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Producer Price Index Tame – Analyst Blog

Dirk Van Dijk — Tue, 17 Nov 2009 15:44:31 +0000

In September, the Producer Price Index rose by 0.3%. While this is an acceleration from the 0.6% decline in September, it is well below consensus expectations of a 0.5% increase.

All of the price pressures were coming from food and energy. If they are stripped out to get the Core Producer Price Index, prices fell by 0.6% for the month -- a much faster decline than the 0.1% decline last month, and even farther below the consensus expectations of a 0.1% increase for the month. Both food and energy rose by 1.6% at the finished level in September.

For energy, though, it was just a partial reversal of the 2.4% decline in September. In September, finished food prices fell only 0.1%. On a year-over-year basis, the total Producer Price Index is down 1.9%. However, last month the year-over-year decline was 4.8%. Thus on a year-over-year basis, the deflationary pressures are abating -- but just think about where we were a year ago!

The finished goods producer price index is the one that gets all the headlines. The core producer price index at the finished level also gets a fair amount of attention. However, the Bureau of Labor Statistics also provides data on what is happening further up the food chain, with data on intermediate and crude goods. To keep the three levels straight in your mind, think Wheat (crude), Flour (intermediate) and Bread (finished).

At those levels, there is some evidence of minor inflationary pressures, but again it is all driven by food and energy costs. At the intermediate level, prices rose 0.3% following a 0.2% increase in September. On a year-over-year basis, prices are down 7.5% at the intermediate level. The huge price declines of a year ago are rolling off.

In September, the year-over-year decline in the intermediate producer price index was 11.7%. Intermediate food prices were down 0.2%, following a 0.5% decline in September. Energy prices rose by 2.3% at the intermediate level -- more than reversing a 2.1% decline in September. Core prices at the intermediate level dropped by 0.2%, following a 0.9% increase in September. Keep in mind price swings tend to be more extreme at the intermediate level than they are at the finished goods level.

Far more extreme, though, are the swings in the crude level producer price index. After all, there is another name for crude goods -- commodities. Overall crude goods rose by 5.4% in October, more than making up for the 2.1% decline in September. Over the last year, prices for crude goods have dropped by 14.1%.

The bulk of that decline, however, came last year as the price of all commodities absolutely collapsed. In October of last year, the crude goods index plunged 16.1% and it was followed by a further 13.1% decline in November. Those will roll off soon, so the year-over-year numbers are going to show much smaller declines. Core crude prices rose by 0.5% in October, on top of a 0.5% rise in September. Crude energy prices rose by 8.3% -- more than offsetting a 5.4% decline in September. Similarly, crude food prices were up 5.2% for the month after having fallen by 1.9% in September.

This report shows that aside from food, and especially energy, there is no real inflation pressure in the economic system. Even looking far up the production chain, price pressures for core goods are very moderate. Thus the Fed should continue to hold down interest rates and be as accommodative as possible. After all, the Fed has two mandates -- price stability and full employment.

With core producer prices falling for two months in a row, and in four of the last six months, price stability would argue for MORE inflation, since we are facing deflation. Yes, the deflationary pressures are less than a year old, but year-over-year declines -- even throwing in food and energy prices of 1.9% -- are a far cry from Weimar Germany, or even the U.S. experience of the 1970’s.

The enemy right now is unemployment, not inflation. It also means that people should just shut the heck up about the decline of the dollar and stop treating it like it's some type of disaster. Yeah, it is sort of bad that a ski trip vacation to Davos, Switzerland will cost a lot more, but hey, maybe it will cause some folks to decide to ski Aspen, instead. Perhaps a few Europeans or Japanese will decide to come vacation in the U.S. since with the low dollar, vacations here are very cheap for them. That would actually create a few jobs in restaurants and hotels here.

More importantly, perhaps companies will decide to buy products made by General Electric (GE) instead of the competing products made by Siemens (SI). We might just start to shrink the yawning trade deficit that is an absolute cancer on the economy.

Talk of the Fed tightening is probably premature by at least a year. Yes, a weaker dollar will mean higher prices for internationally traded goods, most importantly for oil. That, however, would help stimulate more drilling activity, greatly helping the bottom lines for companies like Pride International (PDE) and making the existing reserves of companies like Anadarko (APC) much more valuable. It might just help keep demand for oil down, and accelerate the shift to alternative energy sources, such as wind and solar.

Don’t overlook natural gas as a potential alternative energy source, since we have vast supplies of it here in North America. That would be good news for firms like EnCana (ECA). Yeah, nobody really wants to pay more at the pump, but with other price pressures being kept well at bay, we can afford it -- especially if it leads to more jobs.

Look for the gap between headline and core producer prices to continue to widen, but overall, price pressures are very well contained. This gives the Fed free reign to keep interest rates at extraordinarily low levels for a very extended period of time. And not doing so would be extremely irresponsible.
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Zacks Investment Research

Zacks Bull and Bear of the Day Highlights: Novatel Wireless, The Corporate Executive Board, Automatic Data Processing, Johnson & Johnson and Kraft Foods – Press Releases

Zacks Market Commentaries — Thu, 05 Nov 2009 12:40:35 +0000

For Immediate Release

Chicago, IL – November 5, 2009 – Zacks Equity Research highlights Novatel Wireless (NVTL) as the Bull of the Day and The Corporate Executive Board (EXBD) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Automatic Data Processing (ADP), Johnson & Johnson (JNJ) and Kraft Foods (KFT).

Full analysis of all these stocks is available at http://at.zacks.com/?id=5506

Here is a synopsis of all five stocks:

Bull of the Day:

We upgrade our recommendation for Novatel Wireless (NVTL) to Outperform following the blockbuster financial results of its third quarter 2009.

We expect the top-line of Novatel to maintain its current growth rate supported by strong demand for MiFi mobile intelligent hotspot and USB modems.

The company has generated a record-high level of free cash flow and significantly improved its gross margin. In addition, the company has a very strong balance sheet, capable to support its long-run business endeavors. Management has made the decision to extend the MiFi platform with new features and functionality, as well as building a MiFi ecosystem through organic development and strategic partners.

Bear of the Day:

We maintain our Underperform rating on shares of The Corporate Executive Board (EXBD). While Q3 EPS beat expectations, the company continues to experience deterioration in key operating metrics, including contract value.

Given the current operating pressures, along with ongoing concerns regarding a slowing economy, we believe the shares should trade at a discount to the peer group average. As such, we anticipate that the company's shares should underperform the market in the near-term.

ADP Sees 203,000 Jobs Lost – Analyst Blog

Dirk Van Dijk — Wed, 04 Nov 2009 16:17:23 +0000

This morning, Automatic Data Processing (ADP), the biggest payroll processing firm, estimated that the economy lost 203,000 private sector jobs in October. That was more than the consensus estimate of 190,000 jobs lost. However, the September job loss numbers were revised to a loss of just 227,000 from the original read of 254,000. Thus the losses are coming from a higher base level, and if the revisions are included, this report was in line with consensus or perhaps a bit better.

Still, it indicates that while the economy might be expanding, employment isn’t. However, this is the seventh straight month where ADP has seen fewer jobs lost than the month before. This is similar to the pattern that we saw following the last two recessions.

While employment has always been considered a lagging indicator, it has been becoming more so with each passing decade. In part this reflects the changing nature of the workplace, with manufacturing jobs making up a much smaller part of the total.

Also, this time around an unusually high percentage of the job cuts are of the permanent variety (see "Permanent vs. Temporary Layoffs"). The graph below, originally from the Atlanta Fed, was also used in that post. The job loss numbers are a net number, with new jobs created offsetting other job losses. The rate of layoffs has slowed down, but the rate of job creation has not yet picked up (see "It's the Lack of Job Creation, Stupid!").

By sector, ADP saw 86,000 jobs lost in the service sector, which is far larger, but more stable than the goods producing sector. The service sector losses included 18,000 from financial services -- the 23rd straight month of declines there. The goods producing sector lost 117,000 jobs, including 65,000 in manufacturing and 51,000 in construction.

The read on manufacturing is in direct contrast with the ISM manufacturing survey which came out on Monday and indicated that manufacturing was actually gaining jobs in October. We will see on Friday which one was right when the Bureau of Labor Statistics (BLS) comes out with the official employment numbers. The consensus for the BLS (which includes government jobs, while ADP does not) report is for a decline of 175,000 jobs. The ADP report might make people a little bit more inclined to take the over on that number, but I don’t think by a lot.

By firm size, it looks like large firms, which tend to have better access to financing, are faring better than their little brothers. They lost a total of 53,000, while medium and small firms each lost 75,000 thousand. Traditionally, small businesses are one of the main engines of job creation in the country, something I wrote about here: "A Rarity: The Small-Business Loan." However those numbers are a little bit deceptive since small businesses employ more people overall than do large businesses.

Specifically, there are 17.9 million people working for firms with more than 500 employees, 42.3 million working for firms between 50 and 499 employees and 48.1 million working for firms with fewer than 50 workers. Thus on a percentage basis, large employers dropped 0.3% of their payroll in October, while medium-sized firms dropped 0.18% and small firms dropped less than 0.16%. As evidenced by the announcement yesterday by Johnson & Johnson (JNJ) that it would be trimming back its worldwide workforce by 7%, even the largest, most well-financed and stable of companies have not been immune from layoffs in this cycle.

All of this, however, is prelude to the big number on Friday. The September number was a major disappointment after months of steady improvement. The October report (and the revisions to September and August) will tell us if that was simply a temporary aberration, or the start of a new trend that we should be worried about. My gut tells me that it was an aberration.

The economy is getting back on track, but it seems like it is likely to be stuck in first gear for a while, but at least that is better than going in reverse. Of course there is a bit of a "chicken-and-the-egg" problem, since continued job losses tend to hurt the economy and can lead to further job losses.

A rising unemployment rate at a level over 10% is a recipe for Scrooge to rule Christmas, not Santa. However, it looks as if the fiscal and monetary stimulus program have managed to break that vicious cycle enough to generate at least some economic growth, but not yet enough to cause net job growth. History suggests that it will come, but might take a few more months.

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Zacks Investment Research

A Quick Look at Gold TrendsA Quick Look at Gold Trends

Frank Holmes — Tue, 20 Oct 2009 05:00:00 +0000

With the price of bullion at all-time highs, therersquo;s a raging debate on gold as an investment ndash; is it overbought or can it go still higher? Whatrsquo;s the inflation risk to the dollar? Should we be more worried about deflation? Every Friday we try to address the factors affecting gold in our award-winning Investor Alert, which recaps the week just ended and also looks forward to provide insights on what might lie ahead. Along with gold, the Investor Alert covers energy and natural resources, global emerging markets, domestic equities and the bond market. We encourage everyone with an interest in our key sectors to join the 23,000-plus individual investors who now subscribe to the Investor Alert and the 10,000 investment professionals who receive its sister publication, the Advisor Alert. Signup is free and easy ndash; just follow the appropriate link. To give you an idea of the Investor/Advisor Alertrsquo;s value, here are a few of the gold-related items from the latest issue: International Monetary Fund data shows that currency holdings among reporting central banks reduced the U.S. dollarrsquo;s weight to 62.8 percent as of June 30, the lowest on record. The shift in reserves to euros and yen confirm that world leaders are acting on threats to diversify out of the dollar based on lagging performance on U.S. assets and a weakening dollar. According to UBS, investment growth is not coming from the worldrsquo;s largest bullion-backed exchange-traded fund, but rather from private purchases of bullion and Indian buying during the festival season. COMEX net long positions stood at a record high of 23.5 million ounces. Macquarie Bank said exchange-traded funds backed by physical supplies of industrial metals may potentially drive prices higher than index funds that buy futures contracts because there are currently talks of regulatory measures being imposed in the futures markets. An analysis by the Bank Credit Analyst shows gold and silver markets to be fairly overbought, but BCA expects that any correction should prove short-lived in the absence of a reversal in the dollar and/or deterioration in liquidity conditions. The Bureau of Labor Statistics says the consumer price index for jewelry in the U.S. rose to its highest level since January 1996. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The COMEX is a commodity exchange in New York City formed by the merger of four past exchanges. The exchange trades futures in sugar, coffee, petroleum, metals and financial instruments. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. #09-728

A Quick Look at Gold Trends

Frank Holmes — Tue, 20 Oct 2009 05:00:00 +0000

Did You Hear That Big Thud?

