Saturday, October 09, 2004

10/9/04 A Letter For Wall Street And Voters

A letter was sent to Bush from Harvard professors David Moss, Louis Wells, and 159 additional business school professors, including 2 Nobel Laureates and 2 Pulitzer prize winners. Included was the following: "The data make clear that your policy of slashing taxes- primarily for those at the upper reaches of the income distribution-has not worked. Nearly every major economic indicator has deteriorated since you took office in January 2001... if your economic advisors are telling you that these deficits can be defeated through further reduction in tax rates, then you need new advisors."
Crude closed at a record high of $53.31 a barrel, 100% higher than the price in September 2003.
If jobs and wages continue to grow at their current rate, household income would have declined in 2004.
The employed share of the population declined in September for the second consecutive month.
Over the past year, about 48% of all transactions on the NYSE resulted from programmed trading with buy orders outnumbering sell orders.
Washington DC has an unemployment rate of 7.5%. There are still too many politicians, staff members, and lobbyists.
Mark Hulbert: "The prevailing mood is more one of compacency than it is of fear. And that is more typical of bear markets than it is of bull markets."
On two separate occasions I have mentioned that one cannot draw a straight line from the Monster Employment Index to the nonfarm payrolls report. This week the Monster Employment Index reached a new all-time high to 151 in September from August's 145. It is important to note that Monster lists online job availability. That does not equate to hiring. Many companies use Monster to solicit resumes in order to avoid fees when and if they do hire.
Glad Mfg Co, a division of Clorox, will close its Carterville, GA facility and cut 475 jobs. DDI Corp. will cut 175 jobs.
The bidding for the $23.5 billion Air Force tanker contract will be re-opened. Airbus will be allowed to bid against Boeing. Lawmakers in the Congress have now prohibited the leasing of the tankers. The real money is in the maintenance contract and not the building of the planes. The future for the Boeing 767 is not bright. It could be one more blow to their Everett plant.
Wal-Mart's CEO Lee Scott: "Twenty percent of our customers don't have checking accounte and live paycheck-to-paycheck. This fuel tax is being felt through the lower middle class, which is also heavily in debt. If 100 million customers, Wal-Mart's weekly customer count, are spending an extra $10 a week on gas, that's $1 billion in revenue that no longer exists. People are still buying deodorant, shampoo, the low-margin items. But we're missing the upside, the high-margin discretionary items- toys, barbecue grills, the items that are hanging at the checkout, like 35-millimeter disposable cameras...people are worried about jobs."

Friday, October 08, 2004

10/8/04 The Payroll Numbers


A close inspection makes for ugly reading. There were no employment gains in healthcare- only 8,000 jobs in doctors' offices. Despite low interest rates, there were no gains in construction jobs. There was a loss of 18,000 manufacturing jobs and less hours worked each week for manufacturing employees. The wage gains amounted to 3 cents per hour. Of the total 96,000 increase in nonfarm jobs about one-third or 33,000 were temp jobs. The BLS reported "modest gains occurred in a few service-providing industries," mainly, financial and real estate. More importantly, in September, 7.7 million persons held more than 1 job. That represents 5.5% of the total employment vs 5.2% a year ago. The hurricanes in Florida had no quantifiable effect on the employment numbers. The nonfarm payroll numbers did not include the agricultural workers impacted by the hurricanes.
The upward benchmark revisions to March 2004 produced a gain of 236,000 jobs. The final revision will be out in February 2005. They are not a scientific estimate. As I stated yesterday, they are generated out of a bias. Even so, a loss of 200,000 jobs in the household survey, which I'm not fond of, just about wiped out the 236,000.
Unisys to cut 1,400 jobs, Hedstrom Corp.800 jobs, AT&T 7400, Rusch 91, and Temple-Inland 1,500 jobs.
We have a serious employment problem in our country. The problem is worsening. A political spin will not create one job and will only go towards undermining the Administration's ability to face and deal with reality.


10/8/04 A Close Look At Employment Numbers

There were significant changes taking place in the September payroll gains of 96,000. The most important were in healthcare and construction. To my surprise, there was no employment gain in either area. There was a small pickup of 8,000 at doctors' offices. Temp help gains of 33,000 accounted for just over one-third of the month's increase in employment. Manufacturing lost 18,000 jobs. The manufacturing workweek dropped 0.1 hour. Possibly the most telling story is that there are 7.7 million persons holding more than one job. That represents 5.5% of total employment vs 5.2% one year ago at this time. The small gains in September not already mentioned were financial services 24,000, real estate services 15,000, and utilities of 2,000. The BLS stated there was no quantifiable effect from the Florida hurricanes on the numbers. Please note that today's nonfarm payroll numbers do not include the agricultural workers impacted by the hurricanes.

