Not ALL bad in Nonfarm Payroll report


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from Cesar at Valance:

  1. trend in construction job losses looking better- consistent with housing market getting to a point where drag on GDP will disappear. the prints since March are -39, -59, -38, -50, -20, and -8 in August
  2. Diffusion index jumped from 41.4 to 48.9 (less sectors with job losses)
  3. 37k of 101k job loss in private sector came from temp help

(Click to see more)


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Re: Letter from Kohn to you, 1994


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(an email exchange PLUS pdf of Kohn letter)

consider it public information,
as you can see, he’s one of the few who understand monetary operations

thanks!

>   
>   On Mon, Aug 25, 2008 at 7:58 PM, Steve wrote:
>   
>   Hi Warren,
>   
>   Hope all is well with you.
>   
>   A year or two ago, William Hummel was kind enough to give me a copy of the
>   response you received from Donald Kohn regarding Fed/Treasury money
>   mechanics, confirming what you had laid out in S.C.E.; copy of letter is
>   attached.
>   
>   I might want to use that sometime in the future, if the occasion arises, to help
>   bolster an argument or two — but wanted to ask you permission beforehand.
>   If you’d like to keep it private, I’ll just paraphrase it as necessary.
>   
>   Thanks, and take care,
>   Steve
>   
>   ps- If you still have a copy of your letter to Greenspan, I wouldn’t mind seeing
>   how you worded your questions to him.
>   

Letter from Kohn to Warren, 1994


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Re: Is Fischer correct?


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(an email exchange)

Not even close!

>   
>   On Mon, Aug 25, 2008 at 11:54 PM, Russell wrote:
>   
>   I found Fischer’s speech.
>   
>   ”No combination of tax hikes and spending cuts, though, will change the total
>   burden borne by current and future generations. For the existing unfunded
>   liabilities to be covered in the end, someone must pay $99.2 trillion more or
>   receive $99.2 trillion less than they have been currently promised.
>   

Why/how? Show me the debits and credits and how that changes real outcomes!

>   This is a cold, hard fact.

Yes, he believes it.

>   The decision we must make is whether to shoulder a substantial portion of that
>   burden today or compel future generations to bear its full weight.”

Yes, produce goods and services and send them back in time to pay off the debt.

>   ”We know from centuries of evidence in countless economies, from ancient
>   Rome to today’s Zimbabwe, that running the printing press to pay off today’s
>   bills leads to much worse problems later on. The inflation that results from the
>   flood of money into the economy turns out to be far worse than the fiscal pain
>   those countries hoped to avoid. ”
>   

What is ‘the printing press’ as above? Deficit spending? So why was the Fed pushing the latest fiscal package? Is this an attack on Bernanke?

>   ”Right now, we—you and I—are launching fiscal bombs against ourselves. ”

Then why is the Fed forecasting lower inflation over the next two years and beyond?


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Reuters: Nominal growth to support asset prices


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Nominal growth continues and will continue to support asset prices over time.

To the extent there is not a sufficient desire to spend income, the government has the options to either cut taxes to increase private spending and/or increase government spending with a bid for those idle resources.

Government deficits are slowly rising worldwide, as these ‘automatic stabilizers’ function to reduce slack and restore growth.

However, the widening income distribution also serves to move the output toward goods and services for those with spending power.

And none of the candidates seem to be directly addressing this fundamental issue.

World’s richest got even richer last year


by Joseph A. Giannone

NEW YORK (Reuters) The old saying holds true: The rich do get richer.

Even as world financial markets broke down last year, personal wealth around the world grew 5 percent to $109.5 trillion, according to a global wealth report released on Thursday by Boston Consulting Group.

It was the sixth consecutive year of expanding wealth. The fastest growth was among households in developing regions, such as China and the Gulf States and among families who were already rich.

That wealth also is increasingly concentrated among the richest.

