GDP, Manufacturing, Confidence, and Earnings -- All Up

To round out the first month of 2010, reports this past week all painted positive business signs for the year to come.

As we've been predicting for quite some time, GDP for Q4 was anything but lackluster. The gross domestic product rose at a 5.7% annual pace, the Commerce Department reported Friday, up from a 2.2% rise in the third quarter. The growth rate was the fastest pace reported in six years.

Another regional manufacturing report out from Chicago-land showed additional expansion in January. Their index rose to a healthy 61.5% in January from 58.7% in December. Any readings above 50% indicate business expansion and it is clear now in that region that expansion continues to accelerate.

And in further good news for the retail sector, the University of Michigan consumer sentiment survey beat expectations moving higher to a reading of 74.4 for January. The reading is now at a two-year high and a full point and one half better than economists' consensus expectations.

Also on Friday, President Obama proposed a $33 billion package of tax credits for small businesses as part of his plan to boost job creation.

Obama wants to give small businesses a $5,000 tax credit for each net new employee they hire this year and companies that reduce their payrolls at any point this year would not be eligible for the any of the hiring credits and or wage bonuses.

Further, earnings reports for Q4 and positive business expectations for Q1 continued to roll in this week during company earnings releases and conference calls.

On Friday, Honeywell (HON) said it earned $698 million, or 91 cents per share, beating expections by a penny per share. The firm reaffirmed a full year 2010 profit forecast of between $2.20 and $2.40 per share on revenues of $31.3 billion to $32.2 billion. Their CEO, Dave Cote said, "we are encouraged by the improving order trends and stabilization in many of our end markets."

Microsoft also beat by a penny this week. Late Thursday, Microsoft said it earned $6.66 billion, or 74 cents per share, up from $4.17 billion, or 47 cents a share, in the same period a year earlier. Their revenues rose 14% to $19.02 billion.

But perhaps the strongest of company news came from Apple Computer (APPL) on Wednesday. The firm reported earnings that surged well past Wall Street estimates.

The iMaker said it earned $290 million, or 34 cents per share (a dime above estimates), on sales of $3.24 billion (250M above estimates) in the three months ended March 26. In the same quarter a year ago, Apple earned only $46 million, or 6 cents per share, on revenue of $1.91 billion.

As everyone now knows Apple released the iPad later in the week, but speaking specifically to earnings on Wednesday, CEO Steve Jobs noted, "Apple is firing on all cylinders."  The comments were indeed in line with our observations of PC shipments that rocketed higher in Q4.

Real Estate Prices Firming As Consumer Confidence Grows

So far this week, we've continued a string of good news following last week's focus on banking reform. More specifically reports on consumer confidence and the housing market confirm the worst of the recession's detriments are now behind us.

First in December, existing home prices firmed significantly -- up a sizable 4.9% on the median to $178,300 and up 6.4% on the average to $225,400. The National Association of Realtors attributed the gains to a higher proportion of repeat buyers during the month.

The report on new home sales also confirmed the December trend indicating a firming in those prices as well. Their median month on month price rose 5.2% to $231,000 while the average rose 7.6% to $290,600. The year-on-year rate for the average price is now actually up 10.5%.

The conference board's consumer confidence index edged forward in January to 55.9 vs. December's 53.6 in continued welcome news. The assessment of the present situation improved noticeably, up nearly 5 points to 25.0. The present situation added another 7 tenths to 76.5 and is inching closer to the important 80 milestone. A reading of 80 or better for the expectations index is widely considered to be a signal of economic health.

The assessment of the present jobs market has now improved for three straight months. Those saying jobs are hard to get fell again to 47.4% vs. 48.1% in December and 49.2% in November.

And on Wednesday, markets cheered as Fed policy makers kept the funds and discount rates unchanged at very low levels. Their summary assessment is that the economy is strengthening, labor market declines are abating, and household spending is expanding at a moderate rate.

Google Earns Nearly $2B in Q4

Google says that the advertising market is beginning to return to normal. And normal for them means close to a $2B quarterly profit.

Their latest earning release also highlighted a 17% year on year growth in revenues -- now up to $6.67B per quarter -- from $5.7B per quarter during the same period in 2008. Chief executive Eric Schmidt continues to make optimistic assessments of the current state of affairs.

"Given that the global economy is still in the early days of recovery, this was an extraordinary end to the year," he said. "Our performance in 2009 underscored the strength of our management team, the resilience of our business model and the pace of innovation within our product and engineering teams, which continued unabated throughout the downturn."

