Tag Archive | "Us Labor Department"

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Dollar Gains After Financial Shares Lag

In a volatile day for currency markets, the USD made headway against the euro, yen, GBP, Aussie dollar and Loonie. Helped by more positive economic data, the dollar rebounded during the day after losing ground against the euro and yen in early trading. The dollar halted its assault at $110 vs. the Canadian dollar and posted significant gains aga8inst the Australian dollar.

Factory output and employment gained momentum according to data from the Mid-West Atlantic region and the Philadelphia Federal Reserve Bank. The data suggests stronger than expected employment in the sector in the two regions which include states of Ohio, Pennsylvania, New Jersey and others. The Philadelphia Fed said its business activity index climbed 9.4 points this month from 6.4 percent in December. This marks a significant gain that would help to counter last month’s disappointing non-farm payroll report.

Bolstering the manufacturing data was a report from the US Labor Department showing that state unemployment benefits dipped by about 2,000 claims to a seasonally adjusted rate of 326,000. The combination of these reports will test the accuracy of the Labor Department’s December payroll report.

The data struggled against early morning returns from Goldman Sachs, Citigroup, two companies that were burned by bond trades in the fourth quarter. Goldman stock was a big loser on the day, falling 21 percent at one point. Citigroup shares turned down 4.1 percent and the S&P financial sector index lost 0.7 percent. The news caught investors by surprise in the wake of positive gains posted by JP Morgan Chase, Wells Fargo and Bank of American on Wednesday.

The DOWD was off 76.53 by mid-afternoon. The S&P 500 lost 4.2 po0its to 1,844.18 as the NASDAQ posted slight gains.

Helping the dollar was continues encouraging data regarding inflation. The December Consumer Price Index rose just 0.3 percent after being flat in November.

Bank of England Currency Rate Scandal

 In information released through freedom of information releases, Reuters reported that The Bank of England discussed their processes for setting foreign exchange rates one ear before the manipulation occurred.

Minutes from the April 23, 2012, meeting of the subgroup of the London Foreign Exchange Joint Standing Committee revealed discussions around fixes, the daily setting of benchmark exchange rates. At the meeting, revelations about online chatrooms that discussing advance notice of the daily settings was revealed. The subgroup met at the London offices of BNP Paribas.

The Financial Conduct Authority, the regulatory wing of the Britain, reported that the BoE only became aware of the irregularities months after the April, 2012, meeting. It was action by the US Department of Justice that forced the investigation into the $5.3 trillion-a-day market in October 2013. Large penalties, fines and legal action are expected.

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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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Bonds Rise, Equities and Dollar Blink

Investors reflected the tension of another week of possible air and missile strikes against Syria and a disappointing US jobs report that conflicted with big strides by the auto industry posted earlier in the week. The American consumer seems to be bucking the odds. The Fed’s unclear policy regarding tapering of its $85 billion per month bond purchasing initiative posed a muddled backdrop for the instability of important legislative actions that should soon be addressed.

The return of the country’s most ineffective and most unpopular Congress is likely to push the nervous investor to the sidelines. The House and Senate are due to not only deal with the Syrian crises but must also address the debt ceiling. How Congress will resolve the nation’s debt will certainly keep nervous investors on the sideline until some resolution is reached. The way this Congress malfunctions makes it hard to say what the outcome of the debt ceiling debate might be.

The Fed’s tapering policy is another unsettling factor. Most investors believe the Fed Reserve will pare spending by between $10 billion and $15 billion per month effective later this month. The Fed will meet on September 17th and 18th. This reduction should add strength to the dollar but may undermine equities.

What is clear is that third quarter employment lacks the strength that analysts has expected. Some analysts cite Obamacare and the congressionally enforced sequestration as contributors to sagging employment. The third quarter was expected to be strong after a lackluster 2nd quarter.

US Labor Department’s Non-Farm Payroll Report

A day after the ADP employment report indicated job growth in the private sector during August of 176,000 jobs, most economists predicted that the non-farm payroll report would surpass those expectations adding about 190,000 jobs. Instead the non-farm payroll report for August indicated gains of 169,000 new workers.

The biggest disappointment came from revisions to June and July reported data. Downward revisions subtracted 74,000 jobs from the two monthly reports. Disappointing new construction statistics caused significant declines in new construction employment. Auto employment also was lower than expected.

The most consistent theme to the non-farm payroll report is the ongoing paring of jobs in the public sector. Local, state and national government employment continues to reflect ongoing trimming. Government employment has shed more than 2 million jobs since the outbreak of the recession.  Yet, in August, a rash of teacher hirings pushed government employment up by 17,000 jobs.

The August non-farm payroll report caused the unemployment rate to fall one-tenth of one point to 7.3 percent, the lowest rate since December 2008. The participation rate struck its lowest mark since August 1978. The participation rate for men hit an all-time low.

