Tag Archive | "Unemployment Rate"

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Weather Sinks Jobs


Weather took the blame for a second consecutive non-farm payroll report as equity investors blinked but quickly recovered leaving the dollar and bond market to shoulder the load on Friday. With projections for about 185,000 new jobs in January, the Labor Department’s final report January card was a dismal 113,000 new jobs gained. Compiled with the disappointing 74,000 net gain in December, the under-200,000 two-month report was initially interpreted as softness in the economy.

However, a strong US consumer credit report turned the market around as investors realized the powerful American consumer seems undeterred. The Federal Reserve announced that total consumer credit in December rose $18.8 billion to $3.1 trillion, the biggest gain since February 2013.  

Analysts had projected in increase of about $12 billion. Meanwhile, revolving credit, which measure credit card growth, climbed by $5 billion in December. Both measures point to an engaged consumer, a definite boost to the economy.

Non-revolving credit increased $13.8 billion in December. This includes auto loans and government initiated student loans. Non-revolving credit only expanded by $465 million in November.

A New Course For Yellen?

Speculation immediately arose concerning a new direction by the Federal Reserve. Despite the weak private sector job growth, the nation’s unemployment rate fell 1 percent to 6.6 percent, the lowest rate in five years.

Initially, the Fed set 6.5 percent unemployment as the target to halt bond buying. Most investors and analysts suspect the Fed will fine tune initial goals and tie easing to the broader ranging SEP (Summary of Economic Projections). Investors seemed content that the weak jobs report was a blip in the overall economy, mostly resulting from severe weather that has paralyzed areas of the country in the past two months.

And, February weather has also been difficult. The Fed is scheduled to meet with Janet Yellen at the helm on March 18-19, when revisions to policy could be announced. The February non-farm payroll report will be released before the meeting so Yellen will have three-month composite to review.

Interestingly, the report for February indicated that some 29,000 jobs at all levels of government were lost. The labor participation rate increased to 58 percent, the highest figure since October. In analyzing the unemployment rate reduction, one must not only consider the weather but also the booming number of retirees leaving the workplace as baby boomers move on.

Equities Rally, Dollar Softens

Equities recovered nicely after the disappointing payroll report. The dollar did not fare as well. Investors view the employment glitch as inconsistent with the strong growth in the last quarter of 2013.   

MSCI All-country index – Up 1.09 percent

MSCI Emerging Country Index – Up 0.89 percent

Dow Jones – Up 0.92 percent or 144.4 points to 15,772.99

S&P 500 – Up 1.17 percent or 20.67 points to 1,794.1

NASDAQ – Up 1.56 percent or 63.331 points to 4120.452

Forex pairs

Euro- USD – 1.3633

GPB – USD – 1.649

USD – Yen – 1.0233

USD – CAD – 1.1101

USD – Ruble –  34.7375

US Dollar Index – Down 0.26 percent to 80.694  

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Markets Non-Plussed By Sour Employment Report


A sour US Labor Department non-farm payroll for December vibrated through global equity markets and gave the dollar reason to pause but the longer-term implications appeared tempered. Analysts had expected 196,000 new jobs created in the month but were rudely snapped to attention by the worst employment report in nearly three years. The economy only added 74,000 jobs in the month. November’s excellent report was revised upwards but ripples of uneasiness persisted.

By all accounts, this was a setback to the economy. Several analysts had gone as far to suggest 300,000 new jobs could be added. Blame was placed on the brutal weather that crossed the country, especially affecting the mid-West and Northeast.

Number of hours worked, a key component of the report, also shifted lower.  Again, blame was placed on the inclement weather. Investors immediately wondered what impact the report would have on the Federal Reserve.

Ironically, the unemployment rate dropped to 6.7 percent, a solid 0.3 points on the data. More than 380,000 left the workforce either through retirement or because they stopped receiving unemployment benefits. This is not the type reduction in unemployment the Federal Reserve had anticipated when it set its 6.5 percent target on halting the stimulus.  