Investment U — Tue, 13 Oct 2009 15:39:16 +0000

Did You Hear That Big Thud? by Robert Williams, Publisher It’s incredible how fast the tables can turn sometimes. Eighteen months ago, at the height of the Agriboom, supply shortages turned our nation’s farms into virtual ATMs. Farmers couldn’t grow their respective crops fast enough. Farm incomes were pushed about 30% higher than the average [...]

Prieur’s readings (October 5, 2009)

Prieur du Plessis — Mon, 05 Oct 2009 05:40:32 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other worthwhile articles you would like to share to the comments section.

Look Past The “Blips”

Terence Chan — Sat, 03 Oct 2009 01:34:00 +0000

pa href="http://feedads.g.doubleclick.net/~a/kC4RintY2-szn_H29hqb_ENcSAM/0/da"img src="http://feedads.g.doubleclick.net/~a/kC4RintY2-szn_H29hqb_ENcSAM/0/di" border="0" ismap="true"/img/abr/ a href="http://feedads.g.doubleclick.net/~a/kC4RintY2-szn_H29...

Stalking the Mighty Consumer

QualityStocks — Fri, 02 Oct 2009 12:01:54 +0000

What group can claim credit for being the driving force behind the world’s largest economy? Hint: You are probably a member of this group. The answer is U.S. consumers, whose spending is responsible for more than 70% of U.S. gross domestic product (GDP). As we’ve seen in recent years, when consumer conditions are bad, the effects [...]

Job Losses Hurting Workers’ Comp – Analyst Blog

Zacks Market Commentaries — Mon, 28 Sep 2009 14:49:33 +0000

The U.S. workers' compensation insurance market experienced an underwriting loss in 2008. The softening of premium rates along with an increase in overall loss costs have contributed to this decline in underwriting performance.

Payrolls are decreasing more rapidly than insurers projected. Along with unemployment, the industry is facing also reduced working hours, no replacement of natural attrition and wage reductions.

According to the unemployment data released by the Bureau of Labor Statistics (BLS) in early September, 466,000 jobs were reduced by employers in August and the unemployment rate rose by 0.3 percentage point to 9.7%. A widespread job bust that spanned major industry sectors saw 14.9 million unemployed in August.

About 7.4 million people have become jobless since the recession began in December 2007, while the unemployment rate has grown by 4.8 percentage points. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent months. The rate had been little changed in June and July, after increasing 0.4 or 0.5 percentage points in each month from December 2008 through May.

Though the early signs of an economic rebound inspire our confidence we note that the companies are aggressively focusing on expense management and are implementing stringent methods to curb costs which are mostly driven by retrenchment.

Until the economy recovers, payrolls will remain restricted. As premium production is directly correlated with payroll, any dramatic improvement in the industry’s topline is unlikely.

Additionally, the steady rise in medical costs that continues to outpace wages is another problem for the workers compensation insurance industry. While indemnity claim costs have surpassed wage increases, low investment yields are pressuring industry underwriting results. This, coupled with low interest rates, is continuing to challenge pricing in the market.

Among the worst affected are ACE Ltd. (ACE), Zenith National Insurance Corp. (ZNT), Employers Holdings Inc. (EIG) and SeaBright Insurance Holdings Inc. (SBX).
Read the full analyst report on "ACE"
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Cautiously Positive?

Contrarian Profits — Thu, 10 Sep 2009 19:07:59 +0000

pEuro #38; yen add to gains#8230;RBNZ disappoints#8230;Foreclosures continue to stack up! BOE #38; BOC meet today#8230;And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Thrillin#8217; Thursday to you! Ahhh! A change! Just thought that with the thrilling victories my beloved Cardinals have been accumulating, that Thrillin#8217; would be a nice change to our Thursday lineup!/p pFront and Center this morning#8230; The currencies added to their gains this week yesterday, albeit small gains, but gains nonetheless. The Fed#8217;s Beige Book was #8220;cautiously positive#8221;#8230; And#8230; Overnight, the Reserve Bank of New Zealand met, and left rates unchanged as suspected#8230; This and more as we begin our Thrillin#8217; Thursday!/p pThe Big Dog euro has been off the porch chasing the dollar down the street for a week#8230;/p

A Jobs Jamboree Friday!

Contrarian Profits — Fri, 04 Sep 2009 18:15:49 +0000

pCurrencies trade in a tight range#8230; G-20 to shun an exit from stimulus? Gold and Silver and Oil#8230; A new trend? Loonies follow the commodities higher#8230; And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Happy Friday to one and all! Well#8230; Once again, my day didn#8217;t turn out exactly as planned, but as they say#8230; A bad day at the ballpark is better than a good day and then you plug in the place#8230; It could be work#8230; It could be cutting the grass#8230; Etc../p pOK#8230; I heard a great song on the radio this morning on my way to work#8230; And I said to myself#8230; Chuck, now that#8217;s a great song to start a day with, that everyone should hear each day! It#8217;s a song#8230;/p

Jobs Report Worse than Expected – Analyst Blog

Dirk Van Dijk — Wed, 02 Sep 2009 14:25:19 +0000

This morning, ADP (ADP), the nation’s largest payroll processing firm, released its estimate of job losses in August. They came in at a decline of 298,000 jobs for the private sector. This is significantly worse than the consensus expectations of a decline of 250,000.

There was a little bit of good news in the report in that this is still an improvement over the 360,000 lost in July -- a number that was revised from an original read of 371,000 jobs lost.

The losses in August were almost evenly split between the Goods Producing Sector (Construction & Manufacturing), which lost 152,000 jobs, and the Service sector, which dropped 146,000.

By size of business, the big firms are holding up best with a decline of 60,000. Medium-sized firms (between 50 and 499 employees) shed 116,000 jobs while small businesses slashed their payrolls by 122,000.

Even the Auto industry, which benefited from the Cash for Clunkers program in August, dropped 74,000 jobs. Ford (F) and General Motors have recently announced production increases and are calling some workers back, but it did not show up in the August numbers.

However, in a separate report, the big outplacement firm Challenger, Gray and Christmas reported that layoffs dropped to 76,000 in August -- a 21% decline from July. Generally, however, the ADP data set is bigger and gives a more accurate read on the employment picture than does the Challanger data.

While we have seen many indications that the economy is starting to recover, it has not yet translated over to the employment picture. On the plus side, this should be very good for corporate profits, since the pick-up in sales has not been matched by a increase in labor expense. On the minus side, it will be very hard to sustain a recovery if people do not have jobs (and the income from having them).

It is not as if people can take on debt to tide them over and keep spending anymore. They were able to do so in the last recession since the housing ATM was still working. Not the case today, when most people have very little equity in their houses (or are underwater in them).

The ADP report sets the stage for the Government employment report. As of this morning, the consensus estimate was that it would show a decline of 225,000 jobs in August. The numbers are not directly comparable to the ADP numbers since ADP only covers the private sector. However, it is not likely that the government added 73,000 jobs in the month -- not with the stress that state and local governments are under with falling sales and property tax revenues.

ADP and the Bureau of Labor Statistics have disagreed in the past. After all, the BLS number in July was a decline of 247,000, which is much lower than the even revised -360,000 number from ADP. Still, I think the ADP numbers will make people a bit more pessimistic going into Friday’s big report.

One of the key things to look for in Friday’s report will be the length of the average work week, since businesses will first start to extend the hours of the employees they have when things pick up, and then only later when they feel confident that the recovery is sustainable will they bring more hands on deck.

I will also be looking closely at the indicators of unemployment duration. Being out of work for almost a year is a very different experience -- and one with vastly different economic consequences -- than being out of work for just a few weeks. This recession has been extreme in the length of time people spend on the unemployment line once they are laid off.
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Joblessness Continues to Plague the Economy

Contrarian Profits — Mon, 10 Aug 2009 17:30:01 +0000

pThe U.S. unemployment rate slipped to 9.4% in July from 9.5% in June, the most encouraging sign yet that the U.S. recession is easing./p pBut the news – released in a government report Friday – isn’t all good: Unemployment is likely to remain high in the months to come as some of these encouraging indicators of new economic growth evolve into a painful a href="http://www.moneymorning.com/category/jobless-recovery/" target="_blank"jobless recovery/a./p pFriday’s jobs report and other recent data “reinforce our view that the U.S. recession ended in June, and we have raised our third-quarter 2009 growth forecast to 3.5%,” Christian Broda, a Barclays Capital (NYSE ADR: a href="http://www.google.com/finance?q=NYSE%3ABCS" target="_blank"BCS/a) economist in New York, wrote in a research report yesterday./p pAlan Krueger, the U.S. Treasury Department’s top economist, said he thought forecasts#8230;/p

Joblessness Continues to Plague the Economy

Contrarian Profits — Mon, 10 Aug 2009 17:30:01 +0000

GDP Does Not Compute, Will Robinson!

Contrarian Profits — Wed, 05 Aug 2009 21:30:53 +0000

pCurrencies trade in a tight range. Pound Sterling, the star performer? Something smells fishy#8230;Do you see trend with Gov. Reports? And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Wonderful Wednesday to you! We had a very tight range trading day yesterday in the currencies, which have left them trading in about the same clothes they were wearing when I signed off yesterday! We#8217;ve got that to talk about, and#8230; Another $2 Billion for the CARS program has been allocated#8230; What a crock! OK, Chuck, slow down, you don#8217;t need to get your blood boiling this quickly, this morning!/p pI#8217;m writing from home this morning, as I have a meeting close to our old office, which means its not far from where I#8230;/p

Beware of the Obama Stimulus Trap

Contrarian Profits — Fri, 31 Jul 2009 21:00:44 +0000

pUpbeat headlines have been everywhere in recent weeks, and they all seem to point to a single conclusion: The U.S. economy is in the early stages of a very rapid recovery./p pIn fact, when you peruse the news it’s difficult to come to any other conclusion. For instance:/p ul liA number of key earnings reports have been much better than expected, and company executives buttressed those profit figures with positive comments about the next 18 months./li liThe trading operations of Goldman Sachs Group Inc. (NYSE:a href="http://www.google.com/finance?q=NYSE%3AGS" target="_blank"GS/a) and JPMorgan Chase #38; Co. (NYSE: a href="http://www.google.com/finance?q=NYSE%3AJPM" target="_blank"JPM/a) a href="http://www.moneymorning.com/2009/07/17/jpmorgan-chase-accounting-mirage/" target="_blank"both just reported record profits/a./li liU.S. housing prices rose in May a href="http://www.moneymorning.com/2009/07/30/housing-market-bottom/" target="_blank"for the first time in three years/a. Initial jobless claims have plunged 15% since their April peak. The Conference Board’s Index of#8230;/li/ul

The Reality of Fictitious Jobs

Mogambo Guru — Wed, 22 Jul 2009 00:05:42 +0000

h1 class="entry-title"The Bureau of Labor Statistics reported that 467,000 jobs were lost in June, bringing total non-farm employment down to 140.2 million, which, although bad, could have been worse, as I personally haven’t been fired yet, which is the only good news in the whole thing, as far as I can see.br / /h1 pThe Bureau reports that, officially, “The number of unemployed persons (14.7 million) and the unemployment rate (9.5%) were little changed in June,” which was helped by the fact that the labor force actually went down by the 358,000 people who stopped looking for work./p pThe tally so far is that “Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.2 million, and the#8230;/p

Reduced Payroll Lowers Premiums – Analyst Blog

Zacks Market Commentaries — Mon, 13 Jul 2009 20:01:05 +0000

The U.S. workers' compensation insurance market experienced an underwriting loss in 2008. The softening of premium rates along with an increase in overall loss cost contributed to this decline in underwriting performance.

Payrolls are decreasing more rapidly than insurers projected. Along with unemployment, the industry is facing also reduced working hours, no replacement of natural attrition and wage reductions.

According to the unemployment data released by the Bureau of Labor Statistics (BLS) early July, 467,000 jobs were reduced by employers in June and the unemployment rate reached a high of 9.5%. A widespread job bust that spanned major industry sectors saw 14.7 million unemployed in June.

7.2 million people have become jobless since the recession began in December 2007. Also, the number of job openings has declined by 1.5 million, or 36% year-over-year as of May 2009. With the deepening economic uncertainty, companies are aggressively focusing on cost control which is mostly driven by retrenchment.

