First Half of September 2009 - Economic Good News Wrapup

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• Unemployment Falls in 16 States; Steady in 7 Others

  Posted: Sun, 20 Sep 2009 02:40:00 +0000

  Since early May we've continued to reference the peak and then improvement in new claims for unemployment. This past week was no exception. As recovery takes hold more and more states are seeing encouraging labor situations.
  
  In states around the nation's capital unemployment is falling or holding steady.
  
  Maryland's rate has remained at 7.2 percent since June. In Virginia, the rate has now dropped to 6.5 percent in August from 6.9 percent in July.
  
  William F. Mezger, chief economist for the Virginia Employment Commission, said job claims were down as the pace of layoffs in his state decreased in August. "We had over 7 percent unemployment in June," he said. "We probably won't see it again in '09 the way it looks."
  
  Nationally the report this week showed that initial claims fell another 12,000 in the Sept. 12 week on top of the surprising 19,000 drop in the Labor Day week.

  
  

  
  
  
  With unemployment rates now falling in 16 states, the confidence spike should continue with consumers, small business, builders and investors.
  

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• Confidence Spike: Consumers, Small Business, Builders, Investors

  Posted: Thu, 17 Sep 2009 06:00:00 +0000

  Wednesday saw significant spikes in confidence from four important market groups:
  
  1. The Consumer: On Wednesday the Rasmussen Consumer Index, which measures consumer confidence on a daily basis, rocketed to its highest level in exactly one year.
  
  2. Investors: Also on Wednesday, the Rasmussen Investor Index spiked to its highest level in over a year. Investor confidence is up 28 points since Jan 1.
  
  3. Builders: Confidence among U.S. home-builders rose in September for the third straight month. The National Association of Home Builders/Wells Fargo confidence index bounced to it's highest level in 16 months.
  
  4. Small Businesses: Economic confidence among small businesses leaped to its highest level in 18 months in August as more owners expressed faith in U.S. economic recovery. According to the latest Discover Small Business Watch, their small business index rose 7.7 points from July, reaching the highest level since February 2008.
  
  It is no wonder 2009 growth is coming on strong and the stock market might just be poised for a major leg up.

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• Recession is Over: Positive Economic Data Abounds

  Posted: Wed, 16 Sep 2009 03:20:00 +0000

  Fed Chief Ben Bernanke said Tuesday that indeed the recession of the past year is over. And positive economic data continues to punctuate assertions that the Q3 growth will be anything but lackluster:
  
  1. On Tuesday, the popular ICSC-Goldman report's year-on-year measure jumped into positive ground -- 1.6 percent for the best showing in a year. The companion Redbook measure also showed sizable improvement in the Sept. 12 week, for the best reading since the spring.
  
  2. A positive producer price report followed showing that the core rate of inflation continues to be quite tame at +0.2 percent, following a 0.1 percent decline in July.
  
  3. More good news followed in the government's retail sales report for August. Consumer spending made a healthy showing mostly boosted by the clunkermania and higher gas prices. But other retail segments also signaled general health. All said, retail sales jumped 2.7 percent in August.
  
  
  4. Manufacturing activity in the NY region continues to bounce. On Tuesday the Empire State index was reported to rise nearly 7 points in September to 18.88. New orders rose 6-1/2 points to 19.84 continuing to point to significantly increasing activity in the second half of the year.
  
  

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• Newton's Third Law and The Dow's Epic Rise

  Posted: Tue, 15 Sep 2009 03:34:00 +0000

  "For every action, there is an equal and opposite reaction."
  
  Newton's statement implies that in every interaction, there is a pair of forces acting on the two interacting systems. The size of the forces on the first system equals the size of the force on the second system. The direction of the force on the first system is opposite to the direction of the force on the second system. Forces always come in pairs - equal and opposite action-reaction force pairs.
  
  Last September 29th the Dow Jones Index posted its biggest point-drop ever. The drop wiped out $1.2 trillion in market value with the index slumping over 777 points, in the biggest single-day point loss ever.
  