The response to the disappointing news was muted, both in Washington and in equity and Forex markets. Investors seemed puzzled. Several disputed the figures and suggested an upward revision would be forthcoming in the February report. Earlier in the week, the ADP private sector payroll report had indicated significant job increase of more than 175,000.

Equity Markets

As investor debated the upcoming action by the Fed, markets seemed to take the new in stride. After their December announcement of a $10 billion monthly reduction in bond buying, the Fed will meet again on January 28-29 presumably to discuss another tapering addition.

On Wall Street, the Dow lost 7.71 points to 16,437.05 but the S&P and Nasdaq both posted small gains. The S&P 500 gained 4.24 points to 1,842.37, a 0.6 percent gain for the week, while the Nasdaq Composite gained 18.471 to 4,174.665.

The MSCI world index also posted a 0.6 percent gain for the day, marking a 0.4 percent gain for the week.

Mixed trade data from China sent Asian markets mildly lower. China’s December exports increased 4.3 percent, less than expected while exports grew by 8.3 percent, higher than expected.

In the UK, there was concern about a possible oil field accident. British markets were flat and the pound posted gains against the dollar as oil elevated slightly.

Forex Shifts

The dollar lost ground to the GBP, yen and euro but held firm against the Canadian dollar. The dollar index fell to 80.533 (0.46 percent), marking a one-week low.

Against the yen, the dollar fell to 103.83 yen before rebounding to 104.07, off Thursday 105 level.

Mario Draghi again repeated that the ECB would accommodate the banks with lower interest rates but said no action was forthcoming to resist the deflation possibility. The euro closed at 1.3667, up 0.44 percent. The consensus is that Europe’s banks are healthier than six months ago and that the troubled southern tier is recovering. Unemployment figures would seem to dispute that but there are signs that housing and manufacturing are improving.

British sterling closed the week at $1.6480, up 0.1 percent on Friday. The fate of the UK housing market is drawing political debate about the fate of the Help to Buy Programme.

While the dollar showed some weakness on Friday, investors increased their bets on the USD last week by the largest amount in four months. The Commodity Futures Trading Commission announced that $21.1 billion was invested in the currency last week.   

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Employment Disappointment Shakes Markets


Disappointing numbers from the US labor Department’s non-farm payroll report unnerved investors and shook currency markets around the globe. The disappointment came along with some very positive data from June regarding consumer spending and US factory goods.

The payroll data reflects the economy’s inability to sustain growth on its own merits and will surely be viewed with concern by the Federal Reserve. Non-farm payrolls added 162,000 jobs in July, a solid number but well below projected increases of 184,000. However, the unemployment rate fell two-tenths to 7.4 percent, the lowest rate since December 2008. Over the past three months, non-farm payroll growth has averaged about 175,000 new jobs per month.

The Federal Reserve concluded two days of talks on Wednesday without announcing any policy change. Markets received this status with enthusiasm.

Markets reacted quickly to the disappointment. After closing at record highs on Thursday, equities endured modest losses on Friday. The disappointment was apparently negated by the probability that the Federal Reserve will remain committed to its $86 billion per month stimulus through the rest of the year. The S&P 500 index, which crossed the 1700 threshold on Thursday, the DOW and Nasdaq all were down by midday.

Earnings Strong

Another offset to the employment data is the strong performance of US corporations. Of the 375 companies that have reported second quarter earnings, 67.5 percent have surpassed expectations. On Friday, AIG, the giant insurance carrier beleaguered during the recession, announced its first capital return since the 2008 bailout. The company is offering a dividend and stock buyback. Shares jumped 3.4 percent to $48.67.

Linkedin also surpassed expectations, reporting heavier than expected sales. The stock jumped 9.8 percent to $233.88. Over the last four quarters, 55 percent of reporting companies have posted bigger gains than expected.