The steady rise in medical costs that continues to outpace wages is another problem for the workers compensation insurance industry. While indemnity claim costs have surpassed wage increases, low investment yields are pressuring industry underwriting results. This, coupled with low interest rates, is continuing to challenge pricing in the market.

Among the worst affected are ACE Ltd. (ACE), Zenith National Insurance Corp. (ZNT), Employers Holdings Inc. (EIG) and SeaBright Insurance Holdings Inc. (SBX).

Until the economy recovers, payrolls will remain curtailed. As premium production is directly correlated with payroll, any dramatic improvement in the industry’s topline is unlikely.

Read the full analyst report on "ACE"
Read the full analyst report on "ZNT"
Read the full analyst report on "EIG"
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Zacks Investment Research

Back To Risk Aversion!

Contrarian Profits — Mon, 13 Jul 2009 14:00:01 +0000

pEarnings reports begin this week#8230; Dollar, yen, francs get bought#8230; Medvedev shows off new coin! A busy week! And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Marvelous Monday to you! A Home Run Derby Monday to boot! I have no Idea what#8217;s going on this morning, as I just woke up, and it#8217;s very late in the morning! I was very careful to set my alarm last night, and I#8217;ve never been one of those people that hit the snooze button when it goes off, but here I am, waking up late#8230; UGH!/p pSo#8230; I#8217;m writing from home, and then I#8217;ll shoot in to work#8230; We#8217;re short handed this week, so, I#8217;m sure everyone will be arriving to the office, not see my car, and be#8230;/p

Aspire Misery Index for the Week Ended July 10, 2009

Small Cap Pulse — Sat, 11 Jul 2009 22:03:01 +0000

July 10, 2009 ndash; Another mixed week of economic data, which left Wall Street in doubt about whether the economy is going to rebound any time soon. Fridayrsquo;s downtick in consumer sentiment was a stark reminder that Main Street is not doing well and isnrsquo;t particularly optimistic. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Consumer Sentiment ndash; The University of Michigan Consumer Sentiment (preliminary) index decreased to 64.6, the lowest level since March, from 70.8 in June. The forecast was for a reading of 70. With respect to Americanrsquo;s perceptions about their financial situation, and whether it is a good time to buy big-ticket items, the reading fell to 70.4 from 73.2. The index of consumer expectations for six months from now fell to 60.9, the biggest drop since October, from 69.2. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; US Import and Export Price Indexes - The U.S. Import Price Index rose 3.2 percent in June, the Bureau of Labor Statistics of the U.S. Department of Labor reported today, led by higher petroleum prices.nbsp; The June increase followed a 1.4 percent advance in May.nbsp; Export prices also increased in June, rising 1.1 percent after advancing 0.5 percent in the previous month. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Wholesale Trade Data: Sales/Inventories Sales. The U.S. Census Bureau announced today that May 2009 sales of merchant wholesalers, except manufacturersrsquo; sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $311.3 billion, up 0.2 percent (+/-0.5%)* from the revised April level, but were down 19.9 percent (+/-1.4%) from the May 2008 level. The April preliminary estimate was revised upward $1.4 billion or 0.4 percent. May sales of durable goods were down 0.2 percent (+/-0.7%)* from last month and were down 23.0 percent (+/-1.6%) from a year ago. Sales of metals and minerals, except petroleum were down 8.1 percent for last month, while motor vehicle and motor vehicle parts and supplies were up 4.4 percent. Sales of nondurable goods were up 0.5 percent (+/-0.9%)* from last month, but were down 17.2 percent (+/-1.8%) from last year. Sales of petroleum and petroleum products were up 4.6 percent from last month and sales of drugs and duggists' sundries were up 1.4 percent. Inventories. Total inventories of merchant wholesalers, except manufacturersrsquo; sales branches and offices, after adjustment for seasonal variations but not for price changes, were $402.2 billion at the end of May, down 0.8 percent (+/-0.4%) from the revised April level and were down 7.6 percent (+/-1.2%) from a year ago. The April preliminary estimate was revised upward $0.2 billion. End-of-month inventories of durable goods were down 1.5 percent (+/-0.4%) from last month and were down 8.2 percent (+/-1.6%) from last May. Inventories of metals and minerals, except petroleum were down 5.2 percent from last month and inventories of lumber and other construction materials were down 3.2 percent. End-of-month inventories of nondurable goods were up 0.3 (+/-0.7%)* from April, but were down 6.6 percent (+/-1.6%) compared to last May. Inventories of farm product raw materials were up 6.1 percent from last month, while inventories of paper and paper products were down 2.2 percent. Inventories/Sales Ratio. The May inventories/sales ratio for merchant wholesalers, except manufacturersrsquo; sales branches and offices, based on seasonally adjusted data, was 1.29. The May 2008 ratio was 1.12. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Budget Deficit - The federal budget deficit was $1.1 trillion for the first nine months of fiscal year 2009, CBO estimates, more than $800 billion greater than the deficit recorded through June 2008. Outlays are 21 percent higher than they were in the first three quarters of 2008, but revenues have fallen by 18 percent. The estimated deficit reflects outlays of $147 billion for the Troubled Asset Relief Program (TARP), recorded on a net-present-value basis, and spending of $83 billion in support of Fannie Mae and Freddie Mac.The Treasury reported a deficit of $190 billion for May, about $9 billion higher than CBOrsquo;s estimate for May on the basis of the Daily Treasury Statements. The difference occurred largely because outlays were higher than expected for the TARP and for the Department of Education. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Consumer Debt ndash; The American Bankers Association said that consumer loan delinquencies increased in the Q1 to another record high, to 3.23%. Credit card delinquencies increased to 4.75%. While the percentage of all outstanding debt on cards hit a record high of 6.60%. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Consumer Credit - Consumer credit decreased at an annual rate of 1-1/2 percent in May 2009.nbsp; Revolving credit decreased at an annual rate of3-3/4 percent, and nonrevolving credit decreased at an annual rate of 1/4 percent. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Housing Market ndash; Realtor.com announced a survey which showed that almost 53% of consumers planning to buy a home in the future said they arenrsquo;t ready to do so now. About a third cited concern about their jobs. Concerns about selling their home was cited by 16% of those surveyed and 8% cited concerns about home prices that keep falling. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; And the Homeless ndash; The Housing and Urban Development Department says in its annual report to Congress released Thursday that about 1.6 million people used a homeless shelter or lived in transitional housing between Oct. 1, 2007, and Sept. 30, 2008 -- about the same as the year before. But within that group, the number of families grew 9 percent, from about 473,000 to 517,000. middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Job Cuts ndash; PPD (cutting 227 jobs); Monster (cutting 160 jobs); Covidian (cut 119 jobs); Courier-Journal (44 jobs, or 7% of work force); Arizona Republic (cut 100 jobs);

Layoffs Keep CTAS Uniforms Empty – Analyst Blog

Zacks Market Commentaries — Thu, 09 Jul 2009 16:25:05 +0000

Rising Unemployment Levels Curtails Cintas’ Top-line Growth

According to the data released by the Bureau of Labor Statistics, the U.S. economy has lost around 7.2 million jobs since the start of the recession in December 2007. The national unemployment rate rose to 9.5% in June 2009, the highest in more than 25 years.

Increasing job losses are adversely impacting Cintas Corporation’s (CTAS) revenue growth. Cintas is predominantly a corporate identity uniform company that also provides ancillary services. The company has stated that many of its customers have been forced to reduce employment levels and consolidate facilities due to the challenging business environment.

These reductions and consolidations have negatively impacted the company’s top line growth. The company estimates that the fourth quarter revenue for fiscal 2009 will come in 12–14% lower compared to the prior-year level. We believe the demand weakness will persist in fiscal 2010 also as we expect additional workforce reductions and plant closures by companies across sectors.

Cintas is actively managing its cost structure to adjust to the weak demand conditions. The company is focused on eliminating all non-value added work throughout the organization. In addition, Cintas is reviewing its route structures.

The company intends to consolidate routes and eliminate those that are redundant. The company is also analyzing better production processes and equipment which it believes will have a positive impact on its operational cost structure in the future.

These cost reduction initiatives along with declining energy prices are expected to partially offset the impact of weak demand. Management forecasts diluted EPS in the range of $0.34–$0.37 for the fourth quarter of fiscal 2009, compared to $0.58 in the prior-year quarter.

Read the full analyst report on "CTAS"
Zacks Investment Research

A Sustainable Economic Recovery?

Contrarian Profits — Fri, 19 Jun 2009 14:00:18 +0000

pMore range trading#8230; Eurozone doesn#8217;t need more stimulus#8230; A$#8217;s outperform on rate outlook#8230; A double whammy for the dollar#8230; And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Happy Friday to one and all! The end of another week#8230; I was out on Monday, and it still seems to have been another long week! UGH! Oh well#8230; It#8217;s Friday, and this weekend is Father#8217;s Day#8230; So, we#8217;ve got that going for us, eh?/p pMore range trading in the currencies yesterday, with the euro leading the currencies higher for most of the day, only to see their gains slip, sliding away by the late afternoon. In the overnight markets, the currencies, once again, have moved higher, but nothing to get all lathered up about#8230;/p pThis morning, the euro got#8230;/p

A Jobs Jamboree Friday!

Contrarian Profits — Fri, 05 Jun 2009 19:49:47 +0000

p Currencies get a tourniquet#8230; BOE And ECB leave rates unchanged#8230;Political uncertainty in the U.K#8230;Aussie dollar to rally further? And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Happy Friday to one and all! A Fantastico Friday, as we all will be heading to the Ballpark tonight to watch my beloved Cardinals! This should be a fun time by all! It#8217;s also a Jobs Jamboree Friday, and we#8217;re about to witness something that hasn#8217;t been seen in 25 years#8230; A #8220;published by the BLS#8221; Unemployment Rate of 9%!/p pOK#8230; You know me#8230; I think the (Bureau of Labor Statistics) BLS should just drop the #8220;L#8221;, as they have gone whacko with the adjustments and deletions to the statistics! So#8230; For those of you keeping#8230;/p

Wild Swings!

Contrarian Profits — Wed, 03 Jun 2009 21:59:37 +0000

pEuro goes back and forth over 1.43#8230;Eurozone unemployment rises to 9.2%#8230;Australia#8217;s GDP surprises! Is it protectionism? And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Wonderful Wednesday to you! I#8217;m draggin#8217; the line today, as I was helping my oldest son, Andrew, with things in his brand, spankin#8217; new house, last night. Congrats to Andrew, for finding a great bargain, with a low, fixed, interest rate!/p pOK#8230; Whew! What a day in the currencies yesterday! Another day, and another day of wild swings.. Volatility is the name of the game these days#8230; Watching, for instance, the euro trade down to 1.4220, and then up to 1.4320 and not just on a one-way ticket! Oh No! this is a bounce here a bounce there#8230;#8230;/p

The Currency Rally Continues!

Contrarian Profits — Mon, 01 Jun 2009 13:16:23 +0000

pEuro trades past 1.42#8230; Geithner make a promise to China#8230; Central Bank meetings this week#8230; Canada#8217;s Fin Min, speaks#8230; And Now#8230; Today#8217;s Pfennig!/p pWell, on Friday I left you with the story of a currency rally for the ages#8230; And it didn#8217;t let up there! Although the rest of the day on Friday the bias was to sell dollars, the real chunk of the dollar wasn#8217;t taken until last night in Asia#8230; Here#8217;s the deal folks, and this won#8217;t be the first time you#8217;ve heard this from me either!/p pFundamentals! The fundamentals are coming home to roost, and the rot on vine is being exposed#8230; Just an example of what I#8217;m talking about#8230; G.M. will file for bankruptcy today#8230; Soon, they will#8230;/p

OMB Makes New Deficit Forecast

Contrarian Profits — Tue, 12 May 2009 14:54:07 +0000

pThe BLS adds jobs#8230; Growing Deficits again#8230; Jim Rogers#8230;. A Trade Surplus for Canada#8230; And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Terrific Tuesday to you! Well#8230; I#8217;m here! Lost Wages#8230; No I mean, Las Vegas! It#8217;s such a long flight here! UGH! And the plane was packed#8230; Like I said about a month ago, when you take a flight, it sure doesn#8217;t seem like people have cut back on spending!/p pOK#8230; Well, the currencies took a breather VS the dollar yesterday, and basically traded right around the currency round-up levels most of the day. Overnight, things were pretty quiet too#8230; The markets are trying to figure out which way they are going to go with the dollar#8230; The Deficit is growing,#8230;/p

Opening Pandora’s Box…

Contrarian Profits — Wed, 06 May 2009 19:38:13 +0000

pCurrencies back off#8230; More problems for BOA? More on China#8230;Aussie Retail Sales rebound#8230; And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Wonderful Wednesday to you! I had someone last week in Bermuda ask me why I have my little sayings like Wonderful Wednesdays, and Fantastico Fridays#8230; I told him that it had to do with my life scare of almost 2 years ago, and that I now celebrate each and every day! (well, maybe when I had pneumonia two weeks back I wasn#8217;t celebrating#8230;.)/p pOK#8230; I hope your Cinco De Mayo fun was#8230; Well#8230; Fun! We went out with some good friends, but was back home before bed time for yours truly#8230; Still fun though!/p pThe currencies, led by the euro have run#8230;/p

JOLTS from the BLS

Jeffrey Miller — Sat, 11 Apr 2009 01:16:41 +0000

Understanding changes in employment is crucial for investors. Employment is related to consumption, to consumer confidence, and to GDP. The Bureau of Labor Statistics provides many reports. In the Internet age, these are all backed up with online explanations --...

