Positive Effects of Bottom-Up, Demand-Side, Consumer Tax Cuts

Consumer spending makes up about  70% of the US Economy.

On April 1, 2009, low- and middle-income workers started seeing a bit more in their paychecks, thanks to the "Making Work Pay" tax credit in the federal recovery act. The tax credit is 6.2 percent of a taxpayer’s earned income with a maximum credit of $800 for a married couple filing a joint return and $400 for other taxpayers.  The benefit will generally be spread out over the paychecks workers started receiving in spring 2009 and will continue until the end of 2010.

Tens of billions of dollars have been pumped back into the economy through this bottom-up tax cut. Positive economic indicators have followed:

After at least a 3 year decline, Consumer Spending began to rise in April of 2009.

After a 5 year decline, GDP began to rise in April of 2009.

After a 2 year decline, the Leading Economic Index began to rise in April of 2009,

and is currently higher than at any time in over 4 years.  

Historically, the LEI is one of the most reliable forward indicators that exists.

After a dramatic 1 year increase, Job losses began shrinking in April of 2009. This has been the most rapid turn from net jobs losses to net jobs gains of any business cycle in the last century.

From its low on March 9th, 2009, the current S&P recovery began to rise in April of 2009 and has outperformed the 1974 and the 2002 rebounds over the equivalent period. 

What is amazing about this is that so far only about 12% of the public think they got a tax cut.  The Republicans, who all voted against this tax cut, don't want to talk about it and they seem to be creating a narrative that Obama and the Democrats have raised taxes.

Consumers indeed create jobs through demand for goods and services. No matter what your political persuasion, supporting tax cuts for working men and women seems wise -- and the results illustrated above underscore why the tax cuts in the 2009 stimulus bill got it just right.

(hat tip Dave Rusk)

Consumer Spending Now Likely Fastest In Three Years

U.S. retail sales posted a surprising gain in February despite falling car demand amid trouble at auto maker Toyota MotorCorp. and fierce blizzards that crippled the East Coast for days.

Retail sales rose last month by 0.3%, the Commerce Department said Friday. An average of economists surveyed had forecast a 0.3% decrease in February sales. The Super Bowl early in the month had electronic store sales bounding higher.

"This is a pleasant surprise, especially in the light of the severe winter weather across large parts of the country last month," said Ian Shepherdson, an analyst at High Frequency Economics.

Retail sales data are an important indicator of consumer spending and consumer spending makes up 70% of demand in the U.S. economy.

The unexpected increase moved Macroeconomic Advisers to pushed their forecast for first-quarter gross domestic product growth way up, by four-tenths to 3.1%. Other analysts agree with the strong first quarter forecast.

"Consumers are beginning to come out of their shells," IHS Global Insight analyst Nigel Gault said. "Today's data suggests that real consumer spending will rise about 3% in the first quarter, the fastest increase in three years."

12 of 13 Industry Sectors to Add Staff In Q2

The Manpower Employment Outlook Survey is conducted quarterly to measure employers' intentions to increase or decrease the number of employees in their workforce during the next quarter. It is the most extensive forward-looking survey of its kind, unparalleled in its size, scope, longevity and area of focus. The Survey has been running for more than 45 years and is one of the most trusted surveys of employment activity in the world. The Manpower Employment Outlook Survey is based on interviews with over 61,000 public and private employers worldwide and is considered a highly respected economic indicator.

According to the Survey released on Tuesday, employers in most major labor markets expect to hire in the second quarter at a pace equal to, or stronger than, the same period last year.

Many employers have yet to reach their pre-downturn hiring pace, but prospects in the Asia Pacific, the Americas, Europe, and the US, are all registering modest improvements compared to three months ago and the same period last year. Employer hiring intentions are strongest in India, Brazil and Taiwan.