Other Data On Friday

The Commerce Department’s gauge of core inflation rose 1.2 percent in June. May inflation showed a 1.1 percent rise.

The average work week tuned down to 34.4 hours. Earnings slipped 0.1 percent.  5.7 percent of Americans with jobs could not log enough hours to qualify as full-time jobs. In July, 4.25 million Americans had been unemployed for six months or longer.

Politicians have rejected the President’s infrastructure worm programs and thus have forced the Federal Reserve to be more active than most Americans would like. Additionally, government layoffs continue to hurt the economy as the sequestration passed by Congress will play out during the rest of 2013. As Congress prepares for their August vacation, taxpayers should be asking what Congress will do to get Americans back to work.

Currency Changes

The euro rose 0.4 percent against the USD to $1.3265. The dollar posted gains against the yen to 99.11. The dollar index fell 0.4 percent to 81.994 against a basket of currencies.

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Dollar, Global Equities Rise Sharply


Federal Reserve non-voting, regional members stated positions that the Fed could taper its easing policy as early as this summer but the rumors could not dim the fact that US consumer sentiment is moving forward aggressively. Buoyed by rising sentiment, especially strong in high income Americans, the US dollar climbed to multi-year highs against the a basket of currencies and struck a 4-year high against the yen on Friday.

Global equity markets and US equities gained upward momentum and looked to close strong for the week. The benchmark S&P 500 rose from its worst decline in three weeks on strong consumer sentiment and a rally on European shares. Europe noted surprisingly strong data from automakers and in domestic sales.

However, the euro trembled under a release that the European Central Bank (ECB) was making overtures to its banking members. With the region mired in a deep recession, the ECB is considering turning the overnight deposit rate negative. This would mean that member banks would have to pay the central bank to access overnight reserves.

The euro dipped below the $1.28USD mark briefly touching $1.2795 before bumping above the threshold. At 1.2824, the euro was down 0.4 percent for the day.

Meanwhile the dollar touched its highest rate against the yen since the Lehman Brothers collapse in 2008. The dollar climbed to 103.09 yen before steeping back to 102.95, up 0.7 percent overnight.

Gold endured another day of sharp declines while Brent oil rose 78 cents settling at $103.56 a barrel. US crude jumped 68 cents to $95.94. The consumer confidence index surprised analysts and is spurred by a more optimistic view of personal finances. Declining gas prices and stable inflation rates are allowing US consumers to spend more, a critical driver for GDP growth.

The Federal Reserve Debate

The Federal Reserve has stated that it will continue its aggressive buying policy until the unemployment rate hits 6.5 percent, one percent lower than it is currently. Additionally, despite all the easing to date, has not led to significant inflation rises.

It is expected that the sequester, which has taken a back seat to the recent fabricated crises, will dampen job growth, the administration’s prime concern. These factors point to a continued easing policy.

In terms of the Fed’s stimulus program, only voting member have input. The voting members are Board members. Regional Presidents rotate onto the Board but play a minor role in terms of policy.

On Friday, Richard Fisher, the President of the Dallas Federal Reserve Bank, told the National Association of Realtors that; “We can rightly declare victory on the housing front and (reduce) our purchases, with the aim of eliminating them entirely as the year wears on. I believe the efficacy of continued purchases is questionable.”

Fisher’s comments set off a firestorm of activity that took equities slightly lower. As a non-voting member, Fisher’s hawkish comments will have little bearing on policy. That is not to say that his views have not been echoed by other non-voting member.

Philadelphia Fed Reserve Bank President, Charles Plosser, and Richmond’s President, Jeffrey Lacker, have also been outspoken in calling for reduced purchases and the elimination of the buying policy.

However, Sarah Bloom Raskin, a Federal Reserve Governor and voting member stated her position which coincides with the popular position of the Board; “The U.S. economy has continued to recover from the effects of the financial crisis and deep recession, though at a pace that has been disappointingly slow. The recovery does appear to have picked up steam in some sectors, most notably in housing … However, federal fiscal policy remains an important source of restraint.” Raskin was speaking to the National Economics Club.

