hard at that percentage in a moment.