February 13th, 2010
Retail sales have increased in three of the last four months while inventory levels have shrunk. Add to the mix, a recent drop in consumer sentiment mirroring the public’s angst regarding unemployment. But, they are increasing their spending.
Retailers’ decision to keep inventory levels low protects them from a drop in sales. But, if retail sales continue to improve, they will be forced to restock thereby adding to economic activity.
Analysis of stock market sectors aids in seeing future economic trends because stocks frequently move ahead of the economy. Look at this chart showing the relative market strength of the retail sector. Its market strength has improved since mid January (become a stock-compass.com subscriber so you can see all the market sector charts each week):
Posted in consumer confidence, retail sales, stock market, unemployment | No Comments »
February 10th, 2010
Yesterday, a report from Bank of America’s Merrill Lynch index data revealed a steep drop in junk bond yields. Bonds yielding at least 10 percentage points over benchmark rates crashed to $117 billion from $250 billion only six months ago. Higher yields are demanded by investors in distressed companies. This steep drop shows that there are fewer companies in danger of default.
Take a look at this chart of the Credit Suisse High-Yield Bond Index showing the dramatic rise in price (yield moves opposite to price):
Posted in Uncategorized, economic growth | No Comments »
February 6th, 2010
Yesterday, the Labor Department reported a revision from 85,000 to 150,000 of the amount of payroll jobs lost in December. Add 20,000 more jobs lost in January. At the same time, the unemployment rate decreased from 10.0% to 9.7%. One reason the unemployment rate has not gone higher in the presence of continuing job losses has been the increase in the amount of workers that have given up. The number of discouraged workers increased from 734,000 to 1,065,000 in the past year. That is a 45% increase.
But there is a glimmer of improvement in the latest report: “The number of temporary help workers increased in January by 52,000 to the highest level since December 2008, and temporary workers increased for the sixth consecutive month for the first time since 2005. The 227,000 increase in temporary jobs since August is the largest 6-month increase since that data series started in 1990.”
Posted in Labor department, economic growth | No Comments »
January 9th, 2010
First, this recession seems to be worse, by a number of different measures, than the previous recession in 2001-2002. Take a look at this data from the Bureau of Labor Statistics:
The graph below shows the median weeks of unemployment for people 16 year of age or older. It is about twice as bad than it was in late 2003 and early 2004.
Here is the number of workers at part-time work because they cannot find full-time work. Again, it is almost twice as bad as the last recession; an amazing 9 million people.
This graph shows the number of discouraged workers (people who want jobs but who have stopped searching). Almost 900,000 people who will start looking for work again when the economy improves, thus keeping the unemployment rate high (because they will again be counted as “workers”) for months.
But, there are some significant signs of improvement. As Mark Perry points out here, overtime work and the number of temporary workers has increased dramatically since the summer
Posted in Labor department, unemployment | No Comments »
December 28th, 2009
M2 grew almost double in 2008 than it did in 2009. The percentage growth in M2 was 9.4% between December 2007 and December 2008. But, it was only 5.1% between November of 2008 and November of 2009.
Gold has industrial uses along with the production of jewellery. Many think of gold as a universal hedge, but it is only a hedge against inflation (in a deflation, cash is the only thing that increases in value). In this chart of the gold futures, look how it has dropped in the last few weeks, mirroring the drop in M2. Presumably, this means that the threat of inflation has also diminished recently.
Posted in Federal Reserve, inflation | 1 Comment »
December 13th, 2009
Retail sales for November increased 1.3% in November after a 1.4% gain in October. Even without auto and gasoline sales, there was an increase of 0.6% in November with only a 0.1% gain in October.
Consumer confidence has been in the dumps for many months but has improved recently. The Reuters/University of Michigan’s consumer sentiment index increased to to 73.4 in December from 67.4 in November. But this level is still below a 50% recovery from the 90 plus ratings before the recession compared to 55 about one year ago.