The inability of Congress to take decisive action and put forth a responsible, balanced approach to deeper deficit reduction is also paralyzing the Fed. If Congress could put a plan in place that included new jobs programs, the Fed could exit much more quickly.

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Bad Jobs Report Ominous


The President warned us that the sequester would cost jobs and the March non-farm payroll report looks to have ominous signs for the economy, the recovery and the Federal Reserve. Only 98,000 new jobs were created in March, well below the projected 200,000.

The unemployment rate ticked down one percent to 7.6 percent based on 468,000 persons leaving the unemployment lines. These numbers are in sharp contrast to job creation in January and February, where adjustments added another 68,000 new jobs. More importantly the prevailing mood among investors and business persons is pessimistic.

One of the biggest cuts was in retail, which had been showing strong job growth. After several months of surprising gains, retailers trimmed more than 24,000 jobs in March. On the brighter side, construction which rebounded last month, added another 18,000 jobs in March. This comes if the face of brutal weather across the Northeast.

The March employment figures may squash conversation about the Federal Reserve paring down its easing program. Chairman Ben Bernanke is committed to staying with the Fed’s acquisition policy until unemployment dips well below seven percent. There had been optimistic speculation that the Fed would reduce expenditures by the end of the year. That now appears unlikely.

These numbers should not be a great surprise. The payroll tax holiday expired and Congress insisted on implementation of punitive budget cuts that are going to cost jobs. Republicans are likely to take the rap for this newest jobs development and it will be well deserved.

US Markets are poised to turn down as is the USD. The jobless rate is the lowest since December 2008. The percentage of people looking for work or employed shrunk to 63.3 percent, the lowest rate since 1979.

The real question is will Washington do anything about the reversal. After more than 200,000 jobs gained in February, optimistic has cautiously ruled the day. However, the dysfunction in Washington has unnerved investors and business persons who do not know what to expect next. Rather than look to expand, businesses are once again covering their bases and tightening spending and investment.

Meanwhile, the number of Americans filing for new unemployment benefits rose to the highest level in four months in March. Initial claims increased 28,000 in arch, the highest level since November.

These numbers are consistent with what President Obama projected when debating the sequester. Republicans have staunchly resisted any new jobs programs at a time when economists warned the focus should be more attuned to growth than austerity.

It seems March may be a sign of bigger disappointments to come. Although there was one ray or light released by the Commerce Department on Friday. The trade balance shrank further in march, continuing a positive trend.

US equities opened lower and continued to shed recent gains in light of the disappointing report. The euro climbed above $1.30 and the yen rose above 96.5 against the USD in early trading. This jobs report is a real setback to the global economy and to the US. It is especially unnerving to think it could have been prevented.

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Strong Nonfarm Payroll Report


A strong nonfarm payroll report sealed the deal for US equities in a week that saw new highs set on three successive days. It’s been a great run for equity investors and the new employment data gave rise to optimism that the private sector could thrive despite contrary actions by politicians. In addition to the strong employment figures provided by the US Labor Department, the Federal Reserve released positive indicators suggesting that the US consumer was on the mend and spending.

Nonfarm payrolls increased by a net 236,000 jobs in February, surpassing analyst’s expectations by 76,000 jobs. The unemployment rate dropped from 7.9 percent in January to 7.7 percent in February.

January and December revisions showed downward revision of 15,000 but the February report added support to the USD and the equity markets. The February figure soared past the three-month average of 195,000 and prompted media analysts to call for the government to stop the politicking and resume governing.

The question now is how the recent debacle in Washington will affect the hiring spree. Projections are that if Washington continues its destructive course, more jobs would be lost than gained this year. The effects of the recent sequester have not been felt by the majority of Americans but beginning in April, a good deal of progress could be undone.

