NFIB Small Business Optimism Index (April 2012)

 

- Level 94.5 up 2 points from last month and at the highest level of this year.  This is a survey which asks businesses 10 questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job opening, expected credit conditions, now a good time to expand, and earnings trend.

ICSC-Goldman Store Sales  (week ended 5/5/2012)

 

- Store Sales week/week -0.8%
- Store Sales year/year +3.3%

 

Redbook (week ended 5/5/2012)

 

- Store Sales year/year +2.6%.  Previous was +2.9%.

 

Treasury prices are up (yields down) today on renewed angst about Greece.

There are no fundamentals today.  When the U.S. Treasury market opened in Tokyo (Sunday evening Eastern time) Treasury prices were up sharply (yields down) presumable based on the uncertainty generated by the French Presidential election. The angst must have subsided because this morning Treasuries are tame here in the U.S.

Jobs

 

BLS Employment Situation Report (April 2012)

 

- Non-farm jobs were +115,000.  Previous was revised to +154,000 from +120,000.

 

- Average Hourly Earnings was flat
- Average Workweek was flat.

 

The Unemployment Rate fell to 8.1% because there were 342,000 fewer people in the civilian labor force.  The labor participation percentage (size of the labor force/adult noninstitutionalized population) fell from 58.5% to 58.4%.  More attention should be paid to the participation ratio because it is the people working who drive GDP and pay taxes.  Cheering for a lower unemployment rate when the labor participation ratio is falling misses the point.

 

Another disappointing report.  There is no mystery.  The housing bubble was a borrowed money bubble and the recovery is taking much longer than recovery from a typical cyclical recession. 

Jobs

 

- Initial Jobless Claims 365,000.
- Previous was revised to 392,000 from 388,000
- 4-week Moving Average 383,500.

 

Graph: http://mam.econoday.com/showimage.asp?imageid=22464

 

While better than last week this is still not indicative of anything more than modest recovery.

 

When the BLS Employment Situation Report comes out tomorrow, attention will be focused on jobs added and on the unemployment rate but the most important piece of data is the labor participation rate and than has been falling.

 

Challenger Job-Cut Report

 

- Announced layoffs 40,559. Previous was 37,880.

 

This is a report of layoffs at large companies. 

 

Non-farm Worker Productivity and Costs (1stQ2012)

 

Nonfarm productivity - Quarter/Quarter  -0.5%
Unit labor costs - Quarter/Quarter  +2.0%.

 

No one has a good explanation as to why worker productivity (GDP/hour worked) has declined.  This should be a concern because increasing worker productivity is important to containing inflation.

 

ISM Non-Manufacturing Index (April 2012)

 

Still shows growth but declined from 56.0 to 53.5.  This is a survey index which had four components: business activity, new orders, employment, and supplier deliveries. Any reading above 50 indicates expansion.

 

Graph: http://mam.econoday.com/showimage.asp?imageid=22467

 

BLS Employment Situation Report is tomorrow.  I think that expectations are so low that only something under +100,000 will rally Treasuries.

ADP Jobs (April 2012)

 

- ADP private payroll employment +119,000.  Prior was 209,000 revised to 201,000.

 

BLS was weak last month and this is an indication that it could be weak again.

 

Graph: http://mam.econoday.com/showimage.asp?imageid=22454

 

MBA Mortgage Applications (week ended 4/27/2012)

 

Purchase Index - Week/Week +2.9%
Refinance Index - Week/Week -0.7%
Composite Index - Week/Week +0.1%

 

The housing market remains weak.  It will stay weak until more people are working.

 

Factory Orders (March 2012)

 

- Factory Orders Month/Month -1.5%.  This is the largest decline in three years.  Factory Orders have large swings from month to month and this simply another example of the supply side making up for the lack or prior demand on the consumer side.  With the consumer modestly increasing spending, the supply side will pick up again reacting to increased demand.

ISM Manufacturing (April 2012)

 

- ISM Index of Manufacturing sector - 54.8 up from previous 53.4

 

Mark this as good economic news after weeks of supply side weakness. 

 

Graph: http://mam.econoday.com/showimage.asp?imageid=22446

 

Construction Spending (March 2012)

 

- Construction Spending Month/Month +0.1%
- Construction Spending Month/Month +6.0%

 

Retail

 

ICSC-Goldman Store Sales (Week ended 4/28/2012)

 

- Store Sales week/week -0.3%
- Store Sales year/year +4.2%

 

Redbook (Week ended 4/28/2012)

 

- Store Sales year/year +2.9%

Personal Income and Spending (March 2012)

 

Personal Income - Month/Month +0.4%
Consumer Spending - Month/Month +0.3%. Previous was +0.9%
PCE Price Index - Month/Month +0.2%
Core PCE price index - Month/Month +0.2%

 

 
Personal Income - Year/Year +3.2%
Consumer Spending - Year/Year +4.0%
PCE Price Index -- Year/Year change +2.1%
Core PCE price index - Year/Year +2.0%

 

Real (inflation adjusted) disposable income increased 0.2 percent in March, in contrast to a decrease of 0.1 percent in February.