After upward revisions, GDP grew 2.5 percent in the second quarter. The third and fourth quarters were expected to be even stronger. Now, it appears economists will be sharpening their pencils for the remained of the year.

The jobs report had elements of gain. August average hourly earnings improved over July. Earnings rose five cents making the gain over the past year a 2.2 percent gain.

The length of the average workweek also improved. The average workweek nudged ahead to 34.5 after hitting a six-month low of 34.4 in July.

Equities, Treasuries and The Dollar

The Dow Jones slipped in late Friday trading. The S&P 500 posted a nominal gain as did the Nasdaq. The MSCI’s World Index, which gauges 45 countries, rose 0.6 percent as the FTSEurofirst 300 also climbed 0.5 percent.

Equity markets fluctuated after mixed messages from Russia’s president Vladimir Putin who said Russia would support Syria if the US struck. Later, Putin clarified his remarks to indicate that Russia would not intervene but would continue to ship weapons to the besieged nation.

As Congress debates the proposed attacks, the decision by the President to send the final decision to Congress appears a heady political maneuver. Polling indicates that the citizens oppose US involvement in any capacity. Congressmen who vote for the strikes may pay a steep political price in the next election.

The USD weakened on Friday. The euro was up 0.4 percent to $1.3168. The dollar was off against the yen, settling at 98.89 yen. The dollar index .DXY settled at 82.1884, down 0.5 percent.

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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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Good Data Moves Markets, USD

The Commerce Department and the US Labor Department topped analyst’s expectations and added further momentum to the US equity markets and to the US dollar. The news is a boost to the fragile recovery and reflects consumer confidence that overrides the dysfunction in Washington. That is another story.

On Thursday, the Commerce Department reported that the current flow of goods, services and investments to out of country sources, called the “account deficit,” fell to $110.4 billion in the fourth quarter after an upward revision to $112.4 billion in the third quarter 2012. Projections had been that the fourth quarter current account deficit would expand to $112.8 billion.

The highest current account deficit was registered in the fourth quarter 2005 at 6.5 percent of GDP. The deficit in the fourth quarter 2012 2.8 percent GDP, the lowest since the second quarter 2009 (2.5%).

The breakdown of the deficits in the 4th quarter in the three sectors are:

  • Deficit on Goods – $180.60bn
  • Deficit on Services – $52.2bn
  • Surplus on Income – $52.4 up $5.8bn from quarter 3.

Big Surprise on Retail Sales

The wrangling over the fiscal cliff, the budget and the expiration of the payroll tax holiday did not deter the US consumer, who composes about 70 percent of the nation’s GDP. The surprising demand in retail sales is believed to be linked to more strength in the employment sector.

While employment is still the biggest challenge for the recovery, there appears to be some stabilization that the country’s politicians cannot derail. Retail sales increased 1.1 percent in February, the largest gain since September 2012. January retail sales were revised upwards to show  a 0.2 percent gain. The February projection had been 0.5 percent.

Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh told Reuters that, “Consumers have been less fazed by the increase in taxes than we expected. Because the labor market has been doing a bit better than we were expecting, people are feeling a bit confident and not cutting back their spending.”

GDP Projections Improve

This data has encouraged economists to revise their GDP projections for the first quarter. GDP in the fourth quarter was 2.1 percent. Sage a neutral read for the first quarter, expectations are that the economy will post much needed gains in the current quarter.

The Commerce report indicates January expansion in business inventories to the highest levels in 18 months. Retail inventories, outside auto inventories, rose to their highest levels since August 1995.

JP Morgan has increased tier projection for growth during the first quarter to 2.3 percent. Goldman Sachs was even more bullish, raising expectations to 2.9 percent.

Some of the increase in retail sales should be tempered as it reflects the rising gas prices. However, sales of new cars rose by 1.1 percent in February.

If Washington stays in their cocoon, the economy may continue growth. However, the two conflicting budgets presetne3d by Democrats in the Senate and Republicans in the House ae so divergent that neither party seems to understand anything about the economy or their constituents.

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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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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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Good Employment Data Bumps Markets

On Friday, the US Labor Department posted its Non-Farm Payroll report and global markets were swift to act on the positive trend. Private employers added 114,000 jobs and the unemployment rate dipped 0.03 percent to a four-year low of 7.8 percent.

Republicans were quick to criticize the release as a public relations coup for President Obama. However, the unemployment rate returned to the rate when Obama first took office in 2009. To arrive at the improved rate, July and August non-farm payrolls were increased by 86,000 jobs.  It was believed that the unemployment rate had contracted in July and August but the revisions indicate otherwise.

