Economic Reports 03-03-10

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Economic Reports

The day's economic reports included two lead labor market data points; bright news out of the service sector; and a burst in mortgage activity. We also write about Greece's agreement to endure further austerity measures, and we share more than a sprinkle of opinion on the Greek government's submissive action and the responsibility of Europe.

ADP Private Employment Report

The day's first economic reports came on the important labor market. ADP reported its estimate for February Nonfarm Payrolls today, indicating only 20K jobs were lost on net. However, ADP revised January's payroll figure to -60K. While qualified by weather extremes through the month, February's job loss figure is the lowest since February of 2008, when unemployment started its uptrend. ADP claims that its seasonal adjustment is a fix, but in the past we have stated that while data is seasonally adjusted, it is not double-blizzard adjusted. ADP says weather will act to depress the Bureau of Labor Statistics data due on Friday, the all important Employment Situation Report.

Challenger, Gray & Christmas Job-Cuts Report

Challenger Gray & Christmas reports on announced corporate layoffs monthly. This latest economic report offers the lowest planned job-cuts count since July of 2006. Announced corporate layoffs numbered 42,090 in February, down significantly from January's 71,482 firings. When compared to February of 2009, layoffs were down 77%. Again, weather probably played a role, as many companies closed due to snow last month. Otherwise, there is hope that companies might finally be seeing value in holding onto their employment base. That would be the first step toward new hiring, but the delay between the two could be longer than many expect if economic recovery is delayed by tight credit conditions and the drag of a money starved citizenry.

ISM Non-Manufacturing Report

The nation's purchasing and supply executives in the service sector reported business growth for the second consecutive month. ISM's Nonmanufacturing Index was reported at 53.0%, versus 50.5% in January. Measures above 50 in this economic report indicate expansionary economic activity. Within the component indexes, both New Orders (55%) and Business Activity (54.8%) offered good news, while the Employment Index (48.6%) continues to lag. Still, even the Employment Index improved by 4 percentage points. The evidence is growing for longer term sustained economic recovery, as we here continue to look for a second temporary slip into contraction. The voices for robust growth should soon begin sounding their horns again, and we're keeping a close monitor on the situation for you. Friday's Labor Department data will have a lot to say about when economic growth occurs, though it will have its usual mirages and a a special illusion in weather.

We have one noteworthy rein to pull in on enthusiasm related to ISM's data; while the report indicates overall expansion, about half of reporting industries reported contraction in February. Those industries included: Educational Services; Health Care & Social Assistance; Management of Companies & Support Services; Construction; Utilities; Accommodation & Food Services; Real Estate, Rental & Leasing; and Mining. Do you want to know more? Just ask via the comment tab below.

MBA Mortgage Activity Report

Mortgage activity benefited from a post cabin fever release of built up demand. In the week ended February 26, the Market Composite Index of mortgage activity increased 14.6%. The Purchase Index gained 9% thanks to the weather impact. The Refinance Index gained 17.2%, driven also by lower mortgage rates. Average contracted rates on 15-year and 30-year fixed rate mortgages fell to 4.27% (from 4.35%) and 4.95% (from 5.03%), respectively.

EIA Petroleum Status Report

The EIA reported on inventory and distillates for the period ended February 26. Crude oil inventory increased by 4.1 million barrels in the period, and is currently above the upper limit of the average range for this time of year. Gasoline stocks increased by 0.7 million barrels in the period, and are also above the upper limit. In global economic recession, global and local demand for these important commodities decrease, and so oil and gasoline prices have retrenched from the harrowing heights reached when global demand was higher and growing. The Chinese are smartly stocking up on commodities now, while preparing for the return of economic growth. We should be doing the same... Distillate fuel inventories decreased by 0.9 million barrels, in line with seasonal demand for heating and power generation.

DC News

Dallas Fed President Richard Fisher spoke loudly at the Council on Foreign Relations in New York. Fisher said banks that are too big to fail should be dismantled before they have to be rescued again. He makes a good point, as any operation that is overly reliant upon one resource component, supplier or customer operates at great risk. Throughout business these risks are mitigated, so why not within the financial sector through targeted and well planned regulation and reorganization. I'm okay with taking away proprietary trading from banks, and forcing Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), Bank of America (NYSE: BAC) and others to decide what they want to do with the various segments of their vast operations. At the moment, they are receiving their cake and eating it too.

