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.)