Archive for January, 2014

December Payroll

Wednesday, January 22nd, 2014

The economy continued to add jobs as 2013 came to a close, but the reported pace was significantly slower than the recent trend. The Bureau of Labor Statistics reported just 74,000 jobs were added in December. This follows November’s upwardly revised total of 241,000 new jobs (originally 203,000). Despite the slow growth in payrolls, the unemployment rate fell to 6.7 percent from 7.0 percent in November.

The three-month average for payroll additions is 172,000. That puts this month’s figure nearly 100,000 jobs shy of the recent trend. The prior two months for this indicator have been particularly strong, so if the six-month average is used, that still puts the recent trend at 170,000 jobs. December’s tally stands out and will likely require revisions in the months ahead.

The drop in the rate of unemployment was largely caused by fewer workers in the work force. To end the year, 347,000 people fell out of the labor pool. The changing dynamics of the pool of workers is discouraging and largely unavoidable. The labor force is aging with the baby boomers, so as they exit the labor market, the nation’s labor participation will remain under pressure until they have completely left the market or are being replaced by a younger cohort as quickly as boomers leave.

It is impossible to know why there was such a sharp break from the recent jobs growth trend. It could be a problem with the data, weather related, or a real slowdown. The last explanation is the one Atlas worries about least; it seems to be an unlikely explanation. Another indicator that Atlas follows, the Institute for Supply Management (ISM), contradicts the payroll figure. According to ISM data, both segments of the economy, manufacturing and services, added jobs at an increasing pace with the largest portion of the economy, services, increasing significantly in the period. The way Atlas sees it, December’s payroll figure will likely be revised higher. (by C. Cox)

November Balance of Trade

Tuesday, January 21st, 2014

The difference between imports and exports improved in November according to the Bureau of Economic Analysis. The trade deficit shrank to $34.3 billion from $39.3 billion in October (originally tallied at $40.6 billion). This is a result of imports totaling $229.1 billion and the nation exporting $194.0 billion. November’s tally is the smallest trade deficit since October 2009.

Exports improved for both goods and services. On the goods side, America’s trading partners increased their purchases of industrial supplies, capital goods, and auto related wares. There was a slight decrease in consumer goods and food related items but this decrease was smaller than the increases from the other categories. Service exports increased in the period too. Three areas of the service sector (travel, passenger fares, and royalties & license fees) led the increase.

Imports of goods fell in November but service imports increased over October. Americans purchased fewer foreign made industrial supplies, foods, and consumer goods. But more money was spent on automobiles and capital goods. The category “other transportation” led the service imports higher. This includes things like freight and port services.

The trade deficit is shrinking while it appears the world economy continues to expand. This may be pointing to an increase in American competitiveness. If this is indeed the case, firms may see orders improve which should help their profitability and may lead companies to hire. Atlas is taking note of the positive tone in this release. (by C. Cox)

Me Versus Us

Friday, January 17th, 2014

There has been quite a bit of discussion lately by both the Department of Transportation and some major airlines about allowing passengers to conduct cell phone calls while in flight. Personally, I think it’s a bad idea. You can be certain that someone will carry on a loud, disruptive conversation which will prove too annoying for a fellow passenger. A confrontation will ensue. A fight will break out. Other travelers will join the fray. One of those plain-clothed TSA dudes will have to pull out his gun and squeeze off a warning shot–just to get everyone’s attention–right through the cabin roof. The noise from this blast will startle the sleeping baby next to you who will then begin screaming inconsolably. Believe you me, there may be worse things, but you do not want to be there sitting next to a small child who is screaming inconsolably.

There are two large issues at play here which attract my attention. The first, and perhaps most obvious, centers on the question, “If we can do something, should we?” This is, perhaps, a topic for future discussion, but I would be interested in any opinions about this matter which you might choose to share. The second issue focuses on a matter which has vexed mankind persistently since the beginning: “Where do we as a society draw the line between individual freedom and social responsibility?”

Returning to my initial example, even if the air line allows in-flight cell phone calls, should anyone make one if it will likely disturb the passengers around him who are sleeping or reading? Allow me to expand the question. Should motorcyclists be made to wear helmets? Should we each be required to have some portion of our mandated tax dollars go to providing access ramps at intersections for the handicapped? Should some to those same funds be used to finance drone attacks on individuals situated in countries where we are ostensibly not at war? How about federally funded abortion? The issue can get sticky in a hurry, and maybe the answer is situational. If you have a moment, I’d like to know what you think about this question also.

Recently there was an incident on a commercial airplane flight which was coming in for a landing. As you know, that can sometimes prove uncomfortable, even painful, if you can’t equalize the air pressure in your ear with that of the cabin. A baby started crying. Nothing unusual there. Nevertheless, an older man told the mother to quiet the child, called her names, and ultimately slapped the baby. I think he’s headed for jail, but the point is made. If hearing a baby on an airplane cry under circumstances which are understandable can so enrage another passenger that he decides to whup on it, imagine how you would feel if you were sitting in the cabin surrounded by the local high school’s soft ball team heading for some regional tournament, all aflutter and each on their cell phone with a BFF back home. Now that is a nightmare.
(by J R)

December Confidence

Thursday, January 16th, 2014

Consumers seem to be feeling better lately. The December Consumer Confidence survey from the Conference Board rose 6.1 points to 78.1. The indicator has nearly made up all of the loss it suffered after government shut down in October; the reading in September was 80.2.

