Friday, June 3, 2011
Only On Wall Street Is A Bad Jobs Report a Good Thing!
Unemployment Rises to 9.1%, Money Mayhem Following Massive NFP Disappointment
Massive collapse in the American employment situation: May NFP at 54K, down from 244K, and not only below consensus of 165K, but below the lowest economist prediction of 65K. Private payrolls increased just 83K on expectations of 170K. Manufacturing payroll dropped 5K on expectations of a 10K rise. The unemployment rate was 9.1%, although U-6 declined from 15.9% t 15.8%. The absolute number of unemployed increased fom 13.747 million to 13.914 million. For the third month in a row the Labor Force Participation rate remained flat at 64.2%.
and as if that isn't bad enough, also from ZH:
Take away the Birth/Death adjustment of 206,000 and the Real NFP is: -150,000. This is the biggest monthly B/D adjustment in over a year. And if as all the pundit claimed last month, demanding the McDonalds addition of 62,000 janitorial, part-time jobs be added to the May number, the economy really lost over 200,000 in May.
The household survey must have been atrocious!
Thursday, June 2, 2011
Retail Sales, Factory Orders Sink Market After Brief Rally Attempt
Fed Not to Begin QE3 for Now
by John Hilsenrath at WSJ:
Federal Reserve officials are in no hurry to respond to recent indications U.S. economic growth has hit another soft patch, despite chatter in financial markets that the Fed might start a new program of U.S. Treasury-bond purchases to boost growth.
The central bank has already purchased more than $2 trillion of mortgage and Treasury bonds. The purchases are meant to hold interest rates down by reducing the supply of securities in private hands and to drive investors into areas such as stocks to encourage businesses and consumers.
Fed Chairman Ben Bernanke signaled in April that the hurdle to more "quantitative easing," as it is known, is very high and Fed officials have done nothing to indicate that Mr. Bernanke's guidance has changed as economic data has worsened in recent weeks.
In an April news conference, Mr. Bernanke said the tradeoffs that would come with additional purchases were becoming unappealing. "It's not clear we can get substantial improvements in [employment] without some additional inflation risk," he said.
Fed officials have largely held to that line. In comments last week, St. Louis Fed president James Bullard said the Fed was entering a period in which Fed policy will be on pause—meaning it won't be trying to push interest rates either higher or lower. Charles Evans, president of the Chicago Fed and a strong advocate of past programs, said earlier last month that what the Fed had done already was "sufficient."
In comments Wednesday, Cleveland Fed president Sandra Pianalto said the Fed's current stance was appropriate and added the recovery was likely to continue, even though growth "may be frustratingly slow at times."
Mr. Bernanke has argued that past bond purchases haveworked, but it has have taken a political toll on the Fed. Critics in Congress and overseas say the Fed is fueling inflation globally.
"They don't want to do QE3," said Vincent Reinhart, an economist who formerly ran the Fed's influential division of monetary affairs. QE3 is what many traders have dubbed the possibility of a third round of Fed securities purchases.The last round of quantitative easing, which will amount to $600 billion of bond purchases, is set to conclude at the end of June.
A boost from Congress, through additional deficit spending, looks equally unlikely. Republicans have crafted an agenda based on spending cuts and would likely be reluctant to embrace new efforts to stimulate growth through fiscal policy. New tax cuts would also face a tough reception, given Washington's currentfocus on reducing the long-run deficit.
The Obama administration wants more infrastructure spending in the near term, but administration officials, stung by the divisive legacy of the 2009 stimulus bill, don't call it stimulus.
Infrastructure spending, in addition to education and research and development programs already proposed by Mr. Obama, are "policies that have the potential to impact job creation now but also have the ability to increase our competitiveness," said Brian Deese, deputy director of the National Economic Council.
The current mindset could change if the economy deteriorates. Mr. Bernanke has indicated that the outlook for inflation will play a key role in his decisions about monetary policy. Rising inflation could force the Fed to raise interest rates. A declining rate of inflation could force it to consider startinga new easing program.
The Fed initiated its last program of quantitative easing in 2010 amid worries that the U.S. was slipping toward deflation, or falling consumer prices. The behavior of bond markets doesn't indicate that deflation is a serious worry right now. Prices of Treasury Inflation Protected Securities, also known as TIPS, indicate that investors expect 2.8% inflation in five years, substantially more than was the case last August when the Fed started talking about a new round of quantitative easing. Back then, expected inflation was on a downward trajectory, from 2.8% to less than 2.2% in a couple of months.
Measured inflation is also higher than it was last year. When the Fed initiated the program in November, consumer prices were up 1.1% from a year earlier, well below the Fed's 2% goal. In April they were up 3.1% from a year earlier.
"We don't think it's likely at all, but things could change," Michael Pond, a bond strategist at Barclays Capital, said of the chances of another round of easing. "If growth slows well below its trend and on top of that you have inflation and inflation expectations coming down, it is certainly possible. At this point it is not on the table."
Wednesday, June 1, 2011
Dreadful Day
June Swoon
Killing Crude
"We're on the verge of a great, great depression" --Peter Yastrow, market strategist for Yastrow Origer
from CNBC:
Wall Street is having a hard time figuring out what to do now that the U.S. economy appears to be sputtering and yields are so low, Peter Yastrow, market strategist for Yastrow Origer, told CNBC.
"What we’ve got right now is almost near panic going on with money managers and people who are responsible for money," he said. "They can not find a yield and you just don’t want to be putting your money into commodities or things that are punts that might work out or they might not depending on what happens with the economy.
"We need to find real yield and real returns on these assets. You see bad data, you see Treasurys rally, you see all bonds and all fixed-income rally and then the people who are betting against the U.S. economy start getting bearish on stocks. That’s a huge mistake."
Stocks extended losses after the manufacturing fell below expectations in May and the private sector added only 38,000 jobs during the month.
"Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything," Yastrow said. "We’re on the verge of a great, great depression. The [Federal Reserve] knows it.
"We have many, many homeowners that are totally underwater here and cannot get out from under. The technology frontier is limited right now. We definitely have an innovation slowdown and the economy’s gonna suffer."
However, he said he wouldn’t sell stocks.
"Any bears out there better be careful because the dividend yields on these stocks look awesome relative to all the other investment vehicles out there," Yastrow said. "So bears are going to have to find a new way to express their discontent with the U.S. economy."
Dow Loses 190 Points
And It Just Gets Worse
Stocks are now down 160 points, wiping out not only yesterday's gains, but most of the gains for the entire week! Look at the slope of that decline!
Australia GDP Slips Too!
from the BBC:
/Australia's/ economy contracted by 1.2% in the first three months of the year, compared with the previous quarter, the latest government figures showed.
The government said flooding and cyclones in resource rich states of Queensland and Western Australia had a significant impact on growth.
Australia's economy is heavily reliant on its resources sector.
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