In the US, nearly three-quarters of employers surveyed say they plan to keep staff levels stable, Manpower said, while 12 of 13 industry sectors surveyed said they plan to add staff during the second-quarter. "We continue to see encouraging signs in hiring activity in the U.S.," said Manpower CEO Jeff Joerres in a statement. "Key industries such as manufacturing and construction are seeing notable improvements on a year-over-year basis."

The Manpower survey shows employers in 27 of 36 countries and territories expect some positive hiring activity in the second quarter. Employers in Panama were surveyed for the first time this quarter and report upbeat hiring plans for the next three months.

Of the 10 countries surveyed in the Americas region, hiring plans are stronger in comparison to one year ago in all countries where year-over-year data is available and stronger in six countries quarter-over-quarter. Regional hiring plans are again strongest in Brazil, Costa Rica and Peru. At the same time, hiring expectations from U.S. employers are stronger than those reported in the second quarter of 2009.

The survey adds to a mounting list of evidence that labor markets have turned the corner with healthy net US job additions in the months to come.

More Data Shows Labor Market Positioned for Big Gains

On Friday the government reported that the unemployment rate in the U.S. held at 9.7% in February and employers cut fewer jobs than anticipated. The stabilization in the labor market continued even as two East Coast blizzards of 2-3 feet each forced closings of some businesses during the period.

Furthermore, the jobless rate, which has not increased since October, held steady even as more people entered the workforce.

The steady unemployment rate owed to a 308,000 increase in household employment following a 541,000 January gain. These increases follow monthly declines of as much as 967,000 during the recession. Moreover, the labor force started to expand, last month by 342,000, after a lesser January increase. Throughout 2009 the labor force contracted slightly. The labor force participation rate also rose.

"The weather effects were enough to transform [the data]," said David Resler, chief economist at Nomura Securities International Inc. "Job growth is happening as we speak."

Over at Fortune, they continue to expand their list of employers that have at least 150 openings. And the larger firms are now ramping up hiring significantly since the first of the year.

Among companies adding workers is Accenture Plc, the world’s second-largest technology-services provider, which plans to boost payrolls by about 50,000 this year. Accenture says it is on track to have started new employees in as many as 9,000 jobs in the U.S. by the end of August.

"We are seeing a very broad uplift globally" in demand, says John Campagnino, director of worldwide recruiting, in a interview on Wednesday.

Beyond full-time hires, the number of temporary workers increased by 48,000 in February, the fifth straight monthly gain.

Amidst the snow, factory payrolls increased 1,000 in February after rising 20,000 in the prior month. Most economists had called for a drop of 15,000.  Manufacturing employment continues as a leading segment in labor growth.

Friday’s report showed that almost 1 million Americans said bad weather prevented them from getting to work during the survey week. About 290,000 people on average say bad weather has prevented them from getting to work, according to figures going back three decades.

Economists at Macroeconomic Advisers LLC project that the weather actually reduced the payroll count by anywhere from 150,000 to 220,000 workers. The drop will probably be reversed this month, they said.

The most recent storm of similar intensity that occurred during a survey week was in January 1996. The data for payrolls that month, which have gone through several revisions since the initial estimate, showed a 19,000 drop in employment in the January period followed by a gain of 434,000 in February.

We continue to look for the US economy to add a significant number of jobs in spring and summer this year with the unemployment rate beginning a steady decline in the monthly readings just ahead.

Many argue that the return to job growth has been "slow." On the contrary, this has been the most rapid turn from net jobs losses to net jobs gains of any business cycle in the last century. A jobless recovery? Not this time.

Investment Firm to Fund First Commercial-Scale Solar Installation In VA

Virginia's Landmark Solar Power Project to be Hosted on University Campus

Eastern Mennonite University (EMU) in Harrisonburg will soon be the site of Virginia's first commercial-scale solar photovoltaic (PV) installation in the Commonwealth.

The new installation is part of a proposed revision to the campus master plan to allow for approximately 600 kilowatts of solar energy panels to be installed on the campus. The installation is expected to generate about 12 percent of EMU's total electricity use and save the university an estimated $2 million in avoided electricity costs over the 25-year project.

