Consumers Releasing Pent Up Demand

On Tuesday there was more evidence that U.S. consumers are starting to release their pent up propensity to spend. Redbook reported an extremely strong plus 4.4% year-on-year same-store sales rate in the March 27 week -- by far the strongest gain of the recovery thus far.

Redbook also upped its estimate for a plus 1.2% March-from-February rate, up 3 tenths from its estimate last week. Keeping in mind that retail sales makes up nearly 70% of the annualized U.S. GDP rate, first quarter growth rate continues to look like it is accelerating from the already strong showing in Q4.

If the Redbook rate is annualized it points currently to a torrid 14.4% growth clip for the largest contributing segment of the U.S. GDP.

Taxpayers About to Benefit Handsomely from Citigroup Bailout

You may remember that last year Citigroup (C) got a $25B bailout that was much bigger than the rest of the big banks. Now -- about a year later -- the company is about to pay dearly for the taxpayer provided lifeline.

In today's market, the TARP's 27% take in Citi has grown in value to $33B. And as the bank contemplates it's payback, the ultimate size of the deal may be the largest in Wall street history... and may net U.S. taxpayers another cool $8B for their trouble. (Federal taxpayers received a 23% annualized return on their investment in Goldman Sachs when that wall street firm paid back it's bailout.)

Leading financial firms, including J.P. Morgan Chase and Morgan Stanley, are vying to be chosen as the deal's underwriters to gain the prestige of managing a historic stock sale as well as the fees from investors who buy the shares. To improve their chances, some big banks, such as Goldman Sachs, are offering their services to the Treasury Department at almost no cost.

The windfall expected from the stock sale would amount to a validation of the rescue plan adopted by government officials during the height of the financial panic, when the banking system neared the brink of collapse. A year ago, Citigroup's stock hovered around a dollar a share, and the bank's future seemed in doubt. On Friday, the stock closed at $4.31.

If the sale proceeds as planned, Citigroup would be able to cut nearly all of its ties to TARP and the Obama administration can continue to highlight the profit generated from the rescue of big banks.

"It's unprecedented to do [a stock sale] of this size right after the financial industry has been so battered," said one industry official on Friday. "It's just a very bullish sign."

Citigroup was among nine major banks that were the first to take bailout funds in October 2008, and all have returned their federal loans. In addition to these repayments, the Treasury has received interest, dividends and about $3.5 billion from the sale of warrants, which are contracts allowing a holder to buy a company's stock in the future.

To many it is now clear that rescuing large the Wall Street firms has come at a much lower cost to taxpayers than many had expected.  In fact, so far the investment program has produced all net positive results for the U.S. Treasury.

Retail Sales Results Are Strongest of this Recovery Thus Far

On Tuesday Redbook reports indicated the strongest retail results of the recovery thus far. The results posted a plus 3.6% year-on-year same-store sales rate in the March 20 week. That rate was right in line with the ICSC-Goldman's 3.7% rate also reported on Tuesday.

Redbook also offers a month-to-month comparison which is also at a solid plus 0.9% gain. (That's an annualized 10.8% bump).

The report showed particular strength across women's apparel and for lawn and garden equipment; items that sparked little to no interest with consumers a year ago.

With retail sales making up 70% of annualized GDP growth, Q1 2010 GDP results are shaping up to be even stronger than Q4 2009.

Positive Effects of Bottom-Up, Demand-Side, Consumer Tax Cuts (With Charts)

Earlier this week we posted this article with many of you contacting us to let us know that you had trouble viewing the charts. We are re-posting today using different formatting in hopes that all the charts are available to support the story.

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)

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.