Anyone betting that manufacturing will continue to lead the US economic recovery might think twice after reading comments from survey respondents in Dallas Fed’s April Texas manufacturing outlook.
Similar to Philly Fed’s gauge last week, Dallas headline number tanked, to 8.1 from 24.1 in March. The Philly survey’s headline number fell to 18.5 from 43.4 in March, but unlike the Dallas survey, Philly doesn’t include respondent comments in its report.
Down in Texas there’s a fair measure of cautious optimism among survey respondents, and plenty of concern about high costs and soft demand. Here’s one from a plastics and rubber products manufacturer that sounds pretty good:
“We are very encouraged by the breadth of activity with our cross section of customers in the Dallas–Fort Worth area. It is not just a few companies with increased requirements for plastic parts, but pretty much all of our diverse customer base.”
Now here’s one from the other end of the spectrum, a furniture/related product manufacturer: “Our industry has hit another brick wall. Rapidly increasing costs and fuel costs have shocked the consumer away from any nonmandatory spending. They normally adjust, but it may take several months.” Continue reading…
The rally train rolls on as stocks open 2Q on a positive note, trudging higher but finishing well below session peaks.
Encouraging March employment report, ISM manufacturing generally as expected and decent auto sales prod markets higher. NY Fed’s Dudley also helps sentiment, countering recent hawkish tone from some Fed officials with market-reassuring dovish language of his own.
Again, volume not especially impressive, particularly considering the first day of a new month and quarter. Looked as if bulls might fade in final hour, but had enough kick to finish fine.
DJIA adds another 56.99 to 12376.72; earlier reached highest intraday level since early June 2008. Nasdaq Comp rises 8.53 to 2789.60, S&P 500 ends 6.58 higher at 1332.41.
Kind of quiet for economic data next week, FOMC minutes due out Tuesday could be interesting but not necessarily market moving. Otherwise, week’s peppered with some Fedspeak, expect them to continue guiding expectations toward a QE II finish in June and then no more.
Alcoa kicks off 1Q earnings reporting season a week from Monday, and commentary/outlooks from corporate America may serve as the next test for stocks. Can’t rely on Fed liquidity forever, eventually the investment story needs to come back to the pace of profit growth and margin expansion. Will executives have enough faith in the economy’s forward momentum to pick up hiring and capex, or will they stay cautious and focused on controlling costs in a wait-and-see mode?
Paul and I talk about the March jobs report, outlook for jobs and NY Fed’s Bill Dudley with Mesirow Financial economist Diane Swonk. Dave Kansas then offers some perspective on Nasdaq/ICE bid for NYSE Euronext.
Warm reception for the improvement in the March jobs report, and Dow Indutrials surge to a 2011 high. Good to see 216,000 jobs added, unemployment rate down a tick, but the report wasn’t without its flaws.
Labor force participation remains stuck at a low 64.2%, until recently a level last seen in 1982. Average hourly earnings for private employers actually fell 2c to $19.30 (though weekly pay ticked up). The number of long-term unemployed (out of work more than six months) rose, and now accounts for 45.5% of 13.5M out of work.
The stagnant wages may be the biggest drawback to this report. As Paul Ashworth at Capital Economics notes, job growth still isn’t strong enough to bring the unemployment rate down quickly, and if it only drops 0.1% per month, as it did in March, “it would take another three and a half years to get back down to the pre-recession level.” The still-high rate continues to tamp down wage inflation, with overall average hourly earnings flat for second-straight month, and annual growth rate remained at 1.7%, Ashworth points out. “In real terms, wages are falling.”
There was also a drop in the U-6 measure of underemployment, looks as if there’s fewer “discouraged” workers out there. However, based on the participation rate, it doesn’t look as if they all went from discouraged to back in the labor force, so it makes you wonder how many are just slipping off the radar screen altogether.
Seems as if corporations feel more cautious than the investors who have bid up their stocks lately, with companies content to conservatively bide their time sitting on loads of cash.
“Healthy profits, combined with opportunistic borrowing at very favorable market interest rates, are providing corporations with an ample cushion against the next business downturn,” Credit Suisse says, noting “the ratio of liquid assets to total assets on nonfinancial corporate balance sheets is hovering near a 45-year high.”
Big cash buffers are a manifestation of “the severe money demand shock American firms experienced in recent years,” the firm suggests. While that’s not good for long-term growth, it remains hard to get businesses “to risk even more of their precautionary holdings” on expansion, which could lift job growth.