Interpreting Government Data: Is a Conspiracy Afoot?

Jeffrey Miller — Wed, 08 Apr 2009 02:42:12 +0000

Nearly everyone agrees that there are many economic issues and that government policies are an important part of analysis and forecasting. So much for the non-controversial statement. Investors Need to Know As investors, the key questions we all face involve...

Gov’t data fatally flawed! Real jobless rate hits 19.8%!

Martin D. Weiss, Ph.D. — Mon, 06 Apr 2009 23:23:27 +0000

Many years ago, when Dad and I used to look at official data and analysis, we knew they were flawed. So we developed our own. That's how we figured out that the capital of savings and loans was grossly overstated and that thousands of S&Ls were ...

The first votes are in

James Hamilton — Sun, 22 Mar 2009 15:01:36 +0000

The Federal Reserve can't be entirely pleased with markets' reaction to its announcement on Wednesday of quantitative goals for purchases of long-term assets.

The Fed's objective in this quantitative easing is to move the inflation rate back into positive territory. Let's begin by reviewing the new consumer price index data that were also released on Wednesday by the Bureau of Labor Statistics. These numbers show further modest movement away from a deflationary tendency prior to any actions by the Fed. The seasonally adjusted February CPI was 0.4% higher than in January, which would be a 4.8% annual inflation rate if sustained for a year. Although that's plenty for one month, it nevertheless is still substantially smaller in absolute value than the drops seen in October through December.

Month-to-month percent change (monthly rate) in seasonally adjusted headline CPI. Data source: FRED.

That leaves the seasonally unadjusted CPI just 0.2% above its value from February 2008.

Year-over-year percent change (annual rate) in seasonally unadjusted headline CPI. Data source: FRED.

If we leave out food and energy, the February increase (+0.2% monthly) implies an annual inflation rate of 2.4%,

Month-to-month percent change (monthly rate) in seasonally adjusted core CPI (excludes food and energy). Data source: FRED.

and the year-over-year core inflation rate now stands at 1.8%. Both of these last two numbers are a bit below what I think the Fed should want to see, but they continue to offer comfort that we had been moving away from the deflation threat before the Fed's announcement.

Year-over-year percent change (annual rate) in seasonally unadjusted core CPI (excludes food and energy). Data source: FRED.

In discussing the Fed's announcement of its plan for quantitative easing, I wrote:

What will be the indication that we've done all we can with this tool? I would urge the Fed to be watching the exchange rate and commodity prices quite closely for an indication that the deflation tide has turned.

Exchange rate (euros per dollar). Source: Yahoo Finance.

Percent change in commodity prices between March 17 and March 20
aluminum	+6.4
coffee	+6.8
copper	+4.1
corn	+3.9
cotton	+3.2
gold	+4.0
lead	-1.7
silver	+6.3
tin	-0.4
wheat	-0.4
zinc	+0.3
crude oil	+3.9

That's why I doubt the Fed was pleased to see the dollar fall 5% against the euro last week. The Fed wanted everybody to wake up and notice that deflation is no longer on the table, but it's another thing if markets run off in the other direction fearful that a major inflation is coming. Notwithstanding, the dollar's move at the end of the week only served to undo an appreciation over the first part of the year, an appreciation that may have been unwelcome and unwarranted.

Prices of a number of commodities also zipped up about 5% on the news. Again this is a disturbing development, but again it still leaves the prices of many commodities below where they started the year, as the graph below demonstrates.

Value of prices of assorted commodities relative to value at start of year (Jan 2, 2009 = 100). Data source: WSJ commodity cash prices, via Webstract.

Commodity prices are quite sensitive to the level of real economic activity. If we had been about to repeat a global Great Depression with attendant significant U.S. deflation, maybe $35 oil could be justified. And if the Fed has now successfully communicated that's not going to happen, a commodities rebound might be quite appropriate.

But I think we also have to worry about whether this might be the start of a replay of what we saw a year ago, when excessively expansionary Fed policy provided fuel for commodity price speculation. In January of this year, Fed Chair Ben Bernanke offered this ex post appraisal of the Fed's policy in early 2008:

The [FOMC's] aggressive monetary easing was not without risks. During the early phase of rate reductions, some observers expressed concern that these policy actions would stoke inflation. These concerns intensified as inflation reached high levels in mid-2008, mostly reflecting a surge in the prices of oil and other commodities. The Committee takes its responsibility to ensure price stability extremely seriously, and throughout this period it remained closely attuned to developments in inflation and inflation expectations. However, the Committee also maintained the view that the rapid rise in commodity prices in 2008 primarily reflected sharply increased demand for raw materials in emerging market economies, in combination with constraints on the supply of these materials, rather than general inflationary pressures. Committee members expected that, at some point, global economic growth would moderate, resulting in slower increases in the demand for commodities and a leveling out in their prices--as reflected, for example, in the pattern of futures market prices. As you know, commodity prices peaked during the summer and, rather than leveling out, have actually fallen dramatically with the weakening in global economic activity. As a consequence, overall inflation has already declined significantly and appears likely to moderate further.

Bernanke seemed here to be taking the position that since the Fed got the long run correct-- the end of 2008 brought strong disinflationary pressures and commodity prices collapsed-- it was OK to ignore the commodity price boom of early 2008. I disagree with that assessment. In my opinion, the oil price increase of 2008:H1 was highly destabilizing for the economy and a key factor that turned an economic slowdown into a recession. One of the lessons for monetary policy that we should draw from the recent behavior of real estate and commodity prices is that the Fed can't ignore the consequences of its actions for speculative prices, even if (or perhaps, particularly if) that speculation reflects a basic misreading of fundamentals. If commodity speculators are erroneously about to declare the bull game is back, that in my mind would be a development that would require the Fed to scale back its plans for quantitative easing.

How would I handle that in practice? I think the best strategy is for the Fed to lay all its cards on the table face up, telling everybody exactly what it is hoping to achieve and how it is going to do it. The Fed needs to communicate that it's not going to allow the price level to fall, but it's also not going to allow runaway commodity prices. So why not announce a specific target of, say, 2-3% for headline inflation, which implies a direct commitment that the Fed will become more cautious if it observes a response to its actions of items such as oil and food? This could be accompanied by statements from Fed officials along the lines that they're watching commodity markets and exchange rates closely for an indication that quantitative easing has accomplished all it set out to do.

All this requires acknowledging from the outset that there is only so much the Fed can accomplish in this situation, a premise that in my mind has considerable merit. But in order to be able to contribute whatever it can, the Fed must be able to speak with clarity and credibility.

If the moves we saw in exchange rates and commodity prices this week are the end of the story, then I think all is well. But if they are the beginning of a new trend, the Fed will need to react.

Technorati Tags: macroeconomics, economics, Federal Reserve, deflation, inflation

A Horrific Jobs Report!

Contrarian Profits — Mon, 09 Mar 2009 12:10:12 +0000

p651K jobs lost in Feb#8230; Dec. and Jan Job losses revised up#8230; Talking Norway, Canada, Australia#8230; Brazil stealthlike for 3 months#8230; And Now#8230; Today#8217;s Pfennig!/p pWell#8230; Our Fantastico Friday was interrupted by that horrific Jobs Jamboree number that printed Friday morning#8230; 651K jobs were lost in February, which let me remind you is a couple of days shorter than other months. So, it could have been worse! Hard to believe that could be the case, but it#8217;s true. The unemployment rate rose to 8.1%, from 7.6% in January. The jobless rate is the highest since 1983. The economy has now shed 4.4 million jobs since the recession began in December 2007, with almost half of those losses occurring in the last#8230;/p

U.S. Unemployment Rate Jumps To 8.1%

Daniel Shepard — Fri, 06 Mar 2009 15:29:07 +0000

Friday March 6, 2009 Navivest According to the Bureau of Labor Statistics of the U.S. Department of Labor, non-farm payroll employment continued to fall sharply in February, with the economy losing 651,000 jobs. As a result, the unemployment rate rose from 7.6 to 8.1%. This is the highest level of unemployment in the U.S., since December of [...]

Employment

William Trent — Fri, 06 Mar 2009 14:41:36 +0000

Employment Situation Summary Nonfarm payroll employment continued to fall sharply in February (-651,000), and the unemployment rate rose from 7.6 to 8.1 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employ- ment has declined by 2.6 million in the past 4 months. In February, job losses were large [...]

China Bucks the Trend, GM Goes to Europe, Inflation Prediction, Jobs and More!

Addison Wiggin — Thu, 05 Mar 2009 16:05:04 +0000

pWhile American stocks stumble, Shanghai soars… why Chinese equities are bucking the global trend#8230; More data disasters… ADP jobs report, auto sales register scary declines#8230;Tired of shaking down U.S. taxpayers, GM aims abroad… EU begged for Detroit dollars#8230;Obama, Bernanke talk up Uncle Sam’s book… Eric Fry on how rampant inflation still seems inevitable#8230;Chuck Butler takes a stab at the $10 trillion question: “How long will this dollar strength last?”/p pbr / There’s always a bull market somewhere, the cliche goes. strongToday — and so far in 2009 — Shanghai’s been a surprisingly good spot to place your bets. /strong/p p style="text-align: center;"/p pThe Shanghai Composite climbed another 6% yesterday. Rumor has it the Chinese government is considering doubling its own economic “stimulus” package, from around $580 billion#8230;/p

Mar 5: Initial Claims Down, Below Estimates – Economic Highlights

Zacks Market Commentaries — Thu, 05 Mar 2009 15:29:07 +0000

Initial Claims for the week ending Feb. 28th were 639,000, below the 647,000 estimate, a decrease of 31,000 this week from 670,000 filings for the week ending Feb. 21st, which was the highest level since October of 1982, revised from 667,000. The 4-week moving average was 641,750, an increase of 2,000 from the previous week's revised average, a new 26 year high. The report shows those continuing to receive unemployment benefits fell by 14,000 to 5,106,000 last week, and was only 2,808,000 in the prior year. Tomorrow, at 8:30 AM EST, the Bureau of Labor Statistics will release the unemployment rate for February, which is expected to increase to 7.9% from 7.6% in January. Nonfarm Payrolls are expected to fall by 650,000.

Nonfarm Productivity decreased by 0.4% annualized based on revised data, adjusted from the preliminary figure of an increase by 3.2% for the 4rd quarter, below analysts expectation of an increase of productivity of a 1.3% growth. Nonfarm productivity increased by 1.5% in the 3rd quarter of 2008. This figure should be interpreted with caution as it compares output with hours worked in a time of deteriorated labor markets. Unit Labor Costs were revised upwards to 5.7%, from preliminary estimates of a 1.8% increase, ahead of analysts estimated 3.7% increase over the quarter, following a 2.6% increase in the 3rd quarter. This figure indicates wage inflation in the recent quarter.