The top 1 percent of all households owned 35 percent of the world’s wealth last year. Meanwhile, the top 0.001 percent, ultra-rich households holding at least $5 million in assets, commanded $21 trillion — a fifth of the world’s wealth.

The planet also continues to mint new millionaires rapidly. The biggest jumps in 2007 came from emerging countries in Asia and Latin America. Overall, the number of millionaire households grew 11 percent to 10.7 million last year.


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2008-09-05 USER


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US Economic Releases


Unemployment Rate (Aug)

Survey 5.7%
Actual 6.1%
Prior 5.7%
Revised n/a

 
Another big gap up.
Quite a bit of the run up is due to new people entering the labor force to find work.
Could be due to new extended benefits program.
Could be due to more people looking to earn some extra money.

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Unemployment Rate ALLX 1 (Aug)

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Unemployment Rate ALLX 2 (Aug)

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Change in Nonfarm Payrolls (Aug)

Survey -75K
Actual -84K
Prior -51K
Revised -60K

 
A bit worse than expected and previous months revised up some, mainly due to state and local government reductions.

Weakness but still not recession type losses.

Cesar writes:

weak report

  • NFP down 84k; net revisions down another 58k, 8th straight mthly decline

Yes, continuing weakness in employment, but not at 200,000+ recession type levels.

Also, negative revisions for previous months means productivity was even higher.

  • Unemployment rate jumps from 5.682% to 6.055% (household employment down 342k and labor force up 250k)

Yes, big numbers entering the labor force have been contributing to the higher unemployment rate.

Some of this could be due to extended benefit programs and some could be to high pricers driving people out of ‘retirement’ and back into the labor force.

  • Diffusion index improves from 41.4 to 48.9
  • Index of aggregate hours drops 0.1% (3 months annualized rate down 1.8%)
  • Average duration of unemployment rises 17.1 to 17.4 weeks (median actually improved from 9.7 to 9.2)
  • Average hourly earnings rise 0.4% and increased from 3.4% y/y to 3.6% y/y
  • By sector:
    • Mfg down 61k
    • Construction down 8k
    • Retail down 20k
    • Temp down 37k
    • Education & Health care up 55k
    • Govt up 17k

The last two are the largest sectors and where the trend of growth generally comes from.

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Change in Manufacturing Payrolls (Aug)

Survey -35K
Actual -61K
Prior -35K
Revised -38K

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Mining-Manufacturing Employment ALLX (Aug)

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Average Hourly Earnings MoM (Aug)

Survey 0.3%
Actual 0.4%
Prior 0.3%
Revised 0.4%

 
A bit of an uptick, but not problematic at this point.

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Average Hourly Earnings YoY (Aug)

Survey 3.4%
Actual 3.6%
Prior 3.4%
Revised n/a

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Average Hourly Earnings ALLX 1 (Aug)

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Average Hourly Earnings ALLX 2 (Aug)

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Average Hourly Earnings ALLX 3 (Aug)

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Average Weekly Hours (Aug)

Survey 33.6
Actual 33.7
Prior 33.6
Revised 33.7

 
Hours per worker up, but total hours worked down due to job losses.

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Average Weekly Hours ALLX 1 (Aug)

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Average Weekly Hours ALLX 2 (Aug)

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Mortgage Delinquencies (2Q)

Survey n/a
Actual 6.41%
Prior 6.35%
Revised n/a

 
Still going up, but possibly the rate of increase has slowed.

Should level off as mortgages granted on fraudulent applications were largely eliminated over a year ago.

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Mortgage Delinquencies ALLX (2Q)


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2008-09-04 USER


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Karim writes:

  • Initial claims jump 16k to 445k (4wk avg 439k from 444k)
  • Continuing claims rise 15k to 3435k (4wk avg 3400k from 3367k)
  • A correction from the impact of the extended benefits program would have seen initial claims drop to the 400-425k range (as was expected)
  • This increase and a new cycle high in continuing claims suggests some renewed labor market weakness and adds to downside risks to upcoming NFP reports
  • Unit labor costs for Q2 revised from unch to -0.5% and productivity from 3.5% to 4.3%. These numbers are volatile, but at the margin, the Fed will welcome these revisions as they relate to its inflation outlook.