In a sign that consumers are increasingly willing to spend, more Internet users clicked on ads. The number of paid clicks on ads served on Google's Web sites rose 13% from last year and 9% from the third quarter of 2009.

China's Growth Continues to Accelerate - Eyes On Japan Rank

You may remember us pointing to China's rebounding manufacturing sector last quarter. Well, the country's overall economic growth continues to accelerate and drive a global economic rebound.

On Thursday China announced that its gross domestic product in the fourth quarter 2009 grew by 10.7% year-over-year -- thats up from a revised growth rate of 9.1% in the third quarter.  Given recent manufacturing reports for U.S. manufacturing activities, it is likely the the U.S. economic growth rate also accelerated in Q4.

In fact, for all of 2009 the Chinese economy grew by 8.7 percent. China is now clearly on track to replace Japan as the world's second largest economy -- a feat that could happen by the end of 2010 if the Chinese keep pace with current growth metrics.

U.S. Retail Trend on the Mend

As you know, U.S. retail spending drives nearly three quarters of the U.S. GDP. A close look at retail trending shows a rebound that was good news for holiday retailers. They went into this year’s season with much better control over their inventories and a more calculated approach to their operations than in the later part of 2008 -- back then it appeared that the economy was heading south fast and any calculations for guidance that they had done previously was far helpful.

U.S. Retail Sales Y/Y - 3 Month Moving Average

Chart Source Data:  U.S. Department of Commerce

Besides the overall trend (which continues Northward) many specifically strong sectors point to a revival of the consumer. Health and personal care store sales were +5.1% year over year. Clothing and accessory, sporting goods, hobby, book and music all were similarly strong at +5.0%.

As we've pointed out previously electronic marketers and online mail order houses continue their march upward. The continue to be the growth leader at +10.3%.

The net effect was to raise three-month moving average for total retail sales to +1.9% year over year, the first positive percentage change in 16 months. This is a huge improvement compared to the low for this reading of -10.4% reported in January 2008.

This data continues the string of Christmas week data pointing to a healthy 2010 economically.

N.Y. Manufacturing Accelerates into the New Year

The New York Federal Reserve's Empire State manufacturing survey report released on Friday indicates accelerating December-to-January growth in the New York region. The general business conditions index rose signficantly from 4.2 in December to 15.92. (any reading above zero indicates month-to-month growth; the larger the number, the faster the growth).

The new manufacturing orders index also shows accelerated improvement, jumping to 20.48 vs. December's 2.77. Manufacturing shipments, which follow new orders, rose more than 12.5 points to 21.

Tim Ghriskey, CIO of Solaris Asset Managment observes, "These were significant increases across the board in the N.Y. region and expectations about economic activity remain very positive here in New York."

You  may remember that earlier last year Alcoa highlighted a great sucking sound lurking just below the N.Y. Empire Index.

Intel Posts Explosive Earnings Up 875%: Continues Massive Momentum

Intel posted a fourth-quarter net income of $2.3 billion, up 875% over its report last year at this time. Record revenues came in at $10.6 billion, up 28% year over year. Further the company yet again boosted its revenue guidance saying it expects first quarter revenue of $9.30 billion to $10.10 billion. The consensus estimate had been for revenue of $9.26 billion for the quarter ending March 31, 2010.

The impressive swing in net income was about 10 times greater than the $234 million (4 cents per share) that the firm reported last year on January 15.

We've continued to watch in amazement as Intel seemed completely unphased by the economic downturn of 2008 and 2009:

1. January 2009: Intel beats its Q4 2008 estimates amidst negative headlines everywhere else.

2. April 2009: Intel declares, "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns." In the first-quarter, the firm's profit far exceeded analyst views.

3. July 2009: Still swimming upstream, Intel posts its largest quarterly sequential increase in sales since 1988, further boosts its guidance for Q3 in the face of naysayers calling for lackluster Q3 growth.

4. Oct 2009: Cisco joins Intel in declaring that "Recovery Is Gaining Momentum."

And just prior to yesterday's Intel announcement you'll remember that analyst firm IDC declared that in Q4 2009, the U.S. PC "market exploded higher."

PC Shipments Rocket Higher In Q4

Notebook computers led PC shipments to the strongest quarter in more than a year said research firm IDC on Wednesday. Shipments in the U.S. were up 24% from a year earlier and World-wide PC shipments increased 15% from Q4 of 2008.