Posted in consumer confidence, retail sales | 1 Comment »
November 22nd, 2009
It is obvious to the public that the economy is still pretty weak. This is because of the highest unemployment rate we’ve had in decades. Recent economic reports confirm the public’s attitude:
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The Index of Leading Economic Indicators rose only 0.3% in October. A consensus of analysts had predicted a 0.4% gain. It rose 1.0% in September. The main positive in the report was the spread between very low short-term rates (e.g., the 3-month t-bill) and long-term rates (e.g., the 10-year note). But the main reason short-term rates are so low is because the Fed has prevented them from rising. Unemployment, consumer expectations and building permits were all strong negatives. |
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Weekly unemployment claims (i.e., people who have recently signed up for unemployment) have trended down over the last few weeks from more than 600,000 to around 500,000 per week. But, the average was between 250,000 and 300,000 before the recession began. |
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Housing starts dropped in October to 529,000 from 590,000 in September. Analysts has predicted a gain to 600,000. Permits for future building dropped 4% in October after falling 0.9% in September. |
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Retail sales (less car sales) increased by only 0.2% in October following a 0.4% rise in September. Retail sales as a whole are 1.7% worse then last year – they were 6.2% worse then last year in September. |
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The Fed’s Empire State Manufacuring Survey’s General Business Conditions Index dropped to 23.51 in October from 34.57 in September. This was worse than the analysts’ consensus of 29. The growth of manufacturing in the New York region has slowed. |
Posted in Federal Reserve, economic growth | No Comments »
November 6th, 2009
Third quarter GDP was recently reported to have jumped up by 3.5% after three straight quarters of losses. Many heralded the news as an indication that current economic weakness has started to abate. But, weakness still abounds.
The GDP formula is made up of three main components: consumer spending, business investment and government spending. The most recent consumer spending report showed a drop of 0.3% month-to-month and 0.5% in the last 12 months. The clash for clunkers program made up a lot of the growth in GDP. But the program merely moved ahead future sales. The Commerce Department reported on October 1st that car sales plunged 34% in September.
Between consumer spending, business investment and government spending, it is only government spending that has zoomed up. Look at this chart from Heritage.org showing tax receipts and government spending. The drop in government revenue shows the weakness in the economy.
Posted in Commerce department, economic growth | No Comments »
October 10th, 2009
The Labor Department reported, Friday, that the number of unfilled positions dropped 21,000 to 2.39 million – the lowest since these records began in 2000 and a drop of an amazing 50% since late in 2007 as the recession began.
But the deficit spending of Presidents Bush and Obama was supposed to turn the economy around, wasn’t it? Weren’t we warned of an economic calamity if the TARP, stimulus, auto bailouts, etc. weren’t passed?
In addition to a very weak labor market, our other big economic problem is the plunging U.S. Dollar. Simply put, the lower the dollar, the less savings are worth and the harder it is to buy things. Here’s a chart of the U.S. Dollar for most of the period that President Obama has been in office:
Posted in Labor department, economic growth, unemployment | 1 Comment »
September 22nd, 2009
In a recent post, Mark Perry of the Carpe Diem blog (http://wallstreetpit.com/10503-tips-derived-expected-inflation-only-175-percent) , showed that a spread of only 1.75% exists between the 10-year TIPS (inflation protected) and 10-year Treasury yields.
Other financial instruments are singing the same song. Gold (and commodities in general) are another barometer of inflation. Gold has been moving sideways since July 2008 following a tremendous bullish rise from April 2001 when it was 400 to its high in March 2008 of 1059. But, the commercials (i.e., insiders) in our Commitment of Traders report shows them to be more short, right now, then they have been in the last three years. Notice how the commercials (the blue line below) bought when gold moved to a low last November and are now at an extremely short position.
While gold is at a high, it seems unlikely to move much higher. It has been trying to do so for the last 1 1/2 years.
It is easy to understand why some people think inflation is on the horizon. The Federal Reserve has increased the amount of cash (M1) by a staggering 18.5% during the last 12 months (http://www.federalreserve.gov/releases/h6/Current/). Compare that to the period between September 2007 and September 2008 – only 5.6%.
Posted in Federal Reserve, inflation | No Comments »