The upward benchmark revisions to March 2004 were a plus 236,000 in the number of jobs. The final revision will be provided in February 2005. The numbers are not scientifically quantifiable.

Unisys to cut 1,400 jobs. Hedstrom Corp laid off 800 workers. Temple-Inland to cut 1,500 jobs.

With almost no increase in wages and the wage week hours unchanged, there is a lack of progress on the labor front. In fact, in my view, it is worsening. It is a serious problem. No political spin will make it better.


10/8/04 A Close Look At Employment Numbers

There were significant changes taking place in the September payroll gains of 96,000. The most important were in healthcare and construction. To my surprise, there was no employment gain in either area. There was a small pickup of 8,000 at doctors' offices. Temp help gains of 33,000 accounted for just over one-third of the month's increase in employment. Manufacturing lost 18,000 jobs. The manufacturing workweek dropped 0.1 hour. Possibly the most telling story is that there are 7.7 million persons holding more than one job. That represents 5.5% of total employment vs 5.2% one year ago at this time. The small gains in September not already mentioned were financial services 24,000, real estate services 15,000, and utilities of 2,000. The BLS stated there was no quantifiable effect from the Florida hurricanes on the numbers. Please note that today's nonfarm payroll numbers do not include the agricultural workers impacted by the hurricanes.

The upward benchmark revisions to March 2004 were a plus 236,000 in the number of jobs. The final revision will be provided in February 2005. The numbers are not scientifically quantifiable.

Unisys to cut 1,400 jobs. Hedstrom Corp laid off 800 workers. Temple-Inland to cut 1,500 jobs.

With almost no increase in wages and the wage week hours unchanged, there is a lack of progress on the labor front. In fact, in my view, it is worsening. It is a serious problem. No political spin will make it better.


10/8/04 A Close Look At Employment Numbers

There were significant changes taking place in the September payroll gains of 96,000. The most important were in healthcare and construction. To my surprise, there was no employment gain in either area. There was a small pickup of 8,000 at doctors' offices. Temp help gains of 33,000 accounted for just over one-third of the month's increase in employment. Manufacturing lost 18,000 jobs. The manufacturing workweek dropped 0.1 hour. Possibly the most telling story is that there are 7.7 million persons holding more than one job. That represents 5.5% of total employment vs 5.2% one year ago at this time. The small gains in September not already mentioned were financial services 24,000, real estate services 15,000, and utilities of 2,000. The BLS stated there was no quantifiable effect from the Florida hurricanes on the numbers. Please note that today's nonfarm payroll numbers do not include the agricultural workers impacted by the hurricanes.

The upward benchmark revisions to March 2004 were a plus 236,000 in the number of jobs. The final revision will be provided in February 2005. The numbers are not scientifically quantifiable.

Unisys to cut 1,400 jobs. Hedstrom Corp laid off 800 workers. Temple-Inland to cut 1,500 jobs.

With almost no increase in wages and the wage week hours unchanged, there is a lack of progress on the labor front. In fact, in my view, it is worsening. It is a serious problem. No political spin will make it better.


Thursday, October 07, 2004

10/7/04 Special Bulletin: Sample Design And Estimator Biases

The next debate is tomorrow. It is also the day the Labor Dept revises the state-by-state unemployment data for the past year. Many believe the revision will increase the jobs number by 300,000 to 500,000. How is this possible? The Labor Dept explains employment revision this way. The current employment statistics are based on a sample of 400,000 reports, and the samplying error is small, and "the sampling error is not usually an important factor." How does the nonsampling error arise? It arises "from Unemployment Insurance data and the alternative sources used to establish the noncovered population benchmarks. Sources of nonsampling error include coverage, response, and processing errors in both data series." More importantly, the nonsampling data is "subject to sample design and estimator biases." In sum, the upcoming election will be influenced by non-scientific data gathering with a foundation in biases.

Harry Truman: "If you can't convince them, confuse them."

Michael Niemera, chief economist for the International Council of Shopping Centers: "The soft patch remains in place for the retail sector at this point."