There are other serious elements fighting economic growth. The role of the Federal Reserve and the impact of its infusions is also a matter of concern. When the Fed unwinds its current $85 billion per month spending spree, the economy will be on its own, a place it has not been in 5 years.

Key Statistics in the February Bureau of Labor Statistics Nonfarm Payroll Report

  • The unemployment rate edged down to 7.7 percent.
  • The number of unemployed persons is at 12.0 million.
  • The unemployment rate for whites (6.8 percent) declined in February.
  • The rates for adult men (7.1 percent), adult women (7.0 percent), teenagers (25.1 percent), blacks (13.8 percent), and Hispanics (9.6 percent) showed little or no change.
  • The jobless rate for Asians was 6.1 percent (not seasonally adjusted), little changed from a year earlier.
  • In February, the number of long-term unemployed (those jobless for 27 weeks or more) was about unchanged at 4.8 million. These individuals accounted for 40.2 percent of the unemployed.
  • The employment-population ratio held at 58.6 percent in February. The civilian labor force participation rate, at 63.5 percent, changed little.
  • The number of persons employed part time for economic reasons, at 8.0 million, was essentially unchanged in February. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
  • In February, 2.6 million persons were marginally attached to the labor force, the same as a year earlier.
  • Among the marginally attached, there were 885,000 discouraged workers in February, down slightly from a year earlier.

Job Growth by Sector

  • Professional and business services added 73,000 jobs in February.
  •  Employment in administrative and support services, which includes employment services and services to buildings, rose by 44,000.
  • Accounting and bookkeeping services added 11,000 jobs.
  • Employment in construction increased by 48,000. Since September, construction employment has risen by 151,000.
  • In specialty trade contractors, gain was about equally split between residential (+17,000) and nonresidential specialty trade contractors (+15,000).
  • Nonresidential building construction also added jobs (+6,000).
  • The health care industry continued to add jobs in February (+32,000).
  • Employment in the information industry increased over the month (+20,000).
  • New jobs in in retail trade in February were up 24,000. Retail trade has added 252,000 jobs over the past 12 months.

Personal Data

  • In February, the average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.5 hours.
  • The manufacturing workweek rose by 0.2 hour to 40.9 hours.
  • Factory overtime edged up by 0.1 hour to 3.4 hours.
  • The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.2 hour to 33.8 hours.
  • Average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.82. Over the year, average hourly earnings have risen by 2.1 percent.
  • In February, average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $20.04.

Other Supporting Data

  • Regardless of the Fed’s participation in the jobs rally, the numbers are strong and they are reflected in other reports furnished by The Federal Reserve.
  • Household debt increased at its fastest pace since early 2008 and reflects positive sentiment among the economy’s single biggest driving force, the American consumer.
  • The Federal Reserve also indicates that the new worth of American households is on the mend. Net worth increased to $1.1 trillion in February to a total of $66.0 trillion, the highest since the third quarter 2007.
  • Household debt climbed by 2.5 percent annually, marking the biggest increase since the first quarter 2008.
  • Total household debt settled at $12.83 trillion in the fourth quarter 2012, below the benchmark $13.,83 trillion in early 2008.
  • The biggest contributors to the gains in new wealth are the rising equity markets and the cautious recovery of the real estate market.

What’s Ahead

Imagine where the economy would be were it not for the craziness in Washington. The economy has survived the tax increases and elimination of the temporary payroll tax decrease quite well.

Hopefully the Senate will refine the Sequester insanity so that discretionary cuts are meaningful and do not create hundreds of thousands of job losses.

The way Washington could help the private sector is to get serious about the needs of the people. We need entitlement reform and we need tax reform. Get to work!

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Euro Slides, Dollar Rises, Italy Plays With Fire


On Friday, the euro fell to its lowest rate against the USD since January 10 and to its lowest point against the yen in three weeks. A number of factors came together to keep the euro in a steady slide and the yen on a steady rise.