IDC saw pent-up demand for new computers in a reviving U.S. economy along with year over year comparisons with a much weaker quarter as the recession deepened in late 2008.

"The U.S. market exploded," said IDC analyst David Daoud

You'll remember it was Intel that predicted in June last year that 2009 Q4 growth would be anything but lackluster.

Record Fed Kickback: Taxpayers Get $46.1B

The Federal Reserve paid a record $46.1 billion to the U.S. Treasury in 2009 increasing by $14.4 billion its 2008 payment. It was the largest payment since the central bank was created in 1914. Its total 2009 net income of $52.1 billion also was a record.

"This is a silver lining in that big cloud of the Fed having to intervene massively and expand its balance sheet. " said Nariman Behravesh, chief economist of Global Insight.

Fed Chairman Ben Bernanke and the Fed Board took unprecedented actions to prop up the financial system in the past year and a half. As their results continue to produce healthy outcomes, they now have the benefit of withering criticism from lawmakers bent of limiting the Fed's authority.

Interestingly most of it's income came from open-market buying of U.S. Treasury debt, debt of mortgage finance sources Fannie Mae (FNM.N) and Freddie Mac (FRE.N), and mortgage bonds and other securities. Additional portfolios hold a variety of assets from Bear Stearns, residential mortgage-backed securities, and collateralized debt obligations from AIG.

The holdings are being managed via a "long term" time horizon allowing them to be sold over an interval that maximizes their value.

This is perhaps one of the first significant results of our lesson last year on "how to turn toxic assets into gold." And so far Bernanke and the Fed are getting it just right.

U.S. Telecom Providers to Purchase and Innovate More in 2010

U.S. telecom and cable operators are likely to increase their capital expenditures this year according to estimates from Avian Securities.

In a research report released last week the firm estimates that telecom service providers will increase their spending by 1.5% to $57.7 billion.

Avian estimates that the largest spenders will be AT&T Inc. (NYSE: T) ($17.5 billion), Verizon Communications Inc. (NYSE: VZ) ($16.6 billion), Comcast Corp. (Nasdaq: CMCSA, CMCSK) ($5 billion), and T-Mobile USA ($3.5 billion).

Avian's estimates may be conservative. Several weeks ago Dick Lynch, chief technology officer for Verizon said, "It's no accident that again [in 2009], Verizon's consumer and business services won major industry awards." Lynch asserted that those awards were the direct result of network spending in 2009. "The better the network, the better the performance of the applications that ride on them. It's as simple as that," he said.

Accordingly, it is likely that communications providers will spend much of their 2010 capital budgets on technologies that increase the efficiency of their high speed wireless networks. In 2010, CTO's are focused on core fiber capacity and grooming technologies. AT&T's CTO John Donovan said last week that his firm completed 7.2-Mbit/s wireless upgrades throughout its whole network including doubling the number of cell sites with fiber-optic capacities.



"We expect that the majority of our mobile data traffic will be carried on fiber-based backhaul by the end of 2010," Donovan said. AT&T will continue to enhance the "world's largest deployment of 40-Gig backbone technology," boasted Donovan.

Last week T-mobile had good news boasts of it own. The firm announced the completion of a scheduled upgrade to its entire network -- an upgrade which boosts wireless air speeds from 3.6 Mbps to 7.2 Mbps. Additionally the company promises that speeds in 2010 will peak at blazing wireless rates of 21 Mbps and that spending on a trial in Philadelphia is already underway.

The spending news came just prior to T-Mobile's announcement introducing the "Nexus One", a smartphone that will run on T-Mobile's network. The Nexus One supports these high speed wireless technologies and analysts see its pairing with T-mobile's high-speed network upgrades as a significant enabler for economic and technological innovation.

A Month in Review - Late Dec / Early Jan

• Online Retail Sales Up 4% Year over Year

  Posted: Thu, 07 Jan 2010 04:47:00 +0000

  Online sales rose 4 percent during the November and December holiday period, reversing last year's decline, according to the market research firm comScore.
  
  The heaviest online spending day in history came on Tuesday Dec. 15, when online shoppers spent $913M. For the full holiday online shopping season, $29.1 billion was spent creating a 4% increase versus the same period in 2008.
  