EMU was one of the three national leaders in efficient energy use out of 90 colleges and universities surveyed by the Association of Higher Education Facilities Officers in 2007. In addition to the new solar initiative, EMU sponsors numerous green programs on campus, including an institutional commitment to sustainability.

Under an innovative financing program that has been used extensively by universities in states like California and Colorado, EMU will effectively "host" the installation, paying only for the electricity generated by the panels installed on the campus through a 25-year power purchase agreement with Secure Futures, LLC, a private solar development company based in Staunton, Va.

"This will represent a signature project for EMU, as it embodies the stewardship values of our institution as well as building on our record as a leading green university," said EMU President Loren Swartzendruber.

"The signature components of this project include using state-of-the-art solar technology, and, through Secure Futures' unique financing model, supporting a three-tiered sustainability program including campus, curriculum and community sustainability," said Ron Piper, vice president for finance at EMU.

Staunton-based Secure Futures, LLC, obtained a grant commitment of $225,000 from the Virginia Department of Mines, Minerals and Energy (DMME) for the project. Tony Smith, CEO of Secure Futures, said "this project will represent a milestone for renewable energy in Virginia insofar as scale and impact. We're excited to see a first example of a solar project achieving electricity rates comparable to those offered on the electric grid, especially since Virginia has among the lowest electricity rates in the country."

Ken Jurman, renewable energy manager for the Virginia Department of Mines, Minerals and Energy (DMME), noted that "The EMU solar project as described fits well within the scope and intent of Virginia energy policy to encourage renewable energy resources. I'm very pleased that this initiative is moving ahead - it's exactly the kind of thing we want to encourage across the Commonwealth to move toward a sustainable energy future."

Secure Futures designs, develops, finances and maintains turnkey distributed solar solutions in collaboration with tax-exempt entities to reduce their electricity costs and to create environmental and economic benefits for customers and their communities.

Manufacturing Jobs Grow for Third Straight Month

The Institute for Supply Management released its February 2010 Manufacturing Report On Business Monday. The report shows that manufacturing jobs grew for the third month in a row. Even more upbeat was the fact that the report indicates that job growth in the sector is now accelerating.

Furthermore, overall economic activity in the manufacturing sector expanded in February for the seventh consecutive month and index correlations with the larger U.S. economy indicate growth now for the 10th consecutive month.

ISM's Employment Index registered 56.1% in February. That is 2.8% points higher than what was reported for January. This third consecutive month of growth in manufacturing employment represents the highest reading for the index since January 2005.

Source: Institute for Supply Manufacturing

Ten of the 18 manufacturing industries that are tracked by the ISM reported growth in employment in February. They are: Textile Mills; Petroleum & Coal Products; Apparel, Leather & Allied Products; Paper Products; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Food, Beverage & Tobacco Products.

An early indicator of what jobs growth will look like in the near future is registered in the ISM's Backlog of Orders Index. It registered 61 percent in February, accelerating 5% higher than in January. Of the respondents who report their backlog of orders to the ISM, a full third reported greater backlogs with only 1 in 10 reporting smaller backlogs. You may remember that as backlog orders grow, employers have in increased propensity to hire new workers.

Norbert J. Ore, chair of the ISM's Business Survey Committee said, "The past relationship between the PMI and the overall economy indicates that the average PMI for January and February (57.5 percent) corresponds to a 5.2 percent increase in real gross domestic product (GDP)."

The report is further evidence of a U.S. economy that is on track for healthy net jobs creation by summer.

Q4 Growth - The Best Since 2003

Rebuilding of depleted inventories was behind an improvement in 4Q economic growth estimates above what was previously estimated. The estimate brought estimates up to 5.9% from earlier estimate of 5.7%. Last quarter's growth was likely the strongest since 3Q 2003.