The continuing decline in weekly jobless claims suggests employers have trimmed their workforces about as much as they can, but as Credit Suisse infers, they remain reluctant to expand or hire. Demand remains uneven, at best, and there’s clearly enough uncertainty related to the geopolitical picture and global growth to hold off on hiring, at least here in the US. Continue reading…
Peter Morici, an economics professor at the University of Maryland, is putting a price on the rise in crude prices in terms of jobs lost, and while you can quibble with his math if you like, and he uses the occasion to push for more drilling in the U.S., he makes the very good point that the current crisis, or shock, or whatever you care to call it, is going to cost Americans jobs, and jobs aren’t something we can afford to forego these days.
High Oil, Gas Prices Destroys 600,000 Jobs
Turmoil in the Middle East and elsewhere have pushed up oil prices more than $20 per barrel, and average gasoline prices from less than $3.00 a gallon to about $3.60. All the additional cash spent on imported oil that does not return to buy exports translates into lost demand for U.S. goods and services, lost growth and fewer jobs. Higher gas prices simply means fewer cell phones, restaurant meals and other good purchased that create jobs.
Most economists built some increase into 2011 GDP forecasts, but the recent surge, if it sticks through the spring, will reduce U.S. growth from 3.5 to 4 percent to 3.0 to 3.5 percent, perhaps less. Overall that translates into at least 600,000 fewer jobs, or nearly 50,000 a month. Moreover, lost taxes exacerbate federal and state budget problems.
U.S. policy arbitrarily limits the development of domestic oil and gas, and the more rapid deployment of abundant domestic natural gas. Premised on false assumptions about the immediate viability of electric cars and alternative energy sources, such as solar panels and windmills, these make the U.S. economy more vulnerable, Americans poorer and raise unemployment, and do little to raise environmental standards—instead of drilling in places the U.S. government can regulate, development goes abroad to places where U.S. enforcement has no teeth.
In combination, limits on conventional energy development and excessive optimism about alternative energy technologies are making the United States even more dependent on imported oil and more indebted to China and other overseas creditors to pay for it.
Bottom line on the February jobs report: better, but nothing to spark a celebration. In fact, the report was insubstantial enough to be quickly overwhelmed by sharp gains in crude oil.
Of course, the jobs report did offer enough to get some economists excited, which isn’t too hard considering how long they’ve been gazing at a bleak picture.
February’s job gains “represent the first cog in the labor market gear that will drive the economy into a self-sustaining expansion this year,” economists at PNC say. From where we sit here at MT, it’s very premature to talk “self-sustaining expansion” while the Fed still has the liquidity pedal pinned to the floor, so PNC’s getting a little bit giddy. Firm says “solid gain of 192,000 net jobs reflects strength across most employment categories,” except, of course, government employment, which ditched 30,000 state and local jobs.
PNC does note wages were “unspectacular” though, “gaining just 1 cent, and not keeping up with the inflationary push from energy and food.” Flat workweek and limp increase in earnings were key points of weakness most economists noted.
Bernard Baumohl, chief global economist at Economic Outlook Group, was much less impressed than the gents at PNC. Digging into the numbers shows companies “in a holding pattern when it comes to hiring. Nothing more, nothing less,” he said. Continue reading…
Watching the ebb and flow of weekly jobless claims offers a high-altitude, fairly antiseptic view of what’s happening with layoffs nationally, but if you want to get a little dirt under your fingernails, go browse through state WARN notices.
WARN is short for Workers Adjustment and Retraining Notification Act, set up to give workers and unemployment agencies early warning of business closings and layoffs. The act requires notice (timing varies between states) prior to plant closings, mass layoffs, relocations or in some cases reduced work hours. East Shore Partners’ market strategist Joan McCullough wrote about the these notices (available on states’ department of labor websites) a couple months ago, and since then we’ve been keeping a casual eye on New Jersey and New York.
The national seasonally adjusted weekly claims data have improved, which is naturally welcome, and WARN notices don’t necessarily contradict that trend. But they do offer a more ground-level view of the layoff picture, particularly when you read names of places you might recognize and the number of workers being affected. Continue reading…
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
Bernie Madoff tells CNNMoney he’s having trouble sleeping. Click here to read more about that from CNN. He doesn’t know how lucky he’s got it, living behind bars in America. In China this week, a 39-year old businesswoman received the death sentence for running a $70 million Ponzi scheme – pocket change next to the […]