  "The 2009 online holiday shopping season was a positive one." said comScore's chairman Gian Fulgoni. This year's growth rate "surpassed our forecast and returned to solidly positive rates after nearly a full year of marginally negative growth."
  
  The top growth rate category online for the 2009 holiday season was "Jewelry & Watches", growing a hefty 20% versus year ago.
  
  (click to enlarge)
  (source: comScore)
  
  

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• Purchasing Managers Worldwide: Manufacturing Blossoming

  Posted: Tue, 05 Jan 2010 04:30:00 +0000

  Global factory activity continues to accelerate. According to business managers worldwide, manufacturing vivification is now at the highest rate in nearly four years and new orders growth is now at a rate not seen in more that five and a half years.
  
  The global PMI index is produced by JP Morgan with input from research and supply management organizations around the world. The firm's report on its PMI was released on Monday and combines survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia.
  
  "December PMI data indicate that the global manufacturing sector approaches 2010 on a positive footing," said David Hensley of JP Morgan.
  
  The global employment index has also moved into positive territory for the first time since March 2008, indicating net job growth on a global scale.
  
  Earlier on Monday additional data showed Chinese manufacturing activity expanded at the fastest rate on record in December.
  
  Also on Monday, the Institute for Supply Management said the U.S. manufacturing sector grew for a fifth month in December, with the index hitting its highest level since April 2006. If the ISM's PMI for December is annualized, it corresponds to a 4.6% increase in US GDP annually.
  
  Perhaps the best news in the ISM report is new orders level which -- despite a run of very strong gains in prior months -- jumped again. The new order strength points to continued rising activity in the US manufacturing sector in the months ahead.
  
  Production continues to show strong monthly gains and firms now report adding to their workforces again.
  

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• China's Growth Accelerates - Best In Over 5 Years

  Posted: Mon, 04 Jan 2010 04:02:00 +0000

  China’s manufacturing sector has likely grown to the fastest pace in more than five years, a December survey of purchasing managers reported early Monday.
  
  The HSBC Holdings Plc and Markit Economics purchase manager's index rose to a seasonally adjusted 56.1 from 55.7 in November. It was the highest reading for the index since April 2004.
  
  The report sees China’s growth accelerating to 9.4% this year from an estimated 8.5% in 2009 as the Chinese government continues its stimulus and other world economies recover from the 2008 financial credit crisis.
  
  Lu Ting of the Bank of America-Merrill Lynch in Hong Kong said, "China’s strong recovery momentum will boost manufacturers’ confidence and improved earnings will help them to increase investment and output."
  
  Chinese manufacturing firms' profits rose 7.8 percent in the first 11 months of last year to a record $379 billion.
  
  Like the US Federal Reserve, China officials have pledged a policy that will not make the mistake of ending stimulus policies too soon -- a stance that continues to contribute to the record growth acceleration.
  

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• Investment in Good Works Nets $2.4M Offering

  Posted: Sun, 03 Jan 2010 05:31:00 +0000

  A 48-hour New Year's eve free-will offering netted a Southern California mega-church $2.4M to close their books on 2009.
  
  Pastor Rick Warren of Saddleback Church posted his URGENT LETTER on the church website on Wednesday and by close of business Thursday church members had stepped up to close their critical budget deficit of $900,000.
  
  Warren's Wednesday morning letter stated, "With 10% of our church family out of work due to the recession, our expenses in caring for our community in 2009 rose dramatically while our income stagnated."
  
  But by Friday morning, the pastor was humbled and amazed: "In spite of a media culture that thrives on bad news and is typically clueless about how churches actually work, and in spite of hatefulness and insults by some who immediately jumped to the wrong conclusion - the church of God marches on, and once again God surprises all of us."
  
  The letter outlines the church's accomplishments in 2009 and details how the donations would be used, including the church's food pantry, homeless ministry, counseling and support groups.
  
  "This is pretty amazing," Warren told his congregation during a Saturday service. "I don't think any church has gotten a cash offering like that off a letter."
  

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• The 25 Best "Economic Good News" Articles of 2009

  Posted: Thu, 31 Dec 2009 22:56:00 +0000

  As we ring in the New Year here are the top Good News Headlines of 2009.
  