  But almost a year later the markets are up over 50% from their 2008 lows. And there is likely a lot more room for the markets to run even higher.
  
  If one closely analyzes Sir Isaac's third law of motion and a simple stock chart for the last year, it does not seem far fetched that the market could be poised for a very significant leg up.
  
  (click to enlarge) (Source: Google Finance)
  

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• Is GM's Money-Back Guarantee Good News?

  Posted: Mon, 14 Sep 2009 04:38:00 +0000

  Last week General Motors (GM) announced their new program that further attempts to boost consumer confidence in their vehicles. The money-back guarantee states that you can return the vehicle for any reason, no questions asked, up to 60 days after purchase.
  
  A quote from GM's press release reads like this:
  

  General Motors announced today that it will offer a Satisfaction Guarantee to eligible buyers of new Chevrolet, Buick, GMC and Cadillac vehicles. The guarantee allows customers to return their vehicle to their dealer between 31 and 60 days of purchase and receive a refund of the purchase price for the vehicle.

  GM's idea is that the program will prove that their vehicles are just as good as their competition. That might be, but there is likely even better consumer news just around the corner and that just might translated to further good news for the auto industry.
  
  As most entrepreneurs will attest it is almost always a good idea to offer a money back guarantee. And so it is extremely likely that several other major car makers will follow suit quickly offering very similar programs for their 2009 and 2010 models. The result? More hesitant consumers will see this as just one more reason to move from a very conservative fiscal stance to one that takes a bit more risk on a big ticket purchase. Why not? There will be nothing financially to lose for up to 60 days.
  
  For GM, there is no guarantee that the program will only boost interest in their vehicles, but it does seem clear that if other automakers follow suit, the auto industry (and the economy as a whole), will likely benefit by this increased second half activity.
  

  
  

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• US Consumer Sentiment Continues To Improve

  Posted: Sun, 13 Sep 2009 05:10:00 +0000

  U.S. consumer sentiments since last month indicate a slight upward trend toward greater confidence in the country’s economy. Courtney Schlisserman reports in the Bloomberg Press that projections by Reuters/University of Michigan on “Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars and homes” rose 5.2 points, and that consumer expectations for the economy in six months’ time shows anticipation of more than 4 points, to 69.2 just since consumer sentiments in August. While these numbers do not show a huge increase, they do indicate a turn towards optimism at the same time that consumers are more focused on careful spending and paying off debt.
  
  Most economic analysts are tentatively encouraged by this news and even in the shadow of a 9.7 percent unemployment rate, results from a recent Bloomberg News’ survey shows a predicted 2.9 percent annual rate of growth for the U.S. economy through this month. This week's beige book summaries and other recent indications show second half growth accelerating.

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• Fed Beige Book: Economic Outlook Cautiously Positive

  Posted: Thu, 10 Sep 2009 04:17:00 +0000

  On Wednesday, the Fed's Beige book was released for July and August. It summarizes reports from the 12 Federal Reserve Districts and pointed to economic activity that continues to stabilize.
  
  Compared to the summary from the Fed's last report 11 out of 12 regions asserted that economic activity had either stabilized or improved. Even in the 12th region -- St. Louis -- their read-out pointed to a pace of decline that was moderating.
  
  Almost all regions remarked that among business leader contacts in their territories, the economic activity outlook is now cautiously positive.
  
  The reports underscore what we've been reporting here that clunkermania boosted auto showroom traffic and subsequent new car sales in all regions. Several regions confirmed that the program has also resulted in increases or planned increases in automobile-related production. Beyond the auto industry, most regions reported general improvements in manufacturing production.
  
  Most territories also reported improvement in the residential real-estate markets.
  
  It also came as no surprise that with labor markets on the mend, 8 of 12 regions report upticks in demand for temporary workers - usually a leading indicator of a return to job growth.

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