Inventory accumulation was estimated to have added 3.9% to economic growth last quarter. The accumulation of course was necessitated by dwindling stockpiles in several previous years. There was also an upward revision to growth in real imports to 15.3%.

Price inflation remains quite tame following little to no inflation during the prior two quarters. Diminished price gains for all of last year pulled the annual increase down to 1.2% which is its weakest increase since the early 1960s.

Almost 6% annualized growth and inflation at 1%? Does it get any better? Well, all signs point to Q1 growth accelerating.

Aircraft Sales Have Durable Goods Flying High

Improvement in the factory sector looked material last month. The overall level of durable goods orders jumped 3.0% and that followed an upwardly revised 1.9% December increase. Transportation spiked 15.6% in January after a 1.5% rise the month before. For the latest month, non-defense aircraft lifted-off to a monthly 126.0% increase; defense aircraft rose 11.6%;

The results far outpaced analyst expectations for only a 1.5% overall gain. The notable strength of course came from orders for non-defense aircraft & parts. Those gains that more than doubled, recouped any declines the prior two months.

Regardless of the aircraft sector, the durable factory goods sector appeared on the mend as well. Less the transportation sector, orders were enough to lift the y/y gain in orders to 8.6%. This strength suggests further improvement in shipments and that industrial output is accelerating after the modest y/y gains already logged in prior months.

Looking at core components, most of them posted gains. Leading those components: Computers & electronics were up 4.6% and communications equipment rose 3.1%. Also improving were primary metals, and electrical equipment.

Thursday's report underscores a manufacturing sector that continues its path of accelerated Q1 growth.

Home Prices Continue Seasonal Improvement

Seasonal factors play an important part in the monitoring housing prices, pushing up prices during the high traffic months of the spring and summer and pulling them down in the cold of the fall and winter.

The Case-Shiller data on home prices was released on Tuesday. When seasonally adjusted, the data points to an extended price recovery, at plus 0.3 percent in December vs. 0.2 percent gains in the prior three months going back to September. These results point to a building on top of last years mid-year gains.

City-by-city, the data shows consistent improvement continuing to build in the West and the Midwest. The narrower 10 City Composite Index also accelerated to a gained 0.3% following three months of only a 0.2% increase.

Smart Small Businesses Are Hiring

Savvy telecom startup Wind is hiring Canadian talent while its rivals cower.

Telecom service provider Wind Mobile slipped into Canada's wireless scene determined to gain every strategic advantage it could over the country's telecommunications giants.

Last year -- mostly through online social networking sites - Wind spread the word that it was hiring. Within a year, the company had targeted and recruited more than 700 employees.

Many larger firms have been lax in retention programs in the past several years, betting that economic conditions would not result in unwanted employee departures. "We have hired some ninja engineers from the competitors ... I know for a fact that we have got some very sharp talent from the incumbents," said Wind Mobile chief executive officer Ken Campbell. Campbell argues that staffing a brand-new company in a field where top techies and first-rate customer service people are in high demand, becomes a much easier task in a down economy.

Wind offers competitive pay, stimulating work and professional development opportunities. Campbell's firm has a Toronto waterfront headquarters and is the brand name under which Globalive Wireless Management Corp. is now selling its wireless services in Canada.

"The scope and flexibility we give them as a startup is just so much more interesting than what you would get at a larger company. We just have to, because we are small and we have to be agile," says Campbell.

Many times during economic downturns, employees begin feeling stifled, under-compensated and unchallenged. It is precisely then that they become much more open to other offers -- even with a riskier venture.

If large organizations fail to adequately plan for tightening labour markets, they can lose out on employees with the required skills, which dampens their future growth prospects. Those losses are usually a start-ups gain...

Wind human resources vice-president Christina Sanders, who previously worked at Magna International Inc. and Virgin Mobile Canada, said Wind's employees come from "all sectors and hail from all parts of the world." What they have in common, she said, is "the right attitude, flexibility, entrepreneurship and passion," Ms. Sanders said. "For people who are in telecom, this is a very exciting time."