  1. Graphs That Lie (A First Look 1974 vs 2008 Stock Behavior)
  
  2. What was Warren Buffet doing in 1974? (Invest Now and Get Rich)
  
  3. John Cassidy (The Eternal Pessimist) Sees The Light
  
  4. Deflation? NOT!
  
  5. Evidence Points To Recession's End by July
  
  6. ISM Index Turns Northward (and never looked back)
  
  7. The Stimulus Passes (and naysayers still abound)
  
  8. The Bull Market Move (will leave many in the dust)
  
  9. 101 Economic Positives (the first 101 of 2009!)
  
  10. Corporate Layoffs Subside (substantially)
  
  11. Stock Market Bottom Called Three Days Before the Low
  
  12. This time is NOT Different
  
  13. 50,000+ Job Opportunites In 28 Firms
  
  14. The Recession is Over (In June - NBER will confirm later)
  
  15. Homeowners Cheer LIBOR (And the cheering continues today)
  
  16. Home Prices Up (in a dozen cities and counting)
  
  17. Second Half Growth (coming on strong)
  
  18. Clunkermania
  
  19. Bad News Bears Battle Break-Neck Bounce (and the bears continue to retreat)
  
  20. US Job Growth Likely By Christmas
  

  21. UPS and Fedex add 64,000 Workers
  
  22. FedEx Reports Jump in Package Deliveries

  23. Texas Adds Nearly 70,000 Jobs

  24. Nasdaq Now Up Nearly 75% From 2009 Low
  
  25. Christmas Week Data Points to Rosy 2010
  
  Happy New Year to All!
  
  
  

  
  

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• Jobs Growth in Chicagoland

  Posted: Thu, 31 Dec 2009 05:29:00 +0000

  The Chicago ISM survey of area purchasers was released on Wednesday. The purchasers manager's index (PMI) rose sharply, up nearly 4 points to 60.0. This Chicagoland index has now posted gains for three months straight -- all at accelerating rates (60.0 Dec, 56.1 Nov, 54.2 Oct).
  
  The new orders have also held to over 60 for three straight months. This is actually quite surprising given that each month's comparison is increasingly difficult to maintain such acceleration. Any reading above 50 indicates month-to-month growth.
  
  Order backlogs were also strong in today's report -- month-to-month growth indications that a slowdown is not in store anytime soon.
  
  We have been laser focused on jobs recently. The report indicated that employment jumped more than 9 points in the month to 51.2. That level is indicative of month-to-month net hiring.
  
  Like the Texas report earlier this month, the Chicago area readings underscore a return to payrollexpansion this December -- likely confirmed in next week's employment report.
  

  
  

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• Mister Sunshine Predictions

  Posted: Wed, 30 Dec 2009 03:28:00 +0000

  Brian Wesbury is one of the more optimistic professional economists out there. He's proud of being dubbed "Mr. Sunshine." Wesbury is chief economist at First Trust Advisors of Chicago and his assessments on the economy are quite in line with what you read here at the Good News Economist day after day.
  
  He even has a new book entitled "It's Not As Bad As You Think."
  
  His current unpopular predictions:
  
  1. Like the Good News Economist blog, Wesbury predicts economic growth of 5% or more in Q4 of this year.
  
  2. His job growth predictions mirror our prediction of a return to net job growth in December with unemployment falling below 8.5% by the end of 2010.
  
  3. On housing he is bullish as well. He says things are improving so fast that by the third quarter of 2010, there will likely be a hot seller's market in the housing segment of the economy.
  
  4. He also sees (like us) retail sales that are now up at an annualized rate of 7% in the last six months of the year.
  
  5. He points to manufacturing output that is up 8% and inventories that are now extremely low. The meaning? Manufacturing has fallen behind and firms have likely waited too long to try to catch up with demand. The result? Manufacturing activity will accelerate quite quickly in coming months in order to restock inventories and catch up with demand.
  
  6. And finally he asserts that tight credit condition claims are overblown considering the tremendous money supply. "Money is like a flood" claims Wesbury. It will find its own level and with so much liquidity in the system, the flood will find its way into the economy one way or the other. Tighter credit policy is similar to other recessions, and those non-accommodating stances did not stop those recoveries.
  
  Wesbury summarizes, "I'm an optimist on the economy and its long history shows I'm usually right."

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• Christmas Week Data Points to Rosy 2010

  Posted: Tue, 29 Dec 2009 00:35:00 +0000

  Last week markets were subdued as many economists and investors on Wall Street and Main Street took several days off to prepare for holiday celebrations.
  
  The data that did arrive was mostly reminiscent of the spirit of St Nick – slipping coinage into stocks without their owner’s knowledge.
  