Factory Orders, based on preliminary data, had fallen by 1.9% in January, by $6.9 billion to $351.9 billion, following a 3.9% drop in December, and 6.5% drop in November. This came in line with expectations that factory orders would fall 3.4%, although considering the December revision, the level of activity is considerably lower than expected. This is the 6th consecutive monthly decline in factory orders, the longest streak of consecutive monthly decreases since the series was instated in 1992, although Monday's release of the ISM Manufacturing Index, shows the contraction of the manufacturing sector to be tapering off. Excluding transportation, new orders decreased slightly less, by 0.9% this month. Over the past year, Factory Orders decreased 21.3%.

Upcoming Releases
Unemployment Rate (03/06 at 8:30 AM EST)
Nonfarm Payrolls (03/06 at 8:30 AM EST)
Wholesale Inventories (03/10 at 10:00 AM EST)
Retail Sales (03/12 at 8:30 AM EST)
Business Inventories (03/12 at 10:00 AM EST)

Zacks Investment Research

Deflation risk down but not out

James Hamilton — Sat, 21 Feb 2009 19:23:12 +0000

While this week brought some pretty frightening numbers on industrial production and manufacturing surveys, I viewed Friday's CPI release from the Bureau of Labor Statistics as slightly encouraging.

The BLS reported Friday that the seasonally adjusted consumer price index rose by 0.3% between December and January, implying a 3.4% annual inflation rate. For those of us who had been worried about deflation, that offers some reassurance that things may not be quite as desperate as we feared.

Month-to-month percent change (monthly rate) in seasonally adjusted headline CPI. Data source: FRED.

Some reassurance, I say, but not a whole lot. The January number still leaves the headline CPI down 2.2% from October, implying an annual deflation rate over the last three months of -8.7%. The year-over-year percent change in the seasonally unadjusted CPI has continued to drop, with the January 2008 to January 2009 change barely positive.

Year-over-year percent change (annual rate) in seasonally unadjusted headline CPI. Data source: FRED.

If we leave out food and energy, the January increase (+0.2% monthly) is enough to erase the deflationary signals for October and December.

Month-to-month percent change (monthly rate) in seasonally adjusted core CPI (excludes food and energy). Data source: FRED.

Even so, the year-over-year core inflation rate continues to decline through the latest reading:

Year-over-year percent change (annual rate) in seasonally unadjusted core CPI (excludes food and energy). Data source: FRED.

The gap between nominal Treasury securities and those whose coupon and principal are indexed to the headline CPI had vanished or even turned negative in November and December, perhaps reflecting significant deflationary concerns. That gap has since widened, suggesting bond-holders see deflation as less likely today than they did a few months ago.

Yield on constant-maturity 10-year U.S. Treasury bond minus yield on 10-Year 1-3/8% Treasury inflation-indexed note due 7/15/2018.

Here's why I think this is worth watching. There's been some interesting discussion as to how we would objectively measure whether the stimulus plan will be beneficial. The core motivation for policy stimulus is the perceived need to increase aggregate nominal spending. Some have claimed that with the nominal T-bill rate near zero, monetary policy is no longer capable of providing such a stimulus. I disagree with that assessment, though I can understand that it is a very legitimate position to take. But if we do get back up to a year-over-year 3% inflation rate, I would think that an objective observer would want to agree at that point that we've achieved all we can hope for with the tool of demand stimulus. I continue to recommend that the Federal Reserve think of achieving that 3% inflation rate as their primary policy objective at the moment.

We're not there yet.

Technorati Tags: macroeconomics, economics, Federal Reserve, deflation, inflation

January Producer Price Index Up 0.8%

Daniel Shepard — Thu, 19 Feb 2009 16:20:07 +0000

Thursday February 19, 2009 Navivest The Bureau of Labor Statistics of the U.S. Department of Labor today reported that the Producer Price Index for Finished Goods rose 0.8% in January, on a seasonally adjusted basis. This follows declines of 1.9% in December and 2.5% in November. The actual number was an upside surprise, as economists were forecasting [...]

The CRB Index: What Commodities Can Tell Investors About Stocks

Investment U — Wed, 18 Feb 2009 14:29:02 +0000

The CRB Index: What Commodities Can Tell Investors About Stocks by Dr. Scott Brown, Advisory Panelist In 1933 and 1934, President Franklin D. Roosevelt was doing the same thing Obama is working to do today - reduce the corruption in our capital markets by increasing transparency and regulation. Most investors know that the SEC and our key securities [...]

Jobs Jamboree / Horror Show!

Contrarian Profits — Mon, 09 Feb 2009 16:28:28 +0000

p598K jobs lost in January#8230; Currencies rally with stocks#8230; G-7 this weekend#8230; More thoughts on Gold#8230; And Now#8230; Today#8217;s Pfennig!/p pOK#8230; Let#8217;s get this ball rolling, eh? The currencies had a nice rally on Friday, as the Jobs Jamboree turned out to be a horror show#8230; But I don#8217;t think it was the Jobs Jamboree horror show that pushed the euro and other currencies higher. I think it was the stock market rally. Recall, last week, when I told you that the stocks and currencies had been trading side by side, which wasn#8217;t something we normally see, as they have different pricing mechanisms, and a low correlation to each other. But they were trading in tandem, and that carried through on#8230;/p

The Bias in Reporting Job Losses

Jeffrey Miller — Thu, 29 Jan 2009 04:14:07 +0000

Each day’s news brings more stories about layoffs at major companies. The stories get a big play in mainstream media. The leading bloggers also cite the stories and encourage readers to keep a summation of job losses. This is quite misleading. Job losses occur in highly visible chunks, as we can readily see. [...]

A Jobs Disaster!

Contrarian Profits — Mon, 12 Jan 2009 14:20:38 +0000

pRetail Jobs are cut in December! #8230; Dollar rallies on renewed Trading Theme#8230; Looking for the Obama bounce#8230; High yielders get sold#8230; And Now#8230; Today#8217;s Pfennig!/p pWell, the big news this morning, is that the Jobs Jamboree was just awful, but #8220;not as bad as some forecast#8221; and therefore the dollar rallied. OK, I#8217;m shaking my head in disgust too, but that#8217;s what the headlines reported later in the day on Friday, as the reason for the dollar rally. But let#8217;s get to the meat of the Jobs report#8230; First of all, jobs lost in December were -525K, which was bang on the forecasts. But here#8217;s the two things I found to be very scary in the report#8230; First of all,#8230;/p

Trillion Dollar Deficits For Years To Come

Contrarian Profits — Thu, 08 Jan 2009 17:00:46 +0000

pCBO forecasts $1.2 Trillion Budget deficit! And we can expect more! ADP shows job losses mounting big time! Brazil#8217;s real reverses course#8230; And Now#8230; Today#8217;s Pfennig!br / Well#8230; There are two major things on the docket for the front and center piece today, both tell us a lot, but I think I#8217;m going to go with the announcement of the Congressional Budget Office (CBO) yesterday afternoon as the lead story, and the ADP jobs report as the second story#8230; So, let#8217;s go to the tape!/p pThe CBO announced yesterday that they are forecasting a $1.2 Trillion Budget Deficit for 2009! Uh-oh! This is scary folks, and there#8217;s plenty more where that came from! This #8220;forecast#8221; doesn#8217;t even consider the stimulus package that the#8230;/p

A Trading Pattern For Gold

Contrarian Profits — Wed, 07 Jan 2009 17:45:49 +0000

pThe currencies rally back! #8230; The risk takers are back! #8230; Mixed bag of economic reports#8230; A #8220;cross thing#8221; for sterling#8230; And Now#8230; Today#8217;s Pfennig!/p pWell, front and center this morning is a rally in the currencies that began yesterday mid-morning, and has carried through the Asian and European markets. I#8217;d tell you why the euro is 2.5 figures above yesterday morning#8217;s level, but you#8217;d laugh at me#8230; No wait! That#8217;s what you#8217;re supposed to do, Chuck, tell the people what#8217;s going on! HA! Seriously though#8230; I don#8217;t think you#8217;d laugh at me, maybe the dolts that run trading floors around the world, or the pundits that write stories about the markets, but not me!/p pHere#8217;s the skinny#8230; Yesterday, I told you#8230;/p

No Rest for the Unemployed

Contrarian Profits — Tue, 16 Dec 2008 22:12:15 +0000

pThe Bureau of Labor Statistics of the U.S. Department of Labor reported that nonfarm payrolls fell by a whopping 533,000 jobs in November, and the official government-approved unemployment rate rose from 6.5 to 6.7%./p pThere is more New Bad News (NBN) contained in November#8217;s drop in payroll employment because, #8220;Job losses were large and widespread across the major industry sectors in November.#8221;/p pThe New Bad News (NBN) to me personally is that this means that if I get fired again, then another job will be that much harder to find, especially since my job skills are apparently substandard, as I father from my current boss being sure that she can train a monkey to do my job and, as she said, #8220;It#8230;/p

Comparing recessions

James Hamilton — Tue, 09 Dec 2008 01:57:01 +0000

Last week was a tough one for the optimists.

In addition to dreadful numbers for auto sales, last week the Institute for Supply Management reported that its manufacturing PMI index fell to 36.2 in November. A value below 50 indicates that more facilities are reporting deterioration rather than improvements in categories such as orders, production and employment. The index never fell below 39 in either of the previous 2 recessions.

Source: FRED.

ISM's related index of business activity constructed from a survey on nonmanufacturing establishments fell to 33.0 in November. We don't have a long enough track record of that index to know what it requires to get a reading that low.

Source: FRED.

But the real attention last week was on the loss of 533,000 jobs during the month of November reported by the Bureau of Labor Statistics on Friday. That's a 0.4% drop, the biggest percentage drop in 28 years, and part of broader employment picture that Ian Shepherdson called "almost indescribably terrible." Notwithstanding, Dave Altig did his best to describe it, perhaps as something not so terrible after all, by comparing the decline in employment since December with what was seen on average during previous postwar recessions.

Horizontal axis: months before or after the business cycle peak. Vertical axis: ratio of nonfarm employment to the value at the business cycle peak. Green line: average postwar recession. Blue line: 2007-2008. Source: Macroblog.

By that measure, this looks a little worse than the average postwar recession, in part, Dave notes, because it's already lasted one month longer than the postwar average. If you compare the current recession with the two longest and most severe postwar recessions (1973 and 1981), we're maybe not quite as badly off now as we were then, at least if you trust the preliminary data.

Horizontal axis: months before or after the business cycle peak. Vertical axis: ratio of nonfarm employment to the value at the business cycle peak, for the recessions beginning in November 1973 (green), July 1981 (red), and December 2007 (blue). Source: Macroblog.

But there's another comparison we can look at along these lines that's much less reassuring. One of the developments that helped get us out of previous downturns is that the Fed responded to the recession by lowering interest rates. The blue line in the graph below shows the average behavior of the fed funds rate in the months following the recessions of 1957, 1960, 1969, 1973, 1990, and 2001. I've left out the somewhat anomalous 1980 and 1981 recessions, in which rapidly changing inflation expectations played a key role. The red line shows the fed funds rate during the current recession. The Fed cut rates more quickly and farther this time around than in any of the other 6 comparison downturns.

Horizontal axis: months after the business cycle peak. Vertical axis: change in fed funds rate since the peak. Data source: FRED.

Why does that trouble me? It means that the Fed did everything it could from the very beginning this time, and it wasn't enough. The average fed funds rate in November was 0.39%, meaning that even if the Fed cuts its official "target" for that interest rate to 0.5% or even 0.25%, it's not going to do anything for anybody. The main weapon we've always used in the past in this kind of situation is now out of bullets.

If a recovery begins soon, Dave's diagrams indicate that this wouldn't be regarded as all that serious a recession. But I see no signs that a recovery is about to begin.