You may remember last March that we said that successful entrepreneurs know that strong firms retool their businesses during lulls in business cycles and that many well known firms were born during recessionary times. Most serially successful entrepreneurs use these lulls as opportunities to borrow, invest, and grow their business model. They know that when markets return, their businesses will be the ones much better equipped to take advantage of the return to strong demand.

Some say that small businesses are not presently hiring. But Wind Telecom -- and many other small start-up firms operating in stealth mode right now -- know better.

Manufacturing Activity Continues Accelerated Expansion

Two key reports this week continue to indicate that the manufacturing sector continues its strong rebound from a year ago.

On Tuesday, the Empire State general business conditions index jumped nearly 9 points to 24.91 -- a reading that indicates substantial month-to-month acceleration in the region's manufacturing conditions. New orders, at a level of 8.78, and shipments, at 15.14, are both solidly indicating month-to-month expansion. January's readings were unusually strong relative to December.

Then on Thursday, the Philadelphia Fed's manufacturing regional index came in at 17.6, indicating month-to-month growth. The level came in above January's 15.2 level to indicate an accelerating rate of growth -- like the Empire Index. Of particular note were new orders which really accelerated this month coming in at 22.7 in February vs. January's 3.2. Shipments also accelerated to a level 19.7 vs. 11.0 in January.

Both reports point to another month of strength for the ISM's national manufacturing report to be released on March 1. All three will likely mean accelerated GDP growth in Q1 2010.

The Stimulus - One Year Later...

Many have you have emailed us with the Organizing for America's chart on job savings and creation since the stimulus bill was passed last year.

I've recreated their chart here:

We all know there is a long way to go and many Americans are still struggling to find jobs, but there is certainly cause for optimism depicted in this chart.

No doubt many of you were reminded of the chart we've been tracking with linear fit trending since October.  Perhaps the Obama administration took note of how we presented these same facts in our earlier post!?

Thanks to all for the emails.  Keep them coming.

If I Ever Get A Job Again...

Dick Robertson - If I Ever Get A Job Again (1933)

If I ever get a job again,
I will never be a snob again;
I'll live within my means,
Carry a dollar in my jeans,
If I ever get a job again.

If I ever get a break again,
Brother, what I'll do to stake again!
No turning out the light,
Bidding my appetite good night,
If I ever get a break again.

I'll get two rooms and a kitchenette,
Furnished comfortably;
With two rooms and a kitchenette,
I'll get a sweet somebody to move in with me!

If I ever get a job again,
I know that two hearts will throb again,
She told me with her eyes
We'll be rehearsing lullabyes,
If I ever get a job again.

If I ever get a job again,
I will never be a snob again!
I'm through with stocks and bonds,
I'd rather spend it all on blondes,
If I ever get a job again!

If I ever get my pay again,
I'll save it for a rainy day again,
But let me tell you, bud,
I'm gonna save up for a flood,
If I ever get my pay again.

I'll get two suits and an overcoat,
Like a millionaire!
Just two suits and an overcoat,
And then when things get better, I'll buy underwear!

If I ever get a job again,
With my old friends I'll hobnob again,
What great fun it will be, saying
"Just have one more on me!"
If I ever get a job again.

Valentines Day Drives Blossom-Oriented Business

This Valentine’s Day is not only the most romantic day of the year, it also hints at budding life for the recovering economy.

For many in the east, life remains buried under several feet of snow, but florists across the country say that this Valentine’s Day may be one of their best ever.

Mary Reynolds, of Frederic’s Flowers in Bedford, VA, says this holiday is shaping up to be one of the best she’s had in 15 years. “We have Friday, where you can deliver to the businesses or the schools, and then you have Saturday and Sunday also to deliver to the homes,” she said.

Other florists have also reported high order volumes:

Calvin Mitchell, who owns Leo Wood Florist, said his business has been “very, very busy.”