  A report on the Tuesday before Christmas showed that US corporate profits in the third quarter were up sharply from the second quarter of 2009. Profits in the third quarter rose an annualized 68.0%, following a 24.5% boost in the second quarter. Corporate profits of course are a strong indication when determining the direction of a company's stock price. When corporate profits rise, then it is a good bet the stock price will get a lift. The report underscores the fact the US corporate profits have now been up for three consecutive quarters -- a fact that shakes out any lingering economic doomsday advocates and gives additional fundamental underpinnings to a stock market that continues to be bullish. (Some indexes now up well over 75% since March)
  
  On the same day, a report on existing home sales revealed steeply higher numbers in November on the heels of record growth in October. Existing home sales rose 7.4% in November on top of October's 9.9% lift-off. The year-on-year rate is now up 44%. The annual unit sales rate of 6.54M single-family homes and condominiums flew by even the most optimistic estimates of only 6.34M dwellings for November.
  
  Retail sales rates in the week before Christmas Day were also jovial. The Redbook retail report illuminated results of plus 1.9% year-on-year. Many feared that a big snowstorm on the east coast would hamper sales, but the net effect of the snow was a big pick up in online shopping instead. Cumulative weekly retail results this quarter continue to point to a quite positive effect on Q4 GDP results.
  
  A very bright spot in the economic data came on Christmas Eve. The initial jobless claims reports continue their downward trend. The claims fell another very substantial 28,000 in the Dec. 19 week to 452,000. The current report points to what it calls a "long-term trend of improvement." The four-week average also fell to 465,250 for a 2,750 decrease. Continuing claims also keep retreating to a level now at about 5M. As we said back in early November, the trends for both initial and continuing claims show sizable improvement and point to our conclusion back then, that net US job growth has now likely begun. (Just in time for Christmas) The December payrolls report (released on January 8th) will confirm that fact.
  
  The best news is that as we move further into 2010, the job market situation will continue to improve substantially. Now that net job loss has stopped, net job growth can begin.
  
  As our jobs chart trend predicted in November, the US economy will likely be adding nearly 500,000 jobs per month by mid 2010. Thanks Santa!
  
  (click chart to enlarge)
  
  Source Data: US Dept of Labor
  
  

  
  

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• Texas Adds Nearly 70,000 Jobs

  Posted: Sat, 19 Dec 2009 15:33:00 +0000

  Last month we predicted that jobs growth would likely begin to return by Christmas. Now Texas data confirms that jobs growth is on the way.
  
  Seasonally adjusted data from the Texas Workforce Commission shows that during October and November, the state's employers added nearly 70,000 jobs. Gains were in categories such as education and health services, hospitality and leisure, professional and business services, and finance. Many of the jobs in October came from government sources, however even private-sector Texas employment began an upward trajectory in November.
  
  "Job growth in the last two months has been encouraging," said Ronny Congleton, the Texas commissioner representing labor.
  
  The Texas unemployment rate dropped to 8 percent in November, the first decrease in Texas in 16 months, officials said Friday. It was the first time overall employment posted two consecutive months of gains since mid-2008.
  
  At the national level, unemployment fell in 36 states and the District of Columbia in November.
  
  The Texas data further underscores a 9-month linear growth trend line that forecasts a strong monthly jobsgrowth rate by mid-2010.
  
  

  
  

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• Nasdaq Now Up Nearly 75% From 2009 Low

  Posted: Sat, 19 Dec 2009 02:39:00 +0000

  
  

  Earlier this week we looked at what the current "dead cat bounce" meant for the Dow Jones Industrial stock index, but with a strong late Friday rally, Nasdaq Index returns have been even more impressive.

  
  

  Up nearly 75% since the March 10th trough, the tech laden index spiked up another 1.5% on Friday, to close up almost 950 points since its late winter low...

  
  

  (click to enlarge chart)

  Source: Google Finance

  
  

  Earlier in the week the Philly Fed factory survey registered activity at a 4-1/2 year high. Activity accelerated rapidly in the U.S. Mid-Atlantic region in December the survey showed. "This will mitigate concerns that the factory sector might be slowing," said Tony Crescenzi at PIMCO.
  

  
  

  With the mounting reports of a jobs rebound, the stock market equity gains, and these business climate improvements, US retail consumers will likely be in a merry mood for the final week of Christmas shopping.