With the Federal Reserve’s QE3 added to this encouraging data, the impact could well be reflected over the next few months.  The Fed’s initiative is already showing positive results as the credit markets appears to be functioning more easily than in the past. There is one more non-farm payroll report due prior to the November 6 elections.

The employment report showed a loss of jobs in the manufacturing sector for the second consecutive month but the dormant construction industry got a boost of 5,000 new jobs. This is a reflection of a slowly improving housing market.

Government employment increased by 10,000 jobs.  This followed an increase in government employment of 45,000 in August.

What is of great importance to the economy and for millions of unemployed workers is the stability of the small business environment. A poll conducted by Vistage International, a consulting firm, indicates that the small business owner does not see a strong 2013. Thus, small businesses are hesitant to add workers.

The undercurrent about the US Fiscal Cliff is weighing heavily on small businesses. Rather than tax reform or austerity cuts, the small business person wants to know how the federal government will stabilize the economy and government spending before the end of the year. 57 percent of business owners stated that the expiration of the Bush Tax Cuts, set to expire December 31st, would definitely have a negative effect upon their business.

However, 12 percent of employers said they intended to add jobs in the next 12 months. Nine percent said they expected to lay-off workers.

Regarding marketplace uncertainty, 30 percent of business owners said the fiscal cliff was a serious issue. 17 percent pointed to political uncertainty as the biggest drain on their business. On the positive side, only 6 percent of the participants indicated tax accessing credit was a problem. This can be attributed to the Federal Reserve’s commitment to hold interest rates at historic lows through 2015.

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Jobs Report Hits Hard

Markets were caught off guard today when the US Labor Department posted its latest non-farm payroll report. The private sector added 69,000 jobs in May. Adjustments to March and April reports lowered job creation by 49.000 jobs. Unemployment rose to 8.2 percent from 8.1 in April.  The release triggered a steep sell-off in equity markets as the DOW fell more than 200 points by midday.  The S&P index fell 1.5 percent in the first half hour of trading.

Analysts had expected jobs to increase by 150,000 and maintain the 8.1 percent unemployment rate. With the crisis in the euro zone worsening by the day and with China experiencing a deeper than expected slowdown, global equity markets were volatile. The fact is that global economies are now under pressure.  The deeply rooted toxins of the euro zone crisis have worked their way around the world.

The data is disappointing but it would be unrealistic to believe that the world is not affected by the volatility in the euro zone. In a world dominated by supply and demand, the demand is extremely low so supply is pared and jobs fall by the wayside.

In May, China’s manufacturing rose slightly, missing projections. In the UK, output spiraled downward at the fastest pace in three years. Manufacturing fell slightly in France and Germany.  No matter how the cake is sliced, it is not a pretty picture.

In Washington, the President expressed concern.  Republicans tried to score points, but have no solutions. Obama has learned what Harry Truman meant when he said “If you can’t stand the heat, get out of the kitchen.” Mitt Romney hit the airwaves but nobody has an idea about what his jobs program would look like.  If the euro zone has taught us anything, it is that austerity will not solve the problem.  What the US needs is a combination of fiscal responsible solutions to income, including tax reform, expenses, including mandated programs and growth.

The Federal Reserve will meet on June 19 and June 20. The disappointing jobs report paves the way for another round of quantitative easing.  The performance of equity markets has caused the Fed to tread softly. It seems like QE3 is around the corner. The question is how will this money be spent.

Where it should be spent is creating American jobs. The US needs infrastructure programs that will bring the nation into the 21st century. The American people and especially the military need work.  The US is going to suffer lack of demand until the euro zone and China are on a level plain. QE3 should be all about jobs and nothing else.

The chances of that happening are slim.  First, it is an election year.  Secondly, the disposition of Congress is counter-productive.  Frankly, the best thing that could happen in this election year is for the voters to create a clean slate by voting every member of Congress out and replacing them with members that would cross party lines to act on behalf of the middle class.

Romney is quick to criticize Obama, but should he not also be criticizing Congress?  During all the Republican debates, not one candidate offered a defined program for job growth.  How many times can we bear to hear Democrats and Republicans present summaries of obvious facts.

  • We should increase exports.
  • We should increase jobs.
  • We should pare the government work force.
  • We should remove regulatory oversight.
  • We need to solve the real estate crisis.
  • We need to eliminate Obamacare.
  • We need to reduce taxes to unsustainable levels.
  • We need energy solutions.

Enough! Do not state the obvious. Politicians need to explain to the populace precisely what actions will be taken to remedy these issues.  No matter who is the President, the biggest challenge that remains is how to transform Congress into a functional body from a third-world body of government to a functional body that represents the masses not the special interests.  No matter your politics, the USA needs solutions and the political will cross party lines to solve problems. Let’s be clear. The President is a figurehead.  No President can succeed without a gridlock-free Congress.



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