 

PCE (Personal Consumption Expense) is an inflation gauge geared to consumers.

 

Chicago PMI (April 2012)

 

- Business Barometer Index 56.2. While this indicates expansion this is lower than expectations and the lowest level since November 2009.

 

Graph: http://mam.econoday.com/showimage.asp?imageid=22435

 

Dallas Fed Manufacturing Survey (April 2012)

 

- Business Activity Index was -3.4.  Previous was 10.8.

Going back to last Friday's weak GDP.  The growth in "I" (business investment and inventories) was +0.59% in 1stQ2012 contrasted with +1.81% in 4thQ2011.  Business continues to cut back on spending because it overestimated the depth of the recovery.

 

This Friday has the BLS Employment Situation Report.

GDP (1stQ2012)

 

- GDP for 1st Q2012 was +2.2%.  This is seasonally adjusted and inflation adjusted. This advance estimate uses 3 months of data for consumer spending but only 2 months of data and one month of estimates for the other components of GDP: investments, government spending, imports and exports.

 

Real personal consumption expenditures increased 2.9 percent in the first quarter, compared with an increase of 2.1 percent in the fourth. Real nonresidential fixed investment decreased 2.1 percent in the first quarter, in contrast to an increase of 5.2 percent in the fourth. Real exports of goods and services increased 5.4 percent in the first quarter, compared with an increase of 2.7 percent in the fourth.  Real imports of goods and services increased 4.3 percent, compared with an increase of 3.7 percent.

 

In short, mainly the consumer drove GDP gain.  The decrease in inventories on the supply side was a correction to a too aggressive buildup in 4thQ2011.

 

The big picture is that having spent so much on "stimulus" and having taken in much less in tax cuts this is a weak gain in GDP for being this far into recovery,  There is no mystery.  The collapse of the housing bubble resulted in significant loses to the banking sector followed by caution.  It also left a large number of people with negative equity in their homes and the jobs loss created by the liquidity crisis is taking longer to recover from that a typical recovery.

 

The only good news is that the consumer is driving GDP.  When all is said and done, that is what is most important. This increase in consumer spending offsets much of the gloom on the headline number but unless jobs pick up (the last jobs report was disappointing) the increase in consumer spending will abate.

 

We continue to increase national debt at a pace much faster than GDP growth and refuse to address entitlement spending. National Debt in the first quarter increased by $359,138,635,737.60 which was an increase of 2.30% for the quarter.  The GDP increase is annual.  On the surface, debt is increasing at more than four times the rate of increase in GDP. This is not a formula for success.

 

 

Employment Cost Index

 

ECI - Quarter/Quarter +0.4%,  This is the cost of labor: wages and benefits.

 

University of Michigan Consumer Sentiment (April 2012)

 

- Level is 76.4 up from 75.7.  This is in keeping with the internals of GDP. The consumer is increasing spending.

Jobs (week ended 4/21/2012)

 

- Initial Jobless Claims 388,000
- Previous was 386,000 revised to 389,000

 

That data is seasonally adjusted. Unadjusted was 366,743.

 

What we may be seeing this year with the warm winter in most of the country may be much about the effect of the historical seasonal adjustments being affected by actual weather as it is about the true state of the jobs market.

 

http://mam.econoday.com/showimage.asp?imageid=22416

 

Housing (March 2012)

 

- Pending Home Sales Index Level 101.4.  Previous was 96.5.
- Pending Home Sales Index Month/Month +4.1%

 

This is based on signed real estate contracts for existing single-family homes, condos and co-ops. The index is now at the highest level since April 2010. This data is from NAR - the folks who overestimated home sales data for 2007-2010.

 

 

Chicago Fed National Activity Index (March 2012) - Index Level -0.29.

 

This is another supply side indicator showing that the wholesale side got ahead of the retail side and applied the brakes.

Mortgage Applications (week ended 4/20/2012)

 

Composite Index - Week/Week -3.8%
Purchase Index - Week/Week +2.7%
Refinance Index - Week/Week -5.6%.

 

Durable Goods Orders (March 2012)

 

New Orders - Month/Month -4.2%
Ex-transportation - Month/Month -1.1%.

 

This was a broad based decline and most certainly is not indicative of economic growth. 

 

Graph: http://mam.econoday.com/showimage.asp?imageid=22407

 

 

FOMC

 

A policy announcement related to the FOMC meeting is scheduled at 9:30 PDT.  Bernanke has a press conference at 11:15 PDT.

 

It would be great if Bernanke simply said "What the hell do you want me to do when the fiscal side of the economy is running $1.4 trillion deficits for the past three years" and walked off the podium.  The fact is that the Fed has interest rates near zero and is monetizing about 60% of the deficit.  This takes away the Fed's discretion to manage the money supply.