  
  

  
  

  
  
  

  
  

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• FedEx Reports Jump in Package Deliveries

  Posted: Fri, 18 Dec 2009 03:08:00 +0000

  FedEx reported Thursday that it shipped 1,000,000 more packages than expected on Monday -- which it anticipates will be its peak shipping day this holiday. The firm reported that this year's busiest day is up 17% from its busiest day last year.
  
  FedEx CEO, Fred Smith further observed that their business has now observed a significant "turning point," and that the company will resume some normal human resources benefits that it had suspended for employees in 2009.
  
  

  Photo Source: Google Images

  "Global economic conditions are improving," Smith said in an investor conference call Thursday. Executives went on to cite their outlook for "modestly improving economic conditions." Because of those improvements, FedEx said it will restart merit salary increases and resume its retirement-plan matches for those employees who participate in their 401(k) program. Both policies had been put on hold.

  
  

  FedEx is among a growing list of companies that are lifting freezes on raises and expense control measures that were imposed during the recession. According to a survey by Watson Wyatt -- a benefits and human-resources consulting firm -- about half of all large U.S. companies that froze salaries for 2009 plan to unfreeze them for 2010, and over a third of companies that reduced 401(k) matching contributions plan to restore them in 2010.
  
  FedEx's comments further confirm "very good signs" for retailers this holiday season and their results will be far from lackluster as many economic pundits had widely predicted earlier this year.
  

  
  

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• Fed Continues Upbeat Tenor

  Posted: Thu, 17 Dec 2009 05:06:00 +0000

  On Wednesday, the Federal Reserve underscored that the U.S. economy is picking up steam but reassured observers that inflation is in check that that it will keep short-term interest rates near zero for an "extended period."
  
  In their statement after the meeting, the members concluded that the US economy has continued to "pick up," that declines in the job market are "abating" and that in general financial conditions "have become more supportive of economic growth."
  
  

  Source: Google Images

  
  Some members believe inflation is likely to remain so low that rate increases might not be needed until 2011.
  
  The Fed underscored in its statement many of the emergency measures it has taken in the past two years were being unwound. In earlier discussions the Fed has indicated that it will begin to unwind other extraordinary accommodations prior to any upward rate moves:
  
  "In light of ongoing improvements in the functioning of financial markets, the [FOMC] and the [Fed's board of governors] anticipate that most of the Federal Reserve's special liquidity facilities will expire on February 1, 2010."
  

  
  

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• Feasting on Dead Cat

  Posted: Mon, 14 Dec 2009 18:20:00 +0000

  And what a dead cat bounce it has been so far.
  
  Since March the bull market run has continued swift and steep leaving many in the dust. On Monday the Dow plowed ahead and closed up 3,954 points higher than its low in March.
  
  For those with the guts to invest with Warren Buffet early in the year, they have seen their portfolio now up over 60%. And it appears that the markets are just getting warmed up.
  
  Despite high unemployment, consumers seem to be in a merry mood this year. As they look to 2010, they see a jobs picture improving and an economy that seems to be back on track.
  
  Perhaps this is just a dead cat bounce. But it is doubtful that many have seen a deceased feline bouncethis high this fast...
  
  (Click to enlarge chart)
  

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• Consumers Are Driving Heady Q4 GDP

  Posted: Mon, 14 Dec 2009 04:11:00 +0000

  The majority of US consumers are no longer on the sidelines. On Friday the numbers point to strong retail sales for two months in a row.
  
  Overall US retail sales in November spiked by 1.3% after a healthy 1.1% gain in October. November's increase was well above the consensus estimates breaking above even the most optimistic estimate. Keep in mind that these numbers are significant components of the overall GDP for the US. When annualized they equated to a heady 13.2% increase in October and 15.6% in November.
  
  
  Sales were led by a 6.0% month over month jump in gasoline sales with additional strength in electronics & appliances. Auto dealers' month to month sales were also up 2.0%.
  
  Categories that also rose were building materials & garden equipment, food & beverage stores, health & personal care, sporting goods & hobby stores, general merchandise, non-store retailers, and food services & drinking places.
  
  Friday's reading indicates the consumer has much more strength than most anybody had previously believed. There is no doubt now that the strong retail sales numbers will result in a Q4 GDP reading well above Q3.
  