In Europe, the euro zone’s 17-member nations released economic information that painted a bleak picture for the region during 2013. Only Germany seemed to discount the overwhelming evidence of another recession. The German confidence index climbed for the fourth straight month, despite a dismal finish to 2012 and data suggesting manufacturing in the country and the region was dialing down.

The euro fell to $1.3166, well below the 15-month peak of $1,3711

The euro fell to 122.23 yen, down  1.4 percent

The dollar index struck a five-month high at 81.508.

In addition to projections that euro zone unemployment would remain in the 12 percent range for 2013 and that Spain’s unemployment rate would stay at 20 percent, there were other factors that are too unsettling to overlook. The ECB had anticipated banks would  pay back 131 billion euro of borrowed funding but fell far short of the mark, repaying just 61 billion euros on Thursday.

Spain announced the country would fall far short of its debt reduction goals in 2012 and well below euro zone requirements. The events in Spain and Italy should be observed by US politicians as examples of what happens when politics and economic concerns face off against each other.

Recent production numbers from the US indicate that businesses are uneasy about how politicians will handle the sequestration due to fall off the March 1st cliff on Friday, March 1, 2013. Coupling this event with the upcoming debt ceiling expiration, the stage is set for a perfect storm that will leave the middle class crippled and the country mired in what will surely become another recession.

And, the political rhetoric in Washington marches on.

On Thursday, minutes from the Federal Reserve’s January meeting were released. The possibility that the Fed will raise interest rates earlier than expected strengthened the dollar against the declining euro.

In addition to the economic woes in Europe, the political theater is unnerving economies outside the region. The amazing but disturbing popularity of Italian bad boy and financial nightmare Silvio Berlusconi have shaken confidence in Italy’s future and thus the future of the euro zone.

Is it possible that the regions third largest economy could turn a blind eye to the unscrupulous Berlusconi? Apparently so as the former Prime Minister is locked in a three way run between himself, current prime minister Mario Monte and Luigi Bersani.

Many economists hold Berlusconi responsible for the lax financial oversight that sank the nation’s economy. However, Italians seem to prefer the wayward ways to the disciplined approach to correction that Monti has advocated.

The euro zone produces 20 percent of the global output. The European Commission said that the euro zone will not return to growth until 2014, dimming hopes of China and the US for their export markets.

Across the region, consumer inflation could deal another blow to the economy. Projection call for an inflation rate increase to 1.8 percent in 2013.

In Washington, Congress returned and seemed undisturbed by the pending negotiations that could set the country back into recession in a very short time. The inability of Congress to put their political rhetoric aside and act responsibly has been repressing the economy since the fourth quarter 2012.

On Thursday, new unemployment claims surpassed analyst expectations as signs of the political weight on the economy continue to mount.

It appears President Obama will stick to his word on reducing spending and increasing taxes. Republicans can move to the middle or cause another economic collapse. If so, it may be 2014 before Democrats regain the house and finally accomplish meaningful legislation about jobs, guns and immigration.

 

 

 

 

 

 

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US Equities Surge, Euro Gains


Fueled by encouraging news from the Department of Labor and the Commerce Department and the University of Michigan, the Dow Jones moved quickly above the 14,000 mark before retreating just below the benchmark. The S&P 500 gained 12.09 points and the Nasdaq Composite jumped 24.44 points in early morning trading.

The Labor Department produced its January Non-Farm Payroll report indicating that the US added 157,000 jobs in January. For December and November, 127,000 more jobs were created than initially reported. The unemployment rate rose to 7.9 percent, but the market responded positively to the December and November adjustments.

Sectors With Job Growth

  • Construction jobs +28,000
  • Retail +22,000
  • Healthcare +23,000
  • Manufacturing unchanged
  • Government -9,000

The average work week was stable at 34.4 hours per week. Personal income rose by $0.4 in January

The improved construction industry is keenly watched by analysts. Health care added 320,000 jobs in 2012. Manufacturing showed no new jobs in January. More than 2,170,000 jobs were created in 2012. In calendar year 2012, job growth averaged 181,000 per month.

