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Another Freaky Friday?
Submitted by Leo Kolivakis, publisher of Pension Pulse.
It
was another freaky Friday. First, let's discuss the US jobs report.
There was a decline of 20,000 payrolls in January and the unemployment
rate fell to 9.7%. Despite being off in my forecast (I was expecting
big payroll gains close to 150K), I am still convinced that big job
gains are in store for Q1 & Q2 2010.
There are two encouraging things worth noting from the January jobs report.
First, temporary employment added 52,000 jobs in January and it wasn't
all Census hiring. Since reaching a low point in September 2009,
temporary help services have added almost a quarter of a million jobs.
Why
is this important? Because employment lags the broader economic
recovery, and companies usually hire temp workers initially before
offering them full-time jobs. As shown in the chart below, the pickup
in temp workers has historically been a good harbinger of future
employment gains.
Next,
Stéfane Marion, Chief Economist & Strategist at the National Bank
of Canada noted the following encouraging news from the US jobs report:
...the
wage bill is now expanding at a 4% clip in the last three months, the
best showing since early 2008. We also note that the household survey
from which the unemployment rate is derived showed the addition of
784,000 jobs in January (after adjusting for revisions to population).
The employment figures derived from this survey, however, are much more
volatile than those obtained from the payroll survey. As such, it is
preferable to use a 3-month moving average to extract the underlying
trend. As shown, household jobs still show a gain of 110,000 after
smoothing. In the past, the household survey has led the payroll
survey coming out of recessions.
All
this means that no matter how the BLS muddies the waters, job growth is around the corner. It has been a severe
recession which is why it's taking a frustratingly long time to see
some meaningful employment gains, but the recovery in the US labor
market is already upon us.
Now, the stock market is another
beast altogether. The explosion of algorithmic trading makes it very
difficult to understand the daily movements in stocks. Just look at
today's price action on the Dow:
What
happened at the end of the day? Traders will tell you "it's just short
covering" while conspiracy theorists will tell you it's the "Plunge Protection Team" (PPT) or Goldman Sachs.
Maybe it was just the
big hedgies manipulating shares lower in the early morning so they can
scoop them up at attractive levels. Who knows? All I know is that there
is still plenty of liquidity out there to drive shares much higher.
That's why I keep buying these dips, especially the big dips on solar
shares.
Look, is the market rigged? You bet it is. If you study
stock markets on a daily basis, you'll see very weird things that defy
logic. But at the end of the day, it all boils down to fear &
greed. Forget Greece, PIIGS and all the noise coming out of Europe.
This is just noise that the big hedgies use to feed off retail and less
sophisticated institutional investors.
So, while it was another
freaky Friday on Wall Street, I'd say the US jobs report was
encouraging as was the price action in the stock market. Things are
slowly getting better, but the pace of job growth is painfully slow.
However, as the recovery gains steam, job growth will follow. It's only
a matter of time now.
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Bruce,
I am pounding the table, day after day, harping on the global pension crisis and people here think I wear rosy glasses and smoke pot all day long. Come on folks! There are serious structural problems but there are also good things happening in the US economy. This might be the cleansing it needed to get back on track. We shall see how things proceed in 2010, but one thing I can tell you is that corporate America also does not want deflation, so they better start hiring Americans because those profits from elsewhere will dsiappear fast without a sustained US recovery.
For small to medium businesses that have not closed
their doors hiring Americans is not economically
feasible between benefits and the vise like grip
unions have on this country. Our hope near term
export our way out of this mess while bozo the clown
in Washington figures out what plan c is to stimulate
jobs in this country in the private sector in order
to have a sustainable recovery. At the moment more
Americans are on the dole between gov hiring, gov
programs and so forth. Nobody with half a brain
wants the U.S. to be the round eyed version of Japan.
Next time I visit someone in corporate America I'll
be sure to tell them you said they better start hiring
or else! I'm sure that will get them to salute.
Where are the good things?
Actual unemployment was 10.6% but they they "seaonally" adjusted it to 9.7%. Yeah tight! Another BLS fudge
Leo,
Couple of things:
Cash as a percentage of debt in the S&P 500 is at the riskiest (lowest) it has ever been. This is more true for smaller American firms. Debt as a percentage of assets is also at its highest recorded point. (Capital IQ)
1) As companies struggle to make profits each Q despite tight cash and low revenues....why in the world would they ever:
A) Load up on inventory... in a JIT (for two decades JIT is a mantra of every good business and the whole foundation of ERP systems, etc) world when data comes over the OCR reader by the hour?