  

  
  

  
  

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• U.S. Trade Deficit Down; Exports Up

  Posted: Fri, 11 Dec 2009 05:42:00 +0000

  A lower value of the dollar has continued to improve the competitiveness of U.S. exports. That undoubtedly accentuated the decline in October's trade deficit to $32.9B. The decline followed a September deficit of $35.7, which was revised even lower than initial estimates given last month.
  
  In more good news, exports jumped. It was their sixth straight month of increase. The latest figure was quite a bit lower than consensus expectations for a deficit of $37.0B.
  
  
  But perhaps the best news in Thursday's report is that exports are benefiting from healthy demand abroad. Exports were led by a $1.2 billion up-tick in capital goods in October followed by gains in demand for consumer goods as well as automobiles.
  
  Today's international trade report continues the string of evidence pointing to a strong Q4 GDP.
  

  
  

  
  

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• Obama Jobs Plan Advances

  Posted: Wed, 09 Dec 2009 05:42:00 +0000

  President Barack Obama pressed forward with his job-creation proposals on Tuesday. Specifics included a hiring tax credit to businesses and other stimulus components. Further, those stimulus programs that he believes have worked best thus far, he would like to extend or amplify.

  Thus far the existing stimulus efforts have taken an abysmal rate of 700,000 jobs lost a month earlier in the year and reduced that to a loss rate of almost zero. Obama asserts that in the months to come additional proposals can begin accelerate that improving net rate.
  

  

  President Obama, at the Brookings Institution in DC on Tuesday.
  Source: Associated Press
  

  Specifically Obama would like to put an additional $50 billion toward infrastructure spending, ramp up Treasury Department lending to small businesses, extend tax credits for business investment, and offer state/local governments additional funding to help meet strained budgetary obligations.

  A new infrastructure boost would further enhance programs that fund roads, bridges, airports, and water system improvements. The implication (as we've stated here many times) is that federal stimulus spending could stretch well into (and beyond) 2010. The White House continues to underscored that much of the $700B of the initial catalyst has not yet been spent and that by enhancing the most effective programs, jobs growth will accelerate in 2010.
  

  Obama's focus on jobs is politically timed well. At a loss rate of 700,000 jobs per month (that were a projected loss for April 2009 and beyond), the economy would have lost over 5M jobs since the time that the initial $700B stimulus measure was passed. Instead the net losses were trimmed to just over 2M in the same time period. (See Job Loss Chart for monthly details)
  

  In addition to Obama's initiatives, lawmakers are also working to continue relief to those effected by those losses. Democrats on the hill are looking to extend unemployment insurance, temporary food-stamp payment increases and subsidies for health-care purchases by the unemployed.

  
  

  
  

  Following Obama's job summit last week, the President has now invited congressional delegates to the White House on Wednesday to discuss the specifics of what he'd like to see produced by those legislative leaders.

  Obama is likely to assert to his guests that lower-than-expected losses from the TARP should give room to spend more on job creation programs. Republicans of course are demanding that all $200 billion in TARP savings be immediately devoted to reducing the deficit.
  
  With the shift to net jobs growth in coming months, the political climate to accelerate jobs growth will no doubt become more accommodating.

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• Bernanke Underscores Improving Financial Conditions

  Posted: Tue, 08 Dec 2009 03:37:00 +0000

  Fed Chairman Ben Bernanke gave his views on many topics on Monday afternoon.
  
  Although he remains cautious his conclusions were in line with latest FOMC meeting minutes that calling for a modest recovery in 2010.
  
  His bottom line: "...my best guess at this point is that we will continue to see modest economic growth next year--sufficient to bring down the unemployment rate..."
  
  Bernanke pointed to several factors that underscore improving financial conditions:
  
  1. Unlike last year at this time, corporations are having relatively little difficulty in raising funds in bond or stock placements.
  
  2. Their stock prices and other asset values have recovered significantly from their lows earlier this year.
  
  3. Although perma-doomsters continue to foster fear, most economists and investors conclude currently that fears of systemic collapse have receded substantially since the beginning of this year.
  
  4. Monetary and fiscal policies continue to be supportive of continued growth.
  
  5. Housing conditions are improving.
  
  6. Consumer expenditures are improving.
  
  7. Business investment is up.
  
  8. Global economic activity is stabilizing.
  
  9. Inflation threats remain subdued.
  
  10. The Fed (and taxpayers) will likely get back all of the money loaned to private companies and may even make a modest profit for the taxpayer.
  

  
  

  
  

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