At Haddonfield Floral Company in the Philadelphia suburb of Haddonfield, N.J., owner D.W. Janszky said that online and phone orders have been strong — especially on Wednesday when so many people were snowed in.

And the snow didn't slow the orders.  Michael Caruso, vice president of Caruso Florist in Washington DC, said he rented four-wheel-drive vehicles to pick up employees and make deliveries.  "We've been in business since 1903 and this isn't the first storm we've weathered," Caruso said, "Our motto is 'Rain or snow or 6 below, we go.'"

Joan Arthur, owner of Arthur’s Flower Cart, says snow has made deliveries in some VA residential areas difficult, but that "business has been booming. I feel like we’ve been blessed. We are delivering as hard as we can go."

44% of Major Metros See Home Prices Up

Home prices rose in 67 of 151 U.S. metropolitan areas in Q4, said the National Association of Realtors (NAR) on Thursday. Furthermore the association pointed to a "broad stabilization" of values across the country.

The median price for single-family home resales was up from a year earlier in over 44% of the areas included in the trade group's quarterly survey.

Some of the metro areas showing the biggest gains from a year earlier were Cleveland (25%), Akron, Ohio, (23%) and San Francisco (13%).

The seasonally adjusted annual rate of previously occupied homes sold jumped 13.9% from the third quarter. The national median price rose 2.9%.

Existing-home sales in the West jumped 16.2% in the fourth quarter to an annual rate of 1.38 million and are 18.2% above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9% below the fourth quarter of 2008, but with many areas showing notable gains.

“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Lawrence Yun, chief economist for NAR.

"The surge in home sales was driven by buyers responding strongly to the tax credit combined with record-low mortgage interest rates," said Yun, "With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices."

East Coast Blizzard Yields Silver Lining for Some

Mega-storms storms paralyze many businesses, but for others ice and snow spells big profits.

"All of our inventory has disappeared faster than concert tickets," says Jon Hoch, owner of Power Equipment Direct Inc., an online dealer that has seen surging sales. Snow blowers inventory is now such that, "We have this beautiful Web site that in a day or two won't have anything left to sell."

For years the cab drivers in DC have taken advantage of snow situations. On Wednesday one traveler heading to Reagan National Airport said a cabbie tried to charge him a "$100 snow fare."

In Pennsylvania, Jack Frost Big Boulder, Blue Knob, and Camelback ski resorts are all reporting premium skiing conditions. Servicing key markets like Philadelphia, DC and the Poconos -- all areas have had record snows -- and East coasters are heading for the hills -- their wallets in tow.

Michael Cleren of Jack Frost reports, "We are set for record [sales] numbers in the next 10 days." For most eastern ski resorts business is strong and the snow pack is now in place for healthy March operations and profits.

For grocery stores, these are also profitable times. The snow storms have challenged Wawa, Safeway and Giant retailers to stay open during the inclement weather. Those that can manage to keep their doors open report brisk sales with the public making a run on staples just prior to the storm.

Sal Mattera, Wawa operations chief reports other good news for some Wawa vendors:
the store pays overtime to keep their parking lots plowed and sidewalks clear. During a storm, customers are in a spending mood. If customers can make it to their parking lot, Wawa does everything possible to make sure they make it inside.

Less Than AAA Rating? Never!

Treasury Secretary Timothy Geithner said the country’s debt rating is not at risk because of the trillions of dollars of government spending to shore up the economy.

Asked on ABC’s “This Week” Sunday whether the government would lose its triple AAA sovereign debt rating, Geithner said: “Absolutely not and that will never happen to this country.”

Geithner said there was less risk now that the economy would slip back into recession, a pattern known as a “double-dip” recession.

“We have much, much lower risk of that today than at any time over the last 12 months,” Geithner said.

The labor market which was under significant strain last year at this time is now on the cusp of creating a substantial number of new jobs. The unemployment rate is already beginning to reflect that turn falling from 10% in Dec to 9.7% in Jan.