Jeff Rubin, chief economist for CIBC World Markets, stated "as the world's largest importer of crude, all of a sudden prospects for the once hot U.S. economy don't look so hot anymore... the North American economy will soon be feeling the brake of soaring energy prices."

According to a survey by the Business Council, 70% of the CEOs polled project sluggish growth for our economy in 2005, ranging from flat to 2% growth.

Bradley Belt, director of the Pension Benefit Guaranty Corp., stated he expected a significant increase in the 2004 deficit, eclipsing 2003's record $11.2 billion deficit. He remarked that "the longer-term solveny of the pension insurance program...is at risk."
10/7/04 Change That Tune

Hussein had WMD. Hussein is linked to al-Qaeda. We invade Iraq. Nearly 1100 U.S. soldiers have been killed and at least 7500 wounded. The financial cost ranges between $120 billion and $200 billion and counting. Hussein did not have WMD in 2003. He had them in 1991. Hussein is not linked with al-Qaeda. Change that tune. The world is better off without Hussein. Iraq is an integral part of the world on terror. That's because we invaded Iraq and created the terror. Changing that tune won't bring back those U.S. soldiers killed and won't heal our wounded warriors.

When oil was trading at $40 a barrel, the high prices at the pump were impacting consumer spending. Now that it is trading at $53 a barrel, we're told there is little or no impact on consumer spending. Changing that tune will not ring the register for Wal-Mart's 175,000 cashiers. The Wal-Mart stores comparable sales for September rose 2% vs 5.6% a year ago and Sam's Club sales rose 4.5% vs 8.2% a year ago. For the October 4-week period, the company is forecasting comparative sales for the U.S. to be up in the 2 to 4% range. John Morris, retail analyst at Harris Nesbitt, stated "we clearly have evidence of the consumer slowing in the last two weeks of September, and some of the retailers are backing off of saying we'll see a significant rebound in October."

The Bank of America is laying off 4,500 employees.

The 4-week average of initial jobless claims rose by 4,250 to 348,500, the highest level since mid-February. Yet, analysts forecast a huge upward revision for job creation in the past year and the addition of 150,000 jobs for September. Of course, analysts fail to describe the quality of the jobs nor the pay and benfit levels. All jobs are not created equal.

We have quite a coalition in Iraq. Alexander Kwasniewski of Poland stated "they deceived us about the weapons of mass destruction. That's true. We were taken for a ride." Will the voters be taken for a ride on November 2?

According to a report by the Kaiser Commission on Medicaid and the Uninsured, the cost of caring for 52 million poor and disabled Americans who rely on Medicaid for health care is projected to jump 11.7% for states this fiscal year. Aside from education, Medicaid is the largest item in most state budgets.

Henry Ward Beecher: "Fear secrets acids; but love and trust are sweet juices."