B) Add people ...as opposed to hoping the company down the road does it first?
What Company do you know that makes decisions that way? Please name one?
2) Temp hiring at this time of year has four sources:
A) Weather snow shovelers
B) Tax accountants to close year end books and get ready for tax season (actually a big source of contract hires this time of year)
C) Retailers who hire temps to return inventory left over after Christmas season (especially true of goods typically on consignment like books, music, dvd's, shoes, winter coats, etc)
D) Census workers
None of those categories is going to turn around the economy and none of them signals much except its January
3) This mantra of yours leaves me with strange reactions. While everyone has a right to an opinion...and different opinions are to be treasured and listened to...opinions that are repeated frequently but unsupported and unexplained and generate no insight or analysis...are really borderline trolling or attention gathering
4) Lastly, American corporations wishing not to have deflation does not remotely enter the minds of corporations making decisions about what their forecasts and their cash flows tell them they can afford.
Thats precisely why they have been laying people off...forecasts and cash. Unless you can tell us where the cash is going to come from or why the jobs based on a solid ROI projections per company are going to start....you have expressed an opinion....based on a wish.
Unfortunately thats not very valuable imho. We all have wishes.
That may be, by I suspect there's a whole hell of a lot more "cleansing" to come. Good things happening in the US economy? Taper out the governments efforts, and pretty much all of those "good things" pretty much disappear. And taper out it must.
the only cleansing will be when Leo gets wiped out and cant post anymore
Corporate Americais not going to start hiring so as to avoid deflation. It does not work like that. Corporations adjust employment based on real and perceived demand. There is not much of that around.
Their profits are disappearing. The $ is up 10% in a month. What does that translate to in earnings per share for the big multinationals? (the ones doing this hiring)
I gotta say that I agree with Leo here, somewhat.
You can only sell inventories that were produced BEFORE the layoffs and cut costs to make profits for so long.
There will be more hiring to match natural demands, which never were as low as the amount of people that they laid off.
As they hire more people, demand goes up for goods and services because people will spend again.
The only way to right this ship is to hire people. Without hiring people, you'll see the inventory disappear and thus the job cuts won't bring any profits anymore.
Who knows if corporate America will do it, but it's the best way to go.
No one even bothers to address sticky wage issues or the impact of commerical real estae issues coming up to a head in 3 and 4 Q.
Good luck with that. Employment might temporarily click up, but it won't last. This whole BS is little different than Big Push development theory that was used in the 70s and 80s. That didn't really work either.
Nor does Leo deal with the uncertainty of various policies of the Obama administration that act to actually discourage hiring (health care IRA proposals, socialism and taking over companies like GM in general).
I think Leo gets his wish for a couple quarters, then we Dine In Hell from there.
Ps- I am respectful of Leo's opinion and appreciate a different view. It pays for all of us to be nimble and not caught up in gloom and doom. That being said Argh! You're killin' me here Leo.
Dear Cindy,
Thanks and while I agree with you, the commercial RE "bomb" is really not going to hit banks as hard as you think. It's not like they don't see it coming and aren't provisioning for it. As far as the Obama administration, they've made plenty of mistakes, but they know if they do not get their act together, they're cooked. Jobs will be the focus from now on. Period.
Quite a big assumption that there is anyone to buy those inventories. Without hiring people, gross wages stay down, and less is sold at the same price, or more is sold at a lesser price. The inventory doesn't get up and walk away.
Also, don't overlook all the demand for big ticket items that was pulled forward by all the clunkers programs on autos, household appliances etc...
Just a couple points, Leo.
1) This article is entirely too rosy. Please try to include some gloom-and-doom next time. Nothing too dire though; maybe just some fanciful speculation that an asteroid will strike the earth and destroy all life.
2) Please post a comment so that the peanut gallery can flag it.
Thanks in advance,
Loup :)
@loup,
FUNNIEST COMMENT OF 2010! I'M STILL LAUGHING OUT LOUD !!!
Exactly. Try telling this to a guy in the construction business looks pretty grim to me and I'm not in the real
estate game. Level of unemployment right now is at
129.5 million jobs the same as 1999. And there is more
people of working age and the baby boomers can't retire
their retirement portfolio is barely breathing. I know
there is alot of folks out there that has gone back to school to get their nursing certificate but internet
degrees take a year or two. I don't know if I trust this guys time line.
employment I meant sorry.