The Institute For Supply Management (ISM) report was also encouraging. The ISM reports that PMI registered 53.1 percent, a significant jump from the 50.2 registered in December’s report. Manufacturing increased for the second consecutive month. New orders increased to 53.3 percent, an unexpected jump of 3.6 percent.

The ISM reports that 13 of the 18 manufacturing industries posted increases in January. The report may identify the surprising dip in GDP in the fourth quarter. Weather disasters, the fiscal cliff and uncertainty in the euro zone have weighed heavily on the economy. However a paring in defense spending may well be the major factor in lowering the GDP.

Housing prices are making some headway but, on the whole, the industry is mired in a deep slump and it is clear that young Americans are not determined to purchases homes.

The Euro Continues Gains

The euro continued its impressive rally rising to 1.3674USD, a level not visited since November 2011. The new close represents a 0.6 percent one-day gain.

Driving the euro was a better than expected Purchasing Managers’ Index. The January report showed more demand than at any time in 2012. Output in Germany was particularly strong.

The euro is still riding a high from the early three-year loan repayments. Despite down days in Spain, Greece and Italy, there is a new confidence in the euro zone. All major indices in the region were up except for the three laggards who registered another day of hard hits

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Step Aside Washington Let The Economy Work


Despite Washington’s dysfunction, the US Labor Department’s Non-Farm Payroll report showed 155,000 jobs were added in December. Additionally, another 15,000 jobs were adjusted to the November total. By all accounts, the figure continued a steady progressive trend.

Based on the antics of a devastatingly dysfunctional 112th Congress, many analysts feared for the worst. Over the last 60 years, the unemployment rate has averaged 6.0 percent. Today, the unemployment rate is 7.8 percent and there are few reasons to think the economy can re-create more prosperous times. The December unemployment rate is one percent less than 12 months ago.

There are many theories about the direction of the US recovery. However, analysts all agree that the dysfunction in Washington may be the nation’s biggest hurdle.  With momentum leaning forward, the economy received no lift from the pitiful resolution of the fiscal cliff. There is not one provision in this divisive piece of legislation that gives the economy direction much less the much needed stability to know where the country is headed. Lacking than a clear direction of financial policy, the government has engulfed the business community with instability. Business leaders have learned very little about what demands a resolution to the debt crisis will make.

The end result of the first leg of the self-imposed fiscal cliff is that business leaders know less about the direction of the solution than before negotiations commenced. Businesses are again forced to hoard their capital in preparation for the next Congressional debacle. It is a sorry state and not one worthy of the world’s largest economy.

In December, average hourly earnings increased by 0.3 percent. Two important sectors that have been gutter-bound since the outset of the recession, construction and manufacturing, reflect progress as new jobs increased in both sectors.

To many observers, new job creation in December is disappointing. To others, it is a miracle that the economy has withstood a government seemingly on a path of self-destruction. Retail sales over the holidays were below expectations. Consumers started the holiday buying season at a good pace but as the fiscal cliff approached, many consumers applied the brakes. Now, facing several more agonizing fiscal negotiations and when the country needs the full power of the American consumer, it becomes difficult to see positive growth and new job creation.

Will the Congress Remove the Shackles?

The politicians will be negotiating the debt ceiling, and the pending portion of the fiscal cliff in upcoming months. If that isn’t enough to dim the economy, consider it a miracle.

On a positive side, automakers have achieved great success in 2012. And, local, state and national payrolls cut 13,000 jobs in December.

What the country needs is a well-considered debt reduction plan. Only the development of such a plan will encourage corporate investment and return consumers to open pocketbooks. The chances for a resounding debt resolution plan are cloudy at best.