Consumers’ assessment of the present reached 5 ½ year highs. Fewer Americans feels business conditions are bad, and they are more optimistic about the jobs market. The current conditions component increased to 76.2 from 73.5 in the prior period.

Expectations are not near the recent highs of June, 91.1, but they did improve after a more pessimistic outlook in November. The tally in this subcomponent is currently 79.4, a steep increase over November’s 71.1 reading. Employment expectations improved as the chasm between the optimist and pessimist contracted; there are still more Americans anticipating a worsening jobs market, but the positive group is making some headway.

Inflation expectations remained unchanged. The expectation is for a 5.2 percent increase in prices over the next year. This is well above the year-over-year changes seen in the last twelve months in a variety of price gauges.

If this type of price movement occurs, the central bank will likely make adjustments to its policies since prices appreciating as quickly as consumers are anticipating may prove disruptive to the economy. Atlas does not expect this type of inflation gain, but far be it from us to question the wisdom of the American consumer. (by C. Cox)

Outsmarted

Wednesday, January 15th, 2014

Unlike much of the country where global warming has brought on a record cold snap, the days have been rather balmy of late here in Southern California. So much so that I tossed a couple of steaks on our back-porch barbie. I’m not a hard-core carnivore, but I did receive a Smart Fork for Christmas and wanted to try it out. Well, in the middle of all this Nature called and I went inside where our doctor has had us install a Smart Toilet to keep him informed of all our comings and goings as it were. In my hurry, I inadvertently left my Smart Phone on the patio table. It called my Smart Watch.

“He left me outside again,” my phone said.

“Humans!” my watch replied, “How did they ever get along without us? I’ll remind him to pick you up when he goes back. The fork is telling him to flip the steaks so it shouldn’t be too much longer.”

“Don’t count on that,” said my commode.

That’s life in the 21st century. Intel recently participated in a poll asking folks how willing they would be sharing personal information of a rather intimate nature. While just thirty percent said they would be okay sharing their banking information, seventy percent felt fine about using a smart toilet if it would help lower their health care bill.

My Smart Phone shares an interface with my Smart Car and Smart House. I overheard it bragging to them a couple of days ago. “Do you realize,” it said, “that the New York Times just admitted I have 240,000 times the computer memory used in Voyager 1?”

“Who doesn’t?” replied my Smart Refrigerator. The house did an equivalent of a digital nod.

“Heck,” said my Smart Car, “Voyager 1 isn’t lost in space despite being 12 billion miles from here. It knows where it is; our human gets lost trying to find the grocery store!”

I’m not saying all this technology makes me feel inadequate. I do, however, think I’ll go curl up with my Smart Pillow for awhile. At times like this, it seems to anticipate my needs.
(by J R)

November New Home Sales

Tuesday, January 14th, 2014

The pace of home sales fell in November according to the Census Bureau. The 2.1 percent decline came on the heels of October’s substantial upward revision. The initial tally in the prior period showed an annualized pace of 444,000 homes, but an additional 30,000 transactions were found as more complete data was available. November’s tally stands at 464,000 units.

Price measures firmed in the period. The average value of the new homes sold was 7.6 percent higher in November after the mean price dropped 2.5 percent in October. The median price was 4.1 percent higher which follows the gain of 3.9 percent a month earlier.

Inventories remain lean across the nation. The Census Bureau estimates there are 167,000 units for sale, a decline of 12,000. At the current transaction pace, this represents just 4.3 months of inventory; in October there was 4.5 months of supply.

There have been worries about the rising costs of borrowing to buy a home. The thought is that as the costs of loans go up, the number of transactions will decline. This seems logical, but the higher borrowing costs do not appear to be constraining the pace of sales for now. After taking a rather large dip in July to 373,000 from 450,000 units in June on a seasonally adjusted annualized rate, the trend in new homes sales has been steadily higher. November’s tally is the second highest rate of sales since July 2008; only October has been higher in that period of time. (by C. Cox)

November Chicago Fed National Activity Index

Monday, January 13th, 2014

Like many of the indicators we watch, the November iteration of the Chicago Fed National Activity Index (CFNAI) illustrates an economy that is improving. The monthly reading jumped to 0.6 after the prior period was upwardly revised to minus 0.07 from an initial reading of minus 0.18. With the most recent tally, the three month average also moved further into positive territory at 0.25 from a revised 0.12 (originally 0.06).

The positive components were rather pervasive. A majority of the segments (56 out of 85) made positive contributions to the indicator. Of all the components, 54 were better than the month before while just 30 deteriorated. Employment and production were areas of strength. Labor markets have continued to improve as the unemployment rate has fallen, nonfarm payroll figures grew, and jobless claims have eased. Production contributed the most to the overall tally with industrial output and capacity utilization improving in the period.

Atlas likes this indicator because it incorporates 85 different components in an attempt to represent the direction of the economy each month accurately. A reading above zero suggest the country is growing above its historical trend, but the monthly readings tend to be volatile, so Atlas pays most attention to the three-month moving average; its current reading is the highest since February 2012. The improvement in this broad indicator resonates with the central bank’s decision to slow the amount of support it is providing the economy each month via Quantitative Easing. (by C. Cox)