Technorati Tags: employment, recession, macroeconomics, economics

It’s All About The Jobs Jamboree

Contrarian Profits — Fri, 05 Dec 2008 14:34:46 +0000

pCurrencies rally then fall back#8230; Rate slashers! Following Japan? Let#8217;s hope not! Canada#8217;s woes mount#8230;br / And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Happy Friday to one and all! A Fantastico Friday! A Jobs Jamboree Friday! Anything else, Chuck? No, I don#8217;t think so, I#8217;ll stop there#8230; It#8217;s all about the Jobs Jamboree today. It#8217;s all about finding out just how badly the rot on the labor vine has gotten#8230; The Weekly Initial Jobless Claims, yesterday, remained above 500K per week, which doesn#8217;t bode well for next month#8217;s data#8230; But first#8230; November#8217;s Jobs Jamboree on the docket!/p pThe #8220;experts#8221; have forecast a -335K drop in jobs for November#8230; But, your old Pfennig writer believes that this forecast is low. I think it will#8230;/p

Automakers Say They Need Funding Now

Contrarian Profits — Wed, 03 Dec 2008 13:23:18 +0000

p Currencies trade in a tight range#8230; China#8230; Commodity prices to blame#8230; #8220;Safe#8221; Treasuries? And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Wonderful Wednesday to you! Well#8230; I went #8220;shopping#8221; yesterday evening#8230; At least I can say I did my bit to keep the economy afloat! HA! Thanks to all who sent along notes to me yesterday with kind words. I truly appreciate the kind words, you are all too kind! The automakers made their pleas to Congress yesterday, and they claim they are in deep dookie! GM says they need $4 Billion right now! And#8230; The original $25 Billion figure has grown to $35 to $40 Billion#8230;/p pThe currencies were lifeless yesterday, with only a blip up in euros to 1.2740, only#8230;/p

November Unemployment Statistics to Highlight Economic Reports This Week

Contrarian Profits — Tue, 02 Dec 2008 16:50:11 +0000

pThis week’s economic reports will be highlighted by Friday’s unemployment report, which analysts expect will illustrate the 11th straight month of declining job ranks in the U.S. economy./p pNon-farm payroll employment fell by 240,000 in October, and the unemployment rate jumped to 6.5%, up from 6.1% the month before, the Bureau of Labor Statistics a href="http://www.bls.gov/news.release/empsit.nr0.htm" target="_blank"reported in early November/a./p pOctober’s drop in payroll employment followed declines of 127,000 in August and 284,000 in September, according to revised BLS reports. Employment has fallen by 1.2 million in the first 10 months of 2008, with more than half of that decrease occurring in August, September and October. In October, job losses continued in manufacturing, construction and several service-providing industries. Conversely, the healthcare and mining sectors#8230;/p

November Unemployment Statistics to Highlight Economic Reports This Week

Money Morning — Mon, 01 Dec 2008 20:50:33 +0000

Money Morning Staff Reports This week’s economic reports will be highlighted by Friday’s unemployment report, which analysts expect will illustrate the 11th straight month of declining... Money Morning is here to help investors profit ha...

Time for a change at the Fed

James Hamilton — Mon, 24 Nov 2008 17:19:26 +0000

Plan A didn't work. Plan B didn't work. I suggest the Fed get going on Plan C.

The Bureau of Labor Statistics announced last week that the seasonally adjusted consumer price index fell by 1% during the month of October, implying an annual deflation rate around -12%. That's the biggest monthly drop in the CPI since publication of seasonally adjusted changes began in February 1947. The core CPI (excluding food and energy) saw its first decline in a quarter century.

Does this mean that deflation is now upon us? Mike Bryan argues that despite the indication from the headline and core CPI, actual decreases in prices were not that widespread in October. One of the ways that Bryan proposes to measure this is to order the different components of the CPI by how much the price changed, with those whose price fell the most at the bottom and those whose price increased the most at the top. Suppose you threw out items in the bottom category until you'd eliminated 10% of the total spending by the typical consumer, threw out the 10% in the top category as well, and calculated the sample mean of the remaining 80%. That basket of "typical items" did not change in price during October. If you threw out more than 10% of the bottom and top categories, you'd end up with a slightly positive inflation rate for the month. The graph below shows the resulting average October inflation (reported at an annual rate) when you throw out the bottom x% and top x%, plotted as a function of x. The value x = 0 corresponds to the usual sample mean (the headline CPI itself), while x = 50 corresponds to the sample median.

Source: Macroblog.

Alternatively, we might look at the cumulative inflation readings over the last year, rather than the single month of October in isolation. These suggest a 3.7% inflation rate from the CPI and 2.2% for the core CPI. Trimming x = 8% from the bottom and top yearly changes gives an annual trimmed mean of 3.0%.

Year-over-year percent change in the seasonally unadjusted CPI and CPI excluding food and energy. Data from FRED.

So maybe everything's OK? I think not. Two forward-looking indicators are profoundly troubling. First, the yields on inflation-indexed Treasuries for medium-term maturities are actually higher than those for regular Treasuries. If taken at face value, that means investors anticipate an average deflation over the next 5 years at a -1.29% annual rate. Perhaps one might dismiss this as another indication that the usual arbitrage activity is completely absent in current markets, so that the nominal-TIPS spread is no longer a meaningful indicator.

Green line: yield on 5-year constant-maturity Treasury bond minus yield on 5-year constant-maturity TIPS. Blue line: yield on 3-month constant maturity Treasury bill. Data from FRED.

But a second and equally troubling suggestion of expected deflation is the extremely low yields on short-term Treasury bills. Again there may be those who interpret this not as a harbinger of deflation but instead as a reflection of the astonishing (and equally frightening) flight to quality that we have been witnessing.

Even if you don't interpret the October CPI, TIPS yields, and nominal T-bill yields as warning flags of deflation, they nonetheless raise what is to me the core question: If the Fed wanted to use monetary policy to stimulate the economy at the moment, as I believe it should, what would it do?

The traditional answer would be to lower the fed funds target. But surely further cuts in the target rate can accomplish nothing in the current environment. The effective fed funds rate and 3-month T-bill rate are already more than 50 basis points below the current target, so cutting the target by 50 basis points is supposed to accomplish what, exactly? If you're counting on another couple of rate cuts as the last arrows in your quiver, I'm afraid to report that continuing this battle rather desperately calls for a Plan B.

Blue line: daily effective fed funds rate. Red line: fed funds target rate. Source:FRED.

Nor should there be any enthusiasm for yet another lending facility. What started as a few billion dollars is now in the trillions, and credit spreads continue to widen. If we keep doing the same thing we've been doing for the last year and a half, why should we expect any different result?

So here's my suggested Plan C. The goal of monetary policy should be to achieve a core inflation rate of 3.0% (at an annual rate) over the next 6 months. That's something that can be accomplished without rate cuts or lending facilities, and here's how.

Step 1 is for the FOMC to form a clear determination that a 3% core inflation rate is indeed their immediate goal. If you hope to get somewhere, it's a good idea to start with a plan of where you're trying to go.

Step 2 is to communicate the goal to the public. Bernanke and Kohn should state clearly that they're worried by the October fall in the CPI, that they see a danger of too much slack in the economy developing, and that they will now be adopting quantitative easing with the goal of preventing further declines in the overall price level.

Step 3 is to start creating money and use it to buy up assets until the goal set out in Step 1 is achieved. What sort of assets? My answer here would be the exact opposite in philosophy of the kind of purchases and loans that the Fed has been implementing over the last year. The Fed has been trying to sop up the illiquid assets that nobody else wants. But I think what the Fed should be doing is instead acquiring assets of a type that would allow it to quickly reverse its position if a sudden shift in perceptions causes inflation to come in above the intended 3% target. The Fed can't afford to dump the illiquid securities it's been taking on recently, and that leaves it with substantially less flexibility to ease out of an expansionary policy once it starts to be successful. My goal would therefore be to buy assets for the Fed that won't lose their value with a reversal of expectations and whose sell-off by the Fed wouldn't be itself an additional destabilizing force.

What specifically would such assets be? I'd start with those clearly undervalued TIPS. Next I'd buy short-term securities in the currencies relative to which the dollar has been appreciating. Here again if the Fed has to sell these off in a sudden change in perceptions, the Fed will have both made a profit and, by selling, be a stabilizing force. If we're still seeing no improvement, the Fed can start to buy longer-term Treasuries.

What if the policy is unsuccessful, and we still get severe deflation despite the 3% inflation target? In some ways, that's the best outcome of all, since, as I explained previously, in that scenario the Fed has solved the nasty problem of all that debt owed by the Treasury.

Targeting inflation is not just another arrow in the quiver; it's a bazooka, at least for purposes of preventing deflation. Time to take aim and fire.

Technorati Tags: macroeconomics, economics, Federal Reserve, interest rates, deflation, inflation

A very weak employment report

James Hamilton — Fri, 07 Nov 2008 21:30:51 +0000

More bad economic news arrived today from the Bureau of Labor Statistics.

The BLS reported that the unemployment rate has gone up by 1-1/2 percentage points in the last six months, with 6.5% of the labor force now reporting themselves to be looking for work and unable to find it. That brings unemployment to a higher level than it reached in the preceding recession, and is a faster 6-month deterioration than was observed at any time during the preceding two recessions.

Top panel: civilian unemployment rate, from FRED, with NBER recessions as shaded regions. Bottom panel: 6-month change, with dashed line at +0.8 threshold.

Data from the BLS survey of establishments was no less grim. Not only did the BLS report 240,000 fewer workers on payrolls in October (on a seasonally adjusted basis) compared with September, but it revised the September job loss to 284,000, and the August loss to 127,000. That puts the 6-month change in employment at -0.6% and the year-over-year change at -0.8%.

Top panel: 100 times the 6-month change in the logarithm of seasonally adjusted nonfarm payroll employment, from FRED, with NBER recessions as shaded regions. Dashed line at -0.5%. Bottom panel: 12-month change, with dashed line at 0.0%.

There was no place to hide in alternative employment measures. On Wednesday ADP estimated, on the basis of the payrolls that it processes for 24 million American workers, that private employment fell a seasonally adjusted 157,000 workers in October. Yet a third indicator, based on the BLS survey of households, estimated that U.S. employment fell by a seasonally adjusted 297,000 workers in October.

Top panel: 100 times the 6-month change in the logarithm of seasonally adjusted civilian employment, based on the household survey, from FRED, with NBER recessions as shaded regions and dashed line at -0.4%. Bottom panel: 12-month change, with dashed line at 0.0%.

All of which confirms the impression that the economic situation deteriorated considerably in September and October.

Technorati Tags: employment, recession, macroeconomics, economics

U.S. Unemployment Rate Jumps To 6.5%

Daniel Shepard — Fri, 07 Nov 2008 14:18:55 +0000

Friday November 7, 2008 Navivest The Bureau of Labor Statistics of the U.S. Department of Labor reported today released a report, which showed that non-farm payroll employment decreased by 240,000 in October and the unemployment rate jumped to 6.5%, from 6.1% in September. Economists had been looking for a job loss of 200,000, with the unemployment rate climbing [...]

Homes and Cars

Contrarian Profits — Mon, 03 Nov 2008 18:53:59 +0000

What are the two most expensive goods you’re likely to buy in your lifetime? A home and a car, probably. And the news today on both is an indicator of how screwed up things are.

The Washington Post figures the country has about one million homes too many. And close to 30,000 of them are in Las Vegas alone. “The solution, local executives say, will come not from Washington policymakers but from the market itself,” reports the Post. “When there are too many houses, builders stop building them. That has already happened, and many Vegas home builders have gone out of business.”

But of course, that’s not going to stop politicians from intervening anyway and trying to prop up home prices — that is,…

Homes and Cars

Contrarian Profits — Mon, 03 Nov 2008 18:53:59 +0000

What are the two most expensive goods you’re likely to buy in your lifetime? A home and a car, probably. And the news today on both is an indicator of how screwed up things are.

But of course, that’s not going to stop politicians from intervening anyway and trying to prop up home prices — that is,…

Consumer Price Index

William Trent — Sun, 19 Oct 2008 15:16:49 +0000

12-Month Percent Change in Consumer Price Index Source: Bureau of Labor Statistics

Three Pictures from the August Employment Situation Release

Menzie Chinn — Mon, 08 Sep 2008 01:40:17 +0000

The employment situation release seems like old news, and Jim has already teased out some of the most important aspects in his post. However, I thought a little more context would be useful, given that some observers still think a recession can be avoided. From the White House economy fact sheet (accessed 9/7/08):

On September 5, 2008, the Bureau of Labor Statistics released new jobs figures for August. Nonfarm payroll employment decreased by 84,000 jobs in August, and the unemployment rate rose to 6.1 percent. While these numbers are disappointing, what is most important is the overall direction the economy is headed. Last week, the economy posted a strong gain of 3.3 percent at an annual rate in the second quarter, led by growth in consumer spending, exports, and a well-timed and appropriately sized stimulus package. This level of growth demonstrates the resilience of the economy in the face of high energy prices, a weak housing market, and difficulties in the financial markets. Orders for durable goods have been rising in recent months. In addition, productivity growth over the past four quarters has been strong at 3.4 percent -- above the averages for each of the past three decades over the course of the Administration.