“We had a huge shock to the American economy and we’re still living with the aftershocks,” Geithner said. “You’re seeing the first signs now of business starting to take some risks again.”

Geither went on to dismiss earlier comments by Sen. Scott Brown (R-Mass.) -- calling his assessment of the $787 billion stimulus package -- "Flat wrong!"

After winning the Massachusetts election, Brown was quoted as saying that the stimulus did not create or save any jobs.

"I don’t think there is any basis for that judgment," Geithner said.

The White House and independent economists (including our job charts here) have illustrated that the stimulus package has saved at least several million jobs and is on the verge of creating several million more by later this year.

Net Jobs Growth Begins - Substantial Additions By Spring

You may recall our optimistic prediction in November that the positive trending in the labor market pointed to net jobs growth by Christmas. Revised government numbers on Friday bolstered that assertion. 

Further it is now clear that for job seekers in 2010, the economy will likely be their friend. With a 5.7% GDP growth in the fourth quarter of 2009, following the 2.2% increase in the third quarter, this recovery is already stronger than the last two.

Furthermore, (as our updated chart illustrates) the U.S. labor market is on the cusp of substantial, sustained positive job growth. And this net jobs creation is coming only two quarters after the end of our deep recession. That's just one-third of the 21 months it took for job growth to resume after the 2001 recession. A jobless recovery? Not this time.  As our chart suggests, given current trending, the U.S economy will likely add more than 100,000 jobs in February.  And the picture looks even better come springtime.

The government's monthly job report on Friday showed that the disastrous labor situation that plagued the nation's economy going into 2009 is now on the mend. The unemployment rate has peaked and now fallen in January to 9.7%.

Perhaps the most encouraging sign from the current report was the addition of 52,000 temporary workers. Temporary worker hiring often signals that employers are starting to gear up again.

Additionally -- the report shows -- employers brought many "reduced hour" workers back to full-time work status in January. That concrete move is frequently seen as a precursor to hiring additional workers as recovery takes root.

Even cautious economists like Mark Vitner of Wells Fargo remarked on Friday that despite his opinion that the January falling unemployment rate "showed an exaggerated sense of improvement in labor market," he continued, "But there is improvement. I don't want to take that away."

New Factory Orders Continue Steady Rise

Factory orders continued their solid advance in December, up another 1.0% on top of their 1.0 percent gain in November and 0.8% percent gain in October. The advance is strong in durable goods and non-durable goods, both up 1.0%.
Perhaps most encouraging is a capital goods reading that also shows strength in the month. Thursday's report underscores strong momentum for the manufacturing sector going into the New Year. Additionally, on Monday accelerating momentum was observed in the ISM manufacturing report on business for January.

Shipments also continue to rise -- jumping 1.9%, which adds to a 1.6% rise in November and October's 0.9% gain.

Red Hot New Orders Rate Driving Manufacturing Uptick

On Monday the Institute for Supply Management said that the U.S. factory-sector booked its best performance in more than five years in January. Hiring continued to recover and the rate of month-to-month growth was driven by a red-hot pace of new orders that is now accelerating higher each month.

The ISM report points to exceptional overall growth through the rest of the first quarter. The ISM's manufacturing index jumped more than 3 points to 58.4 for its sixth straight indication of month-to-month growth. The reading easily beat consensus estimates and even beat the most optimistic of economists surveyed for such consensus.

In addition the report showed that new orders are now overflowing into backlogs -- which jumped a sharp 6 points to 56.0. This is a first for this recovery. Now all three -- overall manufacturing, as well as orders and backlog are all growing.

Norbert J. Ore, chair of the Institute stated, "the past relationship between the PMI and the overall economy indicates that the PMI for January (58.4 percent) corresponds to a 5.5 percent increase in real gross domestic product (GDP) on an annual basis."

We of course are happy to point out that the current chart and outlook matches surprisingly well with our post, chart, and prediction almost a year ago.  (No one believed us back then.)