Wednesday, October 06, 2004

10/6/04 The Lies Abound
We are making progress in Iraq. The death count mounts. The number of wounded continues to rise. The Fed states the soft patch in the economy is short lived. That’s funny. Challenger, Gray & Christmas stated there were 107,863 announced layoffs in September, 41% more than in September 2003 and 45% more than in August 2004. The latest September figures were the largest since January 2004 and brought this third quarter’s job cuts to 251,585 or about 20% higher than in the second quarter and 4% higher than the year ago September quarter. To make matters worse, only 16, 166 new job openings were announced in this September down from 132,105 in the prior month. John Challenger observed that "weak hiring announcements last month are not a good indication of stronger job creation to come." There was additional economic information to ashen the faces of the Fed policy members. The ISM’s measure of financial services, construction, retail, and other service jobs declined to 56.7 for September from the prior month’s 58.2 and was the lowest reading since May 2003. One should note that the services sector of the economy accounts for at least 80% of our GDP. The manufacturing sector accounts for about 12% of our economy and fell in September to 58.5, the lowest level in a year. In sum, the soft patch is not short lived and is, in fact, picking up steam. The lies abound.
We will witness slight of hand on Friday, the day the BLS revises the unemployment rolls and the unemployment rate. Sure jobs will have been added in construction and healthcare; however, in other areas, such as, hospitality and retail, it is difficult at best to make ends meet on that level of compensation. The BLS will bemoan the loss of jobs due to the hurricane in Florida. Remember Florida announced only 8,400 job losses could be attributed to the hurricanes. Lies will abound to assist Bush in his re-election bid. The facts will show that the job market is listless and that most companies are postponing decisions on hiring full-time employees with benefits. Revising the past to make the present rosier is simply an exercise in futility.
Albert Einstein: "I want to know God’s thoughts… the rest are details."
John Eisenhower, son of Dwight Eisenhower, and 186 former ambassadors, concluded "John Kerry has the experience, strength, and wisdom to lead us in fighting the war on terrorism, winning the peace in Iraq, making America more secure, and restoring America as the beacon of democracy and freedom in the world."
The Financial Times stated in an editorial that "the U.S. is the indebted superpower. …Active U.S. leadership is needed to promote changes in exchange rates and macro-economic policies around the globe. The dollar must fall further now if it is not to fall far more dramatically later on. As these adjustments begin, the U.S. current account deficit will begin to shrink, which will automatically stimulate the U.S. economy."
September unemployment in Germany rose by 27,000 from the August numbers and the jobless rate stands at 10.7%. Consumers have stopped buying and their exports are down.
The European service industry had its slowest growth in a year.
It is not surprising that crude is trading near $51 a barrel. U.S. oil production is at a 54-year low. U.S. retail gas prices at the pump are at a 4-mnth high. Heating oil hit a new record high of $1.40 per gallon. That is the wholesale price. Retail would approach $2 a gallon. Diesel is also at a record high.
Wal-Mart will open 250 super centers next year.
The semiconductor index is down about 20% for the year. Advanced Micro Devices stated that their third quarter sales would be below their second quarter’s.
Jack Handey: "Whenever I see an old lady slip and fall on a wet sidewalk, my first instinct is to laugh. But then I think, what if I was an ant, and she fell on me. Then it wouldn’t seem quite so funny."
I wonder whether Philip Larkin had someone specific in mind. He stated
"They fuck you up, your mum and dad.
They may not mean to but they do.
They fill up with the faults they had
And add some extra, just for you."

Tuesday, October 05, 2004

10/6/04 The Costs For Re-Election
Bush’s presidential bid for election is focused on fear, terror, and tax cuts. The invasion of Iraq is Bush’s chief liability, but the tax cuts are in second place.
Paul Bremer: " We never had enough troops on the ground (in Iraq)."
Our economy is consumer-based with 70% of our economy dependent on the consumer. According to a holiday buying survey by the NPD Group, nine out of 10 consumers stated they will spend the same or less when they shop for the holidays than they did in 2003. According to NPD’s chief industry analyst, a sluggish economy, a nagging labor market weakness, and higher gasoline prices are the culprits behind Americans planning to curb their holiday spending this year.
A soft patch continues at Wal-Mart. Their September same-store sales only rose 2.3%, and this is at the low end of expectations. I continue to believe that Wal-Mart is the very best consumer indicator, and right now there is a large yellow caution light flashing.
U.S. factory orders fell 0.1% in August, the first decline in four months. Orders for non-defense capital goods, excluding aircraft, fell 0.8% in August. That reflects a yellow caution light for future business investment.
The Bush tax cuts have not worked because increased state and local taxes plus the alternative minimum tax have offset those tax cuts. In addition, according to a study by the Harvard Joint Center for Housing Studies, average monthly household income has dropped in real terms, declining from $4,607 in 1999 to $4,385 (adjusted to 2003 dollars). In addition, the Urban Institute reported that the middle 20% of the of earners will get an average tax cut of $162 in 2005 while the top fifth of earners will get an average cut of $1317.
Ohio is third on the Tax Foundation’s list of states with the worst state and local tax burdens. Over the past four years, 237,000 jobs have been lost in Ohio.
Wisconsin has not backed a Republican presidential candidate since it went for Ronald Reagan in 1984. Bush is not Ronald Reagan.
Krispy Kreme will close its Ravenna, Ohio plant that employs about 75 workers. Its original glazed doughnut contains 22 carbs. U.S. Air will eliminate hundreds of management and nonunion jobs and impose wage and other cuts. Eastman Kodak will cut 870 jobs in the UK and France.
John Kerry: "The question is does he (Bush) really see and know what is going on in the lives of middle-class Americans, people struggling to get into the middle class, people who are fighting for survival."