See as well [1].

Consider first a plot of the payroll employment series of various vintages.

Figure 1: Nonfarm payroll employment figures from February (blue), May (red), July (green) and August (black) releases, seasonally adjusted. Source: BLS.

What's obvious is that each successive release has revised downward the employment figures; in other words, the last downward revisions to the previous two months' worth of numbers was not an isolated event. (It's no use plotting the earlier vintages -- those are pre-benchmark and hence show a much higher level of employment -- roughly 100,000 higher.)

Aggregate weekly hours also continued to decline. They are calculated to have declined about 0.9 percent in log terms relative to the December 2007 peak (nonfarm payroll employment has only declined about 0.4 percent).

Figure 2: Log nonfarm payroll employment figures (blue) and log aggregate weekly hours index (red), seasonally adjusted, normalized to 0 in 2007M12. Source: BLS, August employment situation release.

Finally, note that there is no solace to be had in looking at the household survey data. The civilian employment series has declined about 0.5 percent (log terms) relative to 2007.12, and is obviously declining. (The civilian employment series adjusted to conform conceptually to the payroll employment series is up 0.3 percent relative to December 12, but down 0.5% relative to its most recent peak in April 2008.)

Figure 3: Nonfarm payroll employment figures (blue, left axis), civilian employment (red, right axis), and 3 month moving average of civilian employment (maroon, right axis), seasonally adjusted, normalized to 0 in 2007M12. Source: BLS, August employment situation release.

So while GDP is up in Q2, July and August employment -- in Q3 -- suggests a lot slower growth.

Technorati Tags: nonfarm payroll employment, household employment, recession, aggregate weekly hours.

Rising unemployment

James Hamilton — Fri, 05 Sep 2008 22:51:32 +0000

Is there anything good to say about today's report from the Bureau of Labor Statistics that the U.S. unemployment rate jumped up to 6.1% while seasonally adjusted nonfarm payrolls declined by another 84,000 jobs? Well, here's one thing. It gives us some real clarity as to just where the economy stands.

Civilian unemployment rate, from FRED, with NBER recessions as shaded regions.

Sure looks like a recession when you inspect a graph the unemployment rate, doesn't it? And it also looks like a recession from the perspective of a model of unemployment dynamics that I published in 2005. If you use that model to analyze the latest unemployment numbers, you'd calculate the current probability of being in a recession at 95%.

Probability that the economy is in either a mild or severe recession at indicated date, as inferred on the basis of the full sample of revised data on the unemployment rate available as of September 2008 calculated using the model in Hamilton (2005).

As I noted when I discussed that model last month, one reason that the above graph seems to be able to identify recessions so clearly is that it uses the full sample of data available today to infer what was the situation at each historical date. If instead you try to base a call only on the data available at the time, the inference is much choppier. Even so, a 95% probability is not likely to be a miss.

Probability that the economy is in either a mild or severe recession at indicated date, as inferred on the basis of data (as currently revised) on the unemployment rate through the indicated date calculated using the model in Hamilton (2005).

That model distinguishes between a mild recession and a severe recession, with the graphs above combining the two. In fact, the August unemployment report leads to a 14% probability that we just entered the "severe contraction" phase. The last time we had a one-month filter probability of that regime higher than that was October of 1982.

Probability that the economy is in a severe recession at indicated date, as inferred on the basis of data (as currently revised) on the unemployment rate through the indicated date calculated using the model in Hamilton (2005).

Last month I also discussed some thresholds for recognizing a recession recently proposed by UCLA Professor Ed Leamer. Leamer says it usually means recession if the unemployment rate has jumped up by 0.8% within the last six months. When Leamer proposed that criterion two months ago, the 6-month increase of 0.5% seemed to leave us well short of the threshold. Today's numbers imply a 6-month increase of 1.3%, shooting past it pretty definitively.

The 6-month change in civilian unemployment rate, from FRED, with NBER recessions as shaded regions and dashed line at +0.8 threshold.

Leamer also said it would be a recession if the 6-month change in the measure of civilian employment based on the BLS household survey fell by more than 0.4%. Today's number of -0.354% would technically fall short of that, if you're determined to split hairs more finely than the allowable pixels in the graph below.

100 times the 6-month change in natural log of civilian employment, from FRED, with NBER recessions as shaded regions and dashed line at -0.4 threshold.

Finally, Leamer said he'd call it a recession if the 6-month change in nonfarm payrolls fell by over 0.5%. Today's NFP report, while disappointing, still leaves us at only -0.3%. Whew! That was a close call, no?

100 times the 6-month change in natural log of seasonally adjusted nonfarm payroll employment, from FRED, with NBER recessions as shaded regions and dashed line at -0.5% threshold.

No. I think we're better off looking at the 12-month rather than 6-month change in nonfarm payrolls. And the 12-month change, now at -0.2%, is clearly a recession-type number:

100 times the 12-month change in natural log of seasonally adjusted nonfarm payroll employment, from FRED, with NBER recessions as shaded regions and dashed line at 0.0 threshold.

And, by the way, calling it a recession when the 12-month change in nonfarm payrolls becomes negative appears to be pretty robust even given the revisions we know are likely to come in these data later.

100 times the 12-month change in natural log of seasonally adjusted nonfarm payroll employment as it would actually have been reported at any given date, from ALFRED, with NBER recessions as shaded regions and dashed line at 0.0 threshold.

So I don't see any way to slice today's report other than to say, at least as far as the employment numbers are concerned, the U.S. is now definitely in a recession.

And if you won't take my word for it, you can hear pretty much the same thing from Brad DeLong, Justin Fox, William Polley, Paul Krugman, and the various economists quoted by WSJ Real Time.

Technorati Tags: employment, recession probability, recession indicator index, macroeconomics, economics

Labor Numbers Look Even Worse – Analyst Blog

Dirk Van Dijk — Fri, 05 Sep 2008 12:18:59 +0000

This morning's release from the Bureau of Labor Statistics (BLS) was pretty weak on its face, with 84,000 jobs lost and the unemployment rate rising to 6.1% from 5.7% last month. However, when you start to dig a little deeper things look even worse. First let's look at the unemployed:

"The number of unemployed persons rose by 592,000 to 9.4 million in August, and the unemployment rate increased by 0.4 percentage point to 6.1 percent.

"Over the past 12 months, the number of unemployed persons has increased by 2.2 million and the unemployment rate has risen by 1.4 percentage points, with most of the increase occurring over the past 4 months...

"In August, the unemployment rates for adult men (5.6 percent), adult women (5.3 percent), whites (5.4 percent), blacks (10.6 percent), and Hispanics (8.0 percent) rose, while the jobless rate for teenagers was little changed at 18.9 percent. The unemployment rate for Asians was 4.4 percent in August, not seasonally adjusted...

"Among the unemployed, the number of persons who lost their last job rose by 417,000 to 4.8 million in August, with increases occurring among those on temporary layoff and those who do not expect to be recalled to work. Over the last 4 months, the number of unemployed job losers has increased by 810,000...

"In August, the number of long-term unemployed (those jobless for 27 weeks or more) rose by 163,000 to 1.8 million, an increase of 589,000 over the past 12 months. The newly unemployed -- those who were jobless fewer than 5 weeks -- increased by 400,000 over the month."

Note that the increase in unemployment was widespread among all key demographic groups. Also the rise in long-term unemployed is particularly bad news. These are the folks who have exhausted their unemployment benefits. That is a big hit to their already diminished income and they will have to cut their already cut back spending further.

Outside of official recessions, you never see a year-over-year increase in long-term unemployment of over 20%, and we are now north of 50%. A 9.9% increase in a single month is not a good thing.

In addition, both June and July were revised down, and the June revision was particularly striking. Originally reported as a loss of 51,000 jobs, it is now at a loss of 100,000 jobs. Also in August, the statistical adjustment (Birth/Death model) that the BLS makes to the numbers added 125,000 jobs to the labor force. This is to account for new businesses being formed, and those going out of business, that don't report there numbers to the BLS.

By and large it is a trend following procedure they use to make this adjustment. However, the numbers just don't pass the smell test. According to the BLS, enough new firms were created in August to create 16,000 construction jobs, and 9,000 in Financial Services. In the current environment I find that highly unlikely.

Also the government added 17,000 jobs in the month, so the loss in private sector employment (the official number, including the somewhat suspect birth/death model) was a loss of 101,000 jobs. People who are out of work have a harder time paying their mortgage.

In other news, the Mortgage Bankers Association released data on the state of the mortgage situation in the second quarter. Folks, things are not getting any better -- not by a long shot. The delinquency rate on all types of residential mortgages reached a record high of 6.41%, up from 6.35% in the first quarter and 5.12% in the second quarter of 2007.

As for foreclosures, 1.08% of all mortgages entered the foreclosure process in the second quarter alone, up from 1.01% in the first quarter and 0.59% a year ago. In total, 2.75% of all mortgages are now in the foreclosure process, a big jump from 2.47% in the first quarter and almost double the 1.40% of a year ago.

These numbers do not bode well for any firm in the mortgage industry. Don't try to bottom fish in Fannie (FNM) or Freddie (FRE) unless you are in it for a very quick trade (NOTE: that is betting folks, not investing).

Stay away from the mortgage insurance firms like MGIC (MTG) and PMI Group (PMI) and banks and S&L's like Washington Mutual (WM), National City (NCC), Zion (ZION) and Wachovia (WB).

Read the full analyst report on FRE

Read the full analyst report on MTG

Read the full analyst report on PMI

Read the full analyst report on WM

Read the full analyst report on NCC

Read the full analyst report on ZION

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Shadowstats debunked

James Hamilton — Fri, 05 Sep 2008 04:44:50 +0000

I've yet to find someone who has been able to reproduce the claims made by Shadow Government Statistics about the extent to which government agencies are grossly misreporting the U.S. inflation rate. Apparently, neither has the Bureau of Labor Statistics, as detailed in an article by BLS economists John Greenlees and Robert McClelland in the latest issue of Monthly Labor Review.

First, some of the bolder claims by Shadowstats:

The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that....

The BLS initially did not institute a new CPI measurement using a variable-basket of goods that allowed substitution of hamburger for steak, but rather tried to approximate the effect by changing the weighting of goods in the CPI fixed basket. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Boskin/Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price.

Once the system had been shifted fully to geometric weighting, the net effect was to reduce reported CPI on an annual, or year-over-year basis, by 2.7% from what it would have been based on the traditional weighting methodology. The results have been dramatic. The compounding effect since the early-1990s has reduced annual cost of living adjustments in social security by more than a third.

And here's the response by Greenlees and McClelland:

To begin, it must be stated unequivocally that the BLS does not assume that consumers substitute hamburger for steak. Neither the CPI-U, nor the CPI-W used for wage and benefit indexation, allows for substitution between steak and hamburger, which are in different CPI item categories. Instead, the BLS uses a formula that implicitly assumes a degree of substitution among the close substitutes within an item-area component of the index. As an example, consumers are assumed to respond to price variations among the different items found within the category "apples in Chicago." Other examples are "ground beef in Chicago," "beefsteaks in Chicago," and "eggs in Boston"....

The quantitative impact of the CPI's use of the geometric mean formula also has been grossly overstated by some, with one estimate exceeding 3 percent per year. It is difficult to identify real-world circumstances under which geometric mean and Laspeyres indexes could differ by such a large amount. The two index formulas will give the same answer whenever the prices used in an index all change by the same percentage. The bigger the differences in price changes, the more the Laspeyres index will tend to exceed the geometric mean. For the growth rate of the Laspeyres index to exceed the growth rate of a geometric mean index by 3 percentage points, however, the differences in individual price changes have to be quite large.