Yes, and they also show that a share of the job losses were attributable to ‘efficiency gains’ rather than macro weakness (though the two are related) meaning economic potential is firming. This is the ‘classic benefit’ of a slowdown.

  • ISM Non-Mfg headline continues to meander around 50 (rises from 49.5 to 50.6)
  • Prices paid drops from 80.8 to 72.9; employment weakens further, from 47.1 to 45.4
  • Orders up 2 points, export orders down 3pts
  • Labor department official states claims data this week were a ‘clean read’, but that next week’s number will be effected by the Gustav evacuation
  • Trichet says Euro economy in an ‘episode of weak activity’ and that M3 data is overstating monetary expansion as credit growth is moderating. States ECB especially focused on wage growth, but when asked if he agrees with Board member Stark on seeing ‘broad-based’ second round effects, says only seeing ‘some second round effects’. Seems like ECB wants to see weak growth become entrenched and wage demands to moderate before entertaining rate cuts-i.e., unemployment needs to rise further.


US Economic Releases


ADP Employment Change (Aug)

Survey -30K
Actual -33K
Prior 9K
Revised 1K

 
Continuing its long, lazy trend lower, but not recession levels yet.

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ADP Employment Change MoM (Aug)

Survey n/a
Actual 0.0%
Prior 0.0%
Revised n/a

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ADP TABLE 1 (Aug)

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ADP TABLE 2 (Aug)

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ADP TABLE 3 (Aug)

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ADP ALLX (Aug)

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Nonfarm Productivity QoQ (2Q F)

Survey 3.5%
Actual 4.3%
Prior 2.2%
Revised n/a

 
Very high number. Shows the higher GDP is being sustained by fewer workers.

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Unit Labor Costs QoQ (2Q F)

Survey 0.0%
Actual -0.5%
Prior 1.3%
Revised n/a

 
Nice downtick. Domestic labor costs aren’t pushing up prices yet.

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Productivity TABLE 1 (2Q F)

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Productivity TABLE 2 (2Q F)

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Initial Jobless Claims (Aug 30)

Survey 420K
Actual 444K
Prior 425K
Revised 429K

 
Keeps working its way higher after the extended benefit program was initiated, though the 4 week average is a touch lower.

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Continuing Jobless Claims (Aug 29)

Survey 3423K
Actual 3435K
Prior 3423K
Revised 3429K

 
Not looking good and also not sure how much this is influenced by the extended benefits program.

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Jobless Claims ALLX (Aug 30)

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ISM Non-Manufacturing Composite (Aug)

Survey 49.5
Actual 50.6
Prior 49.5
Revised n/a

 
Better than expected.

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ISM TABLE (Aug)

 
Employment and export orders down some, while prices paid still very high.

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ICSC Chain Store Sales YoY (Aug)

Survey n/a
Actual 1.7%
Prior 2.6%
Revised 2.5%

 
Not great, but not falling apart.

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ICSC TABLE (Aug)


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2008-09-03 USER


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US Economic Releases


MBA Mortgage Applications (Aug 29)

Survey n/a
Actual 7.5%
Prior 0.5%
Revised n/a

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MBA Purchasing Applications (Aug 29)

Survey n/a
Actual 349.0
Prior 315.9
Revised n/a

Nice to see this picking up. With agencies sorted out and income holding up, it should continue to improve over time.

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MBA Refinancing Applications (Aug 29)

Survey n/a
Actual 1059.7
Prior 1038.0
Revised n/a

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MBA TABLE 1 (Aug 29)

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MBA TABLE 2 (Aug 29)

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MBA TABLE 3 (Aug 29)

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MBA TABLE 4 (Aug 29)

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Challenger Job Cuts YoY (Aug)

Survey n/a
Actual 11.7%
Prior 140.8%
Revised n/a

This series hasn’t been all that useful one way or another.