Monday, October 04, 2004

10/4/04 The Gravest Danger
During the first debate it was opined that the gravest danger facing our nation is nuclear proliferation. Rather, I believe it is our ever-mounting debt levels.
Thomas Jefferson: "I, however, place economy among the first and most important republic virtues, and public debt is the greatest of the dangers to be feared."
Despite record low interest rates, in 2003 the U.S. government spent $318 billion of taxpayer money on interest payments to the holders of our national debt. In 2004, interest payments on the $7.4 trillion debt will exceed those paid in 2003. By comparison, $61 billion is spent on education. Interest is the third largest expense in the federal budget. The interest cost for each U.S. citizen will exceed $ 1,100 in 2004. When you go to the polls, think twice before you re-elect a fiscally irresponsible president. He has created the gravest danger to this generation and following generations. As Francois Rabelais observed, "debts and lies are generally mixed together."
If the Federal Reserve continues to raise interest rates, the interest on our national debt will mount and will contribute to higher deficit levels. Hopefully, the Fed is not banking on discretionary spending to decline. That will not happen with this administration.
World Bank President James Wolfensohn: "If we want stability on our planet, we must fight to end poverty."
ECB board member Ottmar Issing: "Oil prices have already had a visible, direct impact on prices in the euro area."
Prior to Operation Desert Shield in January, 1991, in November 1990 UN Resolution 678 authorized "all necessary means" to expel Iraq from Kuwait.
On October 23, 2004 our troops will have been fighting longer in Iraq than they did in WW I.
Georgia business bankruptcies have increased 16% and the state’s uninsured have risen to 1.4 million.
How are businesses coping with a double-digit increase in health care premiums again expected for next year? Many select health insurance with higher co-pays and deductibles; however, the latter are not tax deductible but premium dollars are.
Dick Cheney began his college education at Yale University. He went on to graduate from another institution.

Sunday, October 03, 2004

10/3/04 The Unexpected
When surprises mount, one would expect increased volatility in the stock market. In fact, the opposite has taken place with the Vix, the CBOE volatility index, closing on Friday at its lowest level since 1996. Does this mean that stocks are about to erupt? I can’t say that, but I can say that, the expectation that volatility will remain this low, is quite unrealistic given the level of recent events taken in totality, such as, crude at $50 a barrel, gold at $421, the weak dollar, the mounting twin tower deficits, the first presidential debate, the monthly rising death rate in the Iraq war, the growing warnings on corporate earnings, the inability to pass on cost increases, the underemployment rate, 10-year Treasury bonds yielding close to 4%, the threat of a terrorist attack, and the ever-increasing list of millions of Americans without health care insurance. Those problems are not a recipe for complacency. Rather, they could most certainly lead to an unexpected and unwanted eruption.
Hiram Johnson: " The first casualty when war comes is truth."
In 2000, Bush lost Wisconsin to Gore by 5,708 votes or by an average of 80 people per county. Kevin Fetterer, age 42, a painting contractor and father of two, stated "unemployment may be down, but the new jobs being created aren’t ones you can support a family on." Celestica is closing its Chippewa Falls, Wisconsin plant and laying off 224 workers. Rockwell Automation will close its plant in Chippewa Valley and lay off 115 workers. Layoffs typically rise between October and November in Wisconsin as seasonal crop work ends and outdoor jobs taper off. Also, there’s a surge in layoffs around Thanksgiving each year as some employers close shop to accommodate the Wisconsin deer hunting season.
Drew Carey: "Oh, you hate your job? Why didn’t you say so? There’s a support group for that. It’s called EVERYBODY, and they meet at the bar."
The underemployment rate includes people too discouraged to actually seek work or have personal matters that interfere with a job search plus people working part-time because they couldn’t find full-time work or their hours were reduced. The underemployment rate stands at 9.5%, and 76% higher than our nation’s unemployment rate. There are about 4.5 million part-time workers, and the recent high point in 2003 was 4.8 million. This reflects an economic soft patch that has not been short-lived.
Sir Winston Churchill: "A lie gets halfway around the world before the truth has a chance to get its pants on."
Robert Mondavi Corp. announced the layoff of 360 employees or about one-third of its workforce.
Federal officials elevated Mt. St. Helens volcano alert to a Level 3, the highest possible, and issued a formal warning that an eruption was imminent. About 2,500 people were evacuated. It’s possible new gas-rich magma is involved, and that could create the potential for a lager eruption.
Warren Buffet: "We simply attempt to be fearful when others are greedy, and to be greedy only when others are fearful."