To see this point, consider another very simplified example. Suppose that the CPI sample for ice cream and related products in Boston consisted only of an equal number of prices for ice cream and frozen yogurt and that, between one year and the next, all the prices of ice cream in Boston rose by 8.6 percent while all the frozen yogurt prices fell by 4.2 percent. In that case, the geometric mean estimate of overall annual price change would be 2.0 percent, only slightly less than the Laspeyres estimate of about 2.2%. In order to come up with a difference of 3 index points, one has to assume a much more dramatic divergence between ice cream and frozen yogurt prices than the one hypothesized. For example, if ice cream prices rose 30 percent in one year, while frozen yogurt prices fell by 20 percent, the overall geometric mean index would still rise by 2 percent, but the Laspeyres index would rise 5 percent, for a difference of 3 index points. However, such a large annual divergence would be quite uncommon within CPI basic indexes-- between ice cream and yogurt, between types of candy and gum, between types of noncarbonated juices, or between varieties of ground beef. Moreover, for a 3-percentage-point divergence to continue year after year, the divergence between the individual component prices would have to continue to widen. For example, if, by contrast, during the next year ice cream prices increased by the same amount as frozen yogurt prices, then the two index formulas would give the same inflation estimate for that year. Although such a divergence might plausibly occur in one component for 1 year, it is beyond belief that such sharply divergent price behavior would continue year after year across the whole range of CPI item-area components.

Finally, and most importantly, there is rigorous empirical evidence on the actual quantitative impact of the geometric mean formula, because the BLS has continued to calculate Laspeyres indexes for all CPI basic indexes on an experimental basis for comparison with the official index. These experimental indexes show that the geometric mean led to an overall decrease in CPI growth of about 0.28 percentage point per year over the period from December 1999 to December 2004, close to the original BLS prediction that the impact would be approximately 0.20 percentage point per year.

There's much more in the BLS article on this and related questions such as hedonic price adjustment and owner's equivalent rent.

Why do people continue to give credibility to an operation like Shadowstats? Now that's something that I'd like to hear explained.

Technorati Tags: CPI, inflation, Shadowstats, macroeconomics, economics

Don’t Believe the Latest GDP Revision For a Minute

Graham Summers — Fri, 29 Aug 2008 12:38:03 +0000

Aug 29th, 2008: The government is hiding recessionary data by manipulating inflation

A Different Look at the Labor Market

Menzie Chinn — Sat, 23 Aug 2008 01:26:04 +0000

Over the past few months, I've heard that, while job creation is insufficient to keep unemployment rates constant, job losses have not been consistent with recession. More recently, we've heard a slight modification on this "talking point". Commenting on the August 1 labor market release, WSJ RealTime Economics notes:

So far this year, the economy has shed nearly half a million jobs — hardly a sign of strength.
But it could have been much worse. In testimony before a congressional panel Friday, Bureau of Labor Statistics Commissioner Keith Hall noted that the last two recessions had resulted in 1.5 million lost jobs. "Economic growth is not strong enough to support job growth," he told legislators, but he added that relative to the last set of official recessions, job losses this time around "have not been as severe."

In Figure 1, I plot nonfarm payroll employment, the civilian employment series from the household survey adjusted to conform to the NFP concept, and aggregate weekly hours for private industries.

Figure 1: Log nonfarm payroll employment (blue), civilian employment adjusted to conform to the NFP concept (red), and aggregate weekly hours in private industry (green), normalized to zero in 2007M12, all seasonally adjusted. Source: BLS via FRED II, BLS, and author's calculations.

What is clear is that while the employment series might not be evidencing a severe dropoff, the hours series is. This is relevant because growth in hours is at levels consistent with at least the last two recessions. Actually, the hours growth rate is now negative.

Figure 2: 12 month change in nonfarm payroll employment (blue), civilian employment adjusted to conform to the NFP concept (red), and aggregate weekly hours in private industry (green), calculated as 12 month difference in log levels. NBER defined recessions shaded gray. Source: BLS via FRED II, BLS, NBER, and author's calculations.

Aggregate weekly hours have been experiencing continuous negative growth on a month-to-month basis since January 2008...

Technorati Tags: nonfarm payroll employment, household employment, recession, aggregate weekly hours, job losses.

Core inflation

James Hamilton — Fri, 15 Aug 2008 15:13:16 +0000

The Bureau of Labor Statistics reported yesterday that its primary consumer price index CPI-U rose 5.6% over the last year. That's the highest inflation rate in 17 years, the newspapers all call to our attention. Just how concerned should we be about these numbers?

Of that 5.6% year-over-year price increase, 1.9% came within the last two months alone. And there's no question that the big story driving that 2-month increase has been energy prices. NewJerseyGasPrices.com reports that the average retail price of gasoline sold in the United States rose from about $3.78/gallon in the middle of May to $4.12 in mid July, a 9% increase. That's in line with the 10.6% 2-month increase that BLS reported in their seasonally adjusted consumer energy price index between May and July. Energy prices have a weight near 10% in the total CPI. That means that if energy prices had held constant between May and July but all other price increases had been the same, the year-over-year CPI number would have been more like 4-1/2% rather than 5-1/2%.

But does it make any sense to ask, What if energy prices hadn't gone up between May and July? There are certainly good reasons why the Fed should not be taking as much comfort in "core inflation" as it has in recent years. But in this case, there is a clear need to net out the May-to-July energy price increase-- it's already been reversed. The US national average gas price is back to $3.78/gallon, right where it was in mid-May. Thus, even without any further drop in the price of gasoline-- and personally, I do expect further drops-- the 4-1/2% number is a better summary of where we stand right at the moment than 5-1/2%.

So no, I don't think that yesterday's CPI numbers will cause the Fed to panic. Because yesterday's news is already way of out of date.

Technorati Tags: CPI, inflation, core inflation, macroeconomics, economics

CCK: Crown Holdings a Jewel

William Trent — Fri, 15 Aug 2008 11:31:54 +0000

This article is a reprint of my 7 August 2008 RealMoney column. Crown Holdings CCK - Annual Report) looks to me like the type of boring stock Peter Lynch would love. The company’s primary products include steel and aluminum cans for food, beverage, household and other consumer products and metal caps and closures. Cans and bottle caps [...]

Six More Stock Tips from the U.S. Government

William Trent — Fri, 06 Jun 2008 17:05:48 +0000

My latest column is up at RealMoney. We can all agree that the jobs report was pretty lousy. On a year-over-year basis, the growth in employment is barely staying positive. However, as Jim Cramer likes to point out, there’s always a bull market somewhere, and regular readers probably know I like to use the economic reports as [...]

Slot Machine Manufacturers

Fred Fuld — Mon, 02 Jun 2008 06:17:00 +0000

With the proliferation of casinos all across the United States, especially on Native American reservations, there may be an opportunity in the manufacturers of the slot machines, video poker machines, and bingo machines. According to the U.S. Bureau of Labor Statistics, because of the growth of and increasing popularity of Indian casinos and racinos [a racetrack with a casino], employment in gaming services occupations is projected to grow by 23 percent between 2006 and 2016, which is much faster than the average for all occupations.

You will have to decide if any of the following stocks are worth betting on.

International Game Technology (IGT) makes and sells computerized slot, video poker slot, and other gaming equipment and network systems, including big better tracking. The stock has a PE of 26 and a PEG of 1.77 and pays a yield of 1.6%.

Bally Technologies, Inc. (BYI) makes and markets slot and other gaming machines and computerized monitoring systems for the casino industry. They also have player tracking technology. The stock has a PE of 27 and a PEG of 0.8 .

WMS Industries Inc. (WMS) makes and sells gaming machines and video lottery terminals for casinos around the world.They are also expanding into networked gaming machines. The stock has a PE of 35 and a PEG of 1.58 .

Scientific Games Corp. (SGMS) provides gaming related technology products including server-based gaming machines, video lottery terminals, pari-mutuel racing wagering systems, and sports betting systems. The stock has a PE of 51 and a PEG of 1.37 .

Multimedia Games, Inc. (MGAM) is a provider of technology and equipment to casinos. They market server-based gaming systems, interactive electronic games, player terminals, video lottery terminals, electronic scratch ticket systems, electronic instant lottery systems, and slot management systems. The stock has a PE of 40 and a PEG of 3.28 . This is a low cap stock and should therefore be considered very speculative.

Shuffle Master Inc. (SHFL) makes and sells gaming technology products, including automatic card shufflers, chip sorting machines, and PC-based video slot machines. The stock has a PE of 17 and a PEG of 1.15 . This is a low cap stock and should therefore be considered very speculative.

GameTech International Inc. (GMTC) manufactures and markets portable and fixed based electronic bingo systems. The stock has a PE of 17 and a PEG of 0.57 . This is a low cap stock and should therefore be considered very speculative.

FortuNet, Inc (FNET) makes and sells multi-game server-based gaming platforms for bingo gaming markets, and can also be adapted to keno, poker, and slot machines. The stock has a PE of 20 and a PEG of 2.65 . This is a low cap stock and should therefore be considered very speculative.

The related industry to the slot manufacturers is of course the gambling stocks.

Author does not own any of the above.

By Fred Fuld at Stockerblog.com

Forced Labor

Condor Options — Thu, 08 May 2008 16:54:03 +0000

Yesterday we learned that non-farm productivity rose 2.2% in the first quarter of this year. Anyone who was working in an office or factory when the last recession hit in 2001 knows what that means—a lot of people have been laid off or had their hours cut back, and the lucky ones who haven’t are [...]

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The first votes are in

Month-to-month percent change (monthly rate) in seasonally adjusted headline CPI. Data source: FRED.

Year-over-year percent change (annual rate) in seasonally unadjusted headline CPI. Data source: FRED.

Month-to-month percent change (monthly rate) in seasonally adjusted core CPI (excludes food and energy). Data source: FRED.

Year-over-year percent change (annual rate) in seasonally unadjusted core CPI (excludes food and energy). Data source: FRED.

Exchange rate (euros per dollar). Source: Yahoo Finance.

Percent change in commodity prices between March 17 and March 20

Value of prices of assorted commodities relative to value at start of year (Jan 2, 2009 = 100). Data source: WSJ commodity cash prices, via Webstract.

A Horrific Jobs Report!

U.S. Unemployment Rate Jumps To 8.1%

Employment

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Month-to-month percent change (monthly rate) in seasonally adjusted headline CPI. Data source: FRED.

Year-over-year percent change (annual rate) in seasonally unadjusted headline CPI. Data source: FRED.

Month-to-month percent change (monthly rate) in seasonally adjusted core CPI (excludes food and energy). Data source: FRED.

Year-over-year percent change (annual rate) in seasonally unadjusted core CPI (excludes food and energy). Data source: FRED.

Yield on constant-maturity 10-year U.S. Treasury bond minus yield on 10-Year 1-3/8% Treasury inflation-indexed note due 7/15/2018.

January Producer Price Index Up 0.8%

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Comparing recessions

Source: FRED.

Source: FRED.

Horizontal axis: months before or after the business cycle peak. Vertical axis: ratio of nonfarm employment to the value at the business cycle peak. Green line: average postwar recession. Blue line: 2007-2008. Source: Macroblog.

Horizontal axis: months before or after the business cycle peak. Vertical axis: ratio of nonfarm employment to the value at the business cycle peak, for the recessions beginning in November 1973 (green), July 1981 (red), and December 2007 (blue). Source: Macroblog.

Horizontal axis: months after the business cycle peak. Vertical axis: change in fed funds rate since the peak. Data source: FRED.

It’s All About The Jobs Jamboree

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November Unemployment Statistics to Highlight Economic Reports This Week

Time for a change at the Fed

Source: Macroblog.

Year-over-year percent change in the seasonally unadjusted CPI and CPI excluding food and energy. Data from FRED.

Green line: yield on 5-year constant-maturity Treasury bond minus yield on 5-year constant-maturity TIPS. Blue line: yield on 3-month constant maturity Treasury bill. Data from FRED.

Blue line: daily effective fed funds rate. Red line: fed funds target rate. Source:FRED.

A very weak employment report

Top panel: civilian unemployment rate, from FRED, with NBER recessions as shaded regions. Bottom panel: 6-month change, with dashed line at +0.8 threshold.

Top panel: 100 times the 6-month change in the logarithm of seasonally adjusted nonfarm payroll employment, from FRED, with NBER recessions as shaded regions. Dashed line at -0.5%. Bottom panel: 12-month change, with dashed line at 0.0%.

Top panel: 100 times the 6-month change in the logarithm of seasonally adjusted civilian employment, based on the household survey, from FRED, with NBER recessions as shaded regions and dashed line at -0.4%. Bottom panel: 12-month change, with dashed line at 0.0%.

U.S. Unemployment Rate Jumps To 6.5%

Homes and Cars