Overseas News

I watched via satellite system as the Greek Prime Minister addressed his government soberly, admitting that "yes," the country of my parents, which still holds at least half of my heart, would have to agree to additional austerity measures amounting to $6.5 billion. The euro rose as Greece committed to increased taxes and lower pay for its citizens.

The new measures include a two percentage point increase in the value-added sales tax, which is now 19 percent; another increase in the fuel tax; increases of 20 percent in alcohol taxes and 6 percent on cigarette taxes (these matter); a new tax on luxury goods and a 12 percent cut in add-ons to civil servant wages, according to government spokesman, Giorgos Petalotis. They also include a 30 percent reduction in the bonuses given to civil servants as holiday pay, which amount to two additional monthly wages, he said. That's a good portion of the yearly income of these people, who are already underpaid.

Thus, what's good for the euro, will not be good for Greece. The nation is now acting in a manner like the United States did after the economic crash of the late 20s; the US measures tightened a noose around an economy that could not breath already, and The Great Depression ensued. Greek citizens are right to protest, as Greece should demand more temporary assistance from the EU in exchange for less intense austerity measures stretched over a longer time span. This $6.5 billion will be saved in one year, and represents a dramatic strangling.

"Greece is not asking for a handout, but I can say it deserves a hand. The German people should realize this, and demand their union provide it."

Either you have a union or you do not. Greece is not an industrial country like its peers in France and Germany, because it did not benefit from assistance from abroad to rebuild its infrastructure and industry after WWII. Greece is owed by Germany, and Italy too, for the gold stolen from its reserves, the antiquities pillaged from its museums and the lives taken away by barbarians. For so long now, Greece has been the soft-spoken, completely loyal, perfect little brother to the US and Europe, and for too long, its been overlooked, trampled upon, abused and neglected when it has had need for assistance from both older brothers. Greece is not asking for a handout, but I can say it deserves a hand. The German people should realize this, and demand their union provide it.

Corporate News Drivers

Costco (Nasdaq: COST) and BJ's Wholesale Club (NYSE: BJ) were today's reporters of note. Both posted growth, but it was improvement that fell short of Wall Street expectations. As a result, the shares of COST are down 0.75%, while BJ is off 4.7%.

Wednesday's EPS reports include Alphatec (Nasdaq: ATEC), American Safety Insurance (NYSE: ASI), Arena Resources (NYSE: ARD), Babcock & Brown Air Ltd. (NYSE: FLY), BJ's Wholesale Club (NYSE: BJ), Braskem SA (NYSE: BAK), Brooklyn Federal Bancorp (Nasdaq: BFSB), Canadian Solar (Nasdaq: CSIQ), Cinemark Holdings (NYSE: CNK), Companhia Brasileira de Distribuicao (NYSE: CBD), Dillard's (NYSE: DDS), DineEquity (NYSE: DIN), DISH Network (Nasdaq: DISH), Dynamex (Nasdaq: DDMX), Famous Dave's of America (Nasdaq: DAVE), Finisar (Nasdaq: FNSR), Gasco Energy (AMEX: GSX), Information Services (Nasdaq: III), Joy Global (Nasdaq: JOYG), Lincoln Educational (Nasdaq: LINC), Live Nation Entertainment (NYSE: LYV), Myriad Pharmaceuticals (Nasdaq: MYRX), Pennichuck (Nasdaq: PNNW), Pozen (Nasdaq: POZN), Quaker Chemical (NYSE: KWR), RAE Systems (AMEX: RAE), RehabCare (NYSE: RHB), Royal Bank of Canada (NYSE: RY), Sauer-Danfoss (NYSE: SHS), Shenandoah Telecommunications (Nasdaq: SHEN), Sun Healthcare (Nasdaq: SUNH), The Progressive (NYSE: PGR), Trintech (Nasdaq: TTPA), Vanguard Natural Resources (NYSE: VNR), WCA Waste (Nasdaq: WCAA), WPCS International (Nasdaq: WPCS) and Yamana Gold (NYSE: AUY).


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