Today's Economic Reports

By Markos N. Kaminis - Economy & Markets:

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

This article covers more than just analysis of the day's economic reports, but also includes a discussion of the monetary actions of the ECB and BOE, and it covers the market-moving impact of the Chinese Prime Minister's statement today. In fact, we view Wen Jiabao's statement, or rather lack of statement regarding an expected stimulus increase, as the one most important driver of global equity and commodity markets today.

Economic Data Analysis

Weekly Jobless Claims

After yesterday's news from ADP (697K Nonfarm Payrolls Lost in February) and last week's jobless claims (revised to 670K), today's report threatened to further damage market sentiment. Thank the Lord, the weekly tally of new benefits filers came in lower than expected. For the week ended February 28, weekly initial jobless claims filers summed to 639,000, short of the economists' consensus of 650K (by Bloomberg survey). Still, the four-week moving average inched higher by 2,000, to 641,750. As long as the 4-week figure is rising, we should remain diligent and focused on economic survival and recovery.

Starting this afternoon, all popular media chatter focused solely on Friday's Employment Situation Report and the federal government's accounting of job losses for the month of February. You'll be distressed to learn that economists have reportedly raised their forecast for the unemployment rate over the last day based on recent data, to 8%, from 7.9% (according to Bloomberg Radio). Bloomberg's survey still shows the consensus at 7.9%. Whatever the case, there seems a good chance we'll break 700K on the Nonfarm Payroll loss and hit 8% on unemployment.

Monster Employment Index

Monster Worldwide's (NYSE: MWW) Employment Index (MEI) is a barometer of online job demand. The online job search marketplace has been taking market share from print at a good pace over the last decade of Internet expansion. This share gain allowed the MEI to withstand early economic weakness, but it has since also shown signs of pain.

This month's measure edged up to 122, from 118 in January, which was consistent with a seasonal pattern. The gain was broad-reaching across most measured geographical regions. Weakness remains, however, and that was well-illustrated by the index's position 26% lower than the level reached a year ago.

Factory Orders

January's factory orders came in less bad than was expected. You can take this two ways. The optimist will look at the month's decline of 1.9% and marvel at how much better a performance it was than economists had foreseen (-3.5%). It was also better than December's drop (-3.9%). However, the pessimist would note the absolute direction was one of contraction, and the degree of contraction was not negligible. For some the sun sets, while for others it will soon rise.

Productivity & Costs

After getting the fourth quarter GDP revision, every economist and her mother knew there would be significant revision to Productivity and Costs data as well. The Greek knew it too, while my mother was much more interested in winning the Mega Millions Jackpot. In case you're wondering, I admit that it's sentences like this that get me favorite child status, which translates into greater access to seconds at Thanksgiving dinner...

Well, Productivity and Costs were revised dramatically today, but in different directions. Productivity was adjusted lower, as expected, to -0.4%, from the initial +3.2%. The measure, like GDP, of course incorporates "output," which was revised sharply lower as order demand fell off a cliff, plants were closed and work shifts were cut in the final quarter of the year.

Still, market gurus I listened to this morning were dumbfounded by the rise in Unit Labor Costs, as it was revised to an increase of 5.7%, from +1.8% initially reported. Unit Labor Costs is exactly what it sounds like, the cost of producing one unit of goods. When you produce less units but do not reduce workforce rationally in turn, then the cost of producing a unit of product increases. This seems to be the case this time around, but don't you worry. Just give those companies a chance and they'll fix this imbalance right up... and unemployment will skyrocket (read is skyrocketing).

We should note that Durable Goods output was especially weak in Q4. You can connect the dots here, as the auto industry is a key driver behind the sour economic numbers of Q4, and soon Q1 too. Besides this, durables related to the housing industry have taken a few blows over the past year or more, as has anything that costs more than a Dollar Tree (Nasdaq: DLTR) or Wal-Mart (NYSE: WMT) item...

Mortgage Defaults

The Mortgage Bankers Association reported that fourth quarter mortgage delinquencies hit an all-time high of 11.18%. I use the term delinquencies broadly by incorporating both mortgages that are behind by a single payment and those already in the foreclosure process in delinquency. However, of that group, about 8% were not yet in foreclosure proceedings.

A series of factors came to play to generate this record delinquency rate. Besides all the mortgage brokerage fraud and subprime ARMS loans entered into by unqualified individuals on the prodding of greedy brokers, we now have rising unemployment ushering in a second round of distress. Besides this, the court system is blocked up with cases and many bankers have held back on foreclosures while new programs are debated and discussed that might resolve some problems. That said, home price stabilization is not expected before mid-year if not until the end of the year, as fiscal stimulus and home price adjustment begin to offset negative cyclical factors. It will take a shift in the employment trend, and investor confidence, to secure the housing market.

International News Drivers

China's PM Lets Down the Global Marketplace

Yesterday, we warned that the excitement surrounding the topic of new Chinese fiscal stimulus might be overdone, since it was not based on any solid information. Today, our warning played true, as the Chinese Prime Minister Wen Jiabao produced his State of the Union Address completely absent new stimulus. This was likely the most significant market moving factor of the day, for both stocks and commodities, especially oil, which fell 4-5% on the near-term contracts.

ECB & BOE Cut Rates

Both the European Central Bank and the Bank of England cut rates by 50 basis points today, bringing accord back to the global banking system. Recall, the ECB refrained from action in February, and took some well-founded criticism from one astute Cypriot central banker, Athanasios Orphanides.

Jean-Claude Trichet noted that recent drops in European and Emerging European economies are clearly the only threat of reason, and that inflation is unlikely to prove dangerous in 2009 and 2010. Therefore, the ECB cut rates by 50 basis points, to 1.5% on the main fixed refinancing rate. This is the latest action in a 275 total basis point reduction since October of 2008.

The ECB forecasts deep economic contraction for 2009, to a level between negative 3.2% to negative 2.2%. The bankers see economic growth occurring during the course of 2010, with the full year GDP rate somewhere between -0.7% and +0.7%. As for inflation, it is seen dropping to below 1% this year, possibly even into deflationary territory according to Mr. Trichet's press conference. In 2010, inflation is seen increasing to as high as 1.4%. The ECB is clearly on board now with the global plan to spur economic growth with little concern for inflation.

There were a few voices today warning about coming runaway inflation as soon as 2010, but according to resident genius, Ben Bernanke, inflation is not a concern due to the short-term nature of much of his money creation, and his ability to swiftly reverse it. I kind of liked my favorite presidential candidate's thoughts on this subject recently, when he talked of the risk of debt creation and currency dilution to the point where the world says, I'm not lending to the U.S. any longer (read China). He talks about massive destruction of wealth and decimation of the American middle class that would result, and he's right. But what everyone is missing is the catalyst that might take us there... I've got it, but I'm not sharing yet.

The Bank of England also cut rates by 50 basis points, taking itself to the place central bankers couldn't have dreamt possible not so long ago, near zero. As a result, the BOE will employ some American ingenuity in the form of creative expansionary actions as introduced by the Federal Reserve.


(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK). Please see our disclosures at the Wall Street Greek website and author bio pages found there.