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Challenger Job Cuts TABLE 1 (Aug)

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Challenger Job Cuts TABLE 2 (Aug)

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Challenger Job Cuts TABLE 3 (Aug)

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Challenger Job Cuts TABLE 4 (Aug)

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Challenger Job Cuts ALLX (Aug)

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ICSC-UBS Store Sales WoW (Sep 2)

Survey n/a
Actual 0.1%
Prior 0.2%
Revised n/a

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ICSC-UBS Store Sales YoY (Sep 2)

Survey n/a
Actual 2.2%
Prior 2.3%
Revised n/a

Looks okay. No recession here.

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Redbook Store Sales Weekly YoY (Sep 2)

Survey n/a
Actual 2.3%
Prior 1.9%
Revised n/a

Looks okay.

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ICSC-UBS Redbook Comparison TABLE (Sep 2)

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Factory Orders MoM (Jul)

Survey 1.0%
Actual 1.3%
Prior 1.7%
Revised 2.1%

Better than expected and previous month revised up.

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Factory Orders YoY (Jul)

Survey n/a
Actual 5.3%
Prior 7.5%
Revised n/a

Could be construed as being in an uptrend!

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Factory Orders ALLX (Jul)

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Domestic Vehicle Sales (Aug)

Survey 9.4M
Actual 10.4M
Prior 9.1M
Revised n/a

Even this has turned up, though from very low levels.

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Total Vehicle Sales (Aug)

Survey 13.0M
Actual 13.7M
Prior 12.5M
Revised n/a

Better than expected and may have bottomed. As the mix of vehicles produces switches, expect sales to increase.

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Vehicle Sales ALLX (Aug)


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Comments to questions


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Looks like Q4 was the bottom for the real economy, and government spending now kicking in strong for quite a while to keep things muddling through.

Housing has been ‘subtracting’ from GDP with exports picking up the slack.

From this point it won’t take much of an upturn in housing to pick up any slack that might be happening with exports.

Also, while unemployment figures lag quite a bit, seems to me GDP is strong enough to see a few unexpected new jobs in time for the elections.

Meanwhile, seems chunks of the financial sector are still hurting due to the reduced demand for financial services, but they’ll figure it out with new and rehashed products and come back strong, but maybe not to the benefit of existing investors.

Been watching a lot of tv lately:

The Democrats really got blindsighted by McCain’s Rambolita as the convention was forgotten within 24 hours, and the Republicans found someone to rally around.

Seems Biden has turned into a big weight around Obama’s neck as the enthusiasm flows away and they become ‘old news’ and another case of peaking too early. And now with the convention pretty much canceled, Bush and Chaney are kept off prime time to McCain’s benefit, and with New Orleans II now a ‘model of federal efficiency’ the Democrats are scrambling for something to say.


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2008-09-02 USER


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ISM Manufacturing (Aug)

Survey 50.0
Actual 49.9
Prior 50.0
Revised n/a

Not bad; far from recession levels in a sector that will continue to decline as a percentage of GDP indefinately.

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ISM Prices Paid (Aug)

Survey 82.0
Actual 77.0
Prior 88.5
Revised n/a

Less than expected, but still very high. Indication that most companies still paying higher prices even as commodities declined.

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ISM TABLE (Aug)

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Construction Spending MoM (Jul)

Survey -0.4%
Actual -0.6%
Prior -0.4%
Revised 0.3%

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Construction Spending YoY (Jul)

Survey n/a
Actual -4.8%
Prior -5.1%
Revised n/a

Still very weak, but smaller declines.

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Construction Spending TABLE 1 (Jul)

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Construction Spending TABLE 2 (Jul)

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ABC Consumer Confidence (Aug 31)

Survey -49
Actual -47
Prior -50
Revised n/a


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