Richard Gilhooly, an interest rate strategist for TD Securities, New York, offered a sound observation regarding the current job marketplace. “Private sector payrolls at 168,000 were fairly robust in December and the general view is that the recent numbers were likely depressed by fiscal cliff issues, such that improvement should be seen in coming months.

“The household survey was weaker, with only 28,000 jobs, while 192,000 people entered the labor force, pushing the unemployment rate 0.1% higher. Bonds initially traded higher on the unemployment rate and the idea that QE is pegged to at least 6.5 percent, but the market has traded back to the lows subsequently on what is generally a firm report and likely better ahead.”

Imagine where the economy would be if Washington stopped presenting obstacles to a motivated environment.

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Unemployment Data Improves, Fiscal Cliff Looms


Today’s US Labor Department’s Non-Farm Payroll Report surpassed expectations and added to other recent economic data to paint a better picture of a recovering economy. However, the impact of Hurricane Sandy has yet to be measured. The Labor Department report will likely be viewed very differently by political camps and presidential nominees.

The report positively adjusted employment for August and September by an additional 84,000 jobs. This is a welcome upward adjustment that accompanies what can only be regarded as a solid report. The private sector added 184,000 jobs. The public sector trimmed 13,000 jobs, half of which were trimmed from local governments. Despite the strength of the numbers, the unemployment rate rose by one tick to 7.9 percent.

The momentum is positive but most likely not sufficient to deter the Federal Reserve from continuing its buying spree, QE3. The consensus among analysts seems to be that the report is an improvement but there remains much work to do.

About the report, David Cast, an economist with 4Cast, Ltd. in New York said, “Generally it is positive — the payrolls were strong and the unemployment rate sustained most of its fall from last month and the household survey has a decent mix of rising employment. Even manufacturing was positive which is a surprise and there was a strong rebound in professional and business employment, which has been weak in the last couple of months.

Overall a positive report, although the only negatives were that the work week and earnings data were a little softer than expected. So it is not all strong. We got decent upward revisions to the last two months, so generally there is a positive picture although not everything is strong.”

The unemployment rate is 7.9 percent. Currently, there are 12.3 million unemployed Americans.

Unemployment be demographics shows:

Blacks – 14.3 percent

Whites – 7.0 percent

Hispanics – 10.0 percent

Asians – 4.9 percent

Adult men – 7.3 percent

Adult women – 7.2 percent

Teenagers – 23.7 percent

Other important data

Long –term unemployed (persons out of work 27 weeks or longer) – 5 million persons.

Long-term unemployed account for 40.6 percent of the total unemployed.

Civilian workforce rose by 578,000 to 155.6 million in October.

Labor force participation increased to 63.8 percent.

The employment to population ratio held at 58.8.

The number of part-time workers dropped by 269,000 to 8.3 million in October.

2.4 million Americans have looked for a job in the past 12 months.

There were 813,000 discouraged (not looking for work) workers in October; 154,000 lower than one year ago.

Sectors Showing Growth

Professional and business services – +51,000

Healthcare – +31,000

Retail trade – +36,000

Leisure and hospitality – +28,000

Construction – +17,000

Mining – -9,000

The average non-farm workweek was 34.4 hours. The average manufacturing sector workweek slipped 0.1 hours to 40.5 hours. Factory overtime remained unchanged at 3.2 hours. The average workweek for non-supervisory workers slipped 0.1 hours to 33.5 hours. The average hourly wage fell $0.01 to $23.58. The average wage for non-supervisory workers fell $0.01 to $19.79.

In Summary

In addition to this report, US factory orders rose 4.3 percent. The report solidifies that before Hurricane Sandy, the recovery was trudging along carefully. The biggest weight on the economy is not the election. The overwhelming burden on the economy is the fiscal cliff. Businesses with money are on the sidelines waiting to see if Congress will enact a meaningful solution before the December 31st deadline. For the private sector to move ahead, Congress must create a balanced and comprehensive deficit reduction solution. The time to act is now, not in January and not four months down the road. The world is watching.

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