Unemployment Claims Continue to Plummet

Fewer Americans filed for their first week of unemployment benefits last week. So few in fact, that the number of initial claims fell to its lowest level since May 2008.

About 366,000 people filed initial jobless claims in the week ended Dec. 10, the Labor Department said Thursday. That was a decrease of 19,000 from the prior week.

The report continues to signal that the unemployment rate will come down further in December. Even the most pessimistic of economists often look for the weekly tally to stay below 400,000 to signal that job growth is strong enough to lower the unemployment rate.

The drop in claims last week and the drop in the unemployment rate last month was the complete opposite of what a majority of economists had expected. (Remember the majority is always wrong?)

Job Openings Now at Highest Level in Over Three Years

The Labor Department announced on Tuesday that the number of positions waiting to be filled in the U.S. rose in September to the highest level in more than three years. Job openings increased by 225,000 to 3.35 million, the most since August 2008.

Hiring also advanced by 185,000 to 4.25 million.

Last Thursday the government announced that payrolls grew by 80,000 workers in October, and that gains in the prior two months were revised up, by nearly 102,000 positions.

In the 12 months ended in September, the recovery has now created a net 1.3 million jobs, from a gross total of 48.3 million new hires.

Weekly Jobless Claims Break Below 400,000

Jobless claims continue to come down and this week initial claims fell 9,000 to 397,000. The four-week average is now also approaching the 400,000 level, down 2,000 in the week to 404,500. This level is more than 10,000 lower than the month-ago comparison and offers a positive indication for the October employment report to be released on Friday.

The report comes on the heals of an ADP report release Wednesday that showed October private payrolls rose 110,000 six digit growth that mirrored September's growth of 116,000.

The Wednesday Challenger Job-Cut Report also showed corporate layoff rates to be significantly subdued.

The doomsters have long pointed to a jobless claims level of 400,000 as the mark that indicates robust hiring is on the way... of course don't look for the perma-pessimists to change their tune even though the recovery has now produced this number.

The is no doubt however that if the jobless claims levels continue their current trends, that both private and government payroll nets will continue their healthy rise.

Manufacturing Sector Growth Hits 29 Months in a Row

Manufacturing continues to be the shining star in this recovery.  Several reports out this week underscore the fact that US factories continue to post solid results in a growing US economy.

The ISM report on business reported on Tuesday that their "PMI indicates growth for the 29th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 27th consecutive month. The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (55.7 percent) corresponds to a 4.6 percent increase in real gross domestic product. In addition, if the PMI for October (50.8 percent) is annualized, it corresponds to a 2.9 percent increase in real GDP annually."

On Monday two region reports underscored the ISM report.

Very strong rates of monthly expansion in the Chicago area extended through October. The Chicago purchasing managers composite index came in at 58.4, well above 50 to indicate monthly expansion in general business activity though at a slightly less robust pace than September's 60.4 level. But October's 58.4 reading, which is four tenths above the Econoday consensus, is impressive and is right at the four-month average of 58.5.

In Texas -- factory activity increased in October said the Dallas Fed Manufacturing survey. The production index remained positive, suggesting growth is continuing. Other measures of the Dallas survye of current manufacturing conditions also indicated growth in October, and the pace of new orders accelerated, compared to September.

The reports summarize surveys which include businesses from all areas of the economy -- surveys that continue to show exceptionally healthy manufacturing conditions in their regions.

Remembering 1974 - Again! - DJTA Biggest Jump Since 1939

This week stocks surged, extending the biggest monthly rally for the Standard & Poor’s 500 Index since 1974, and the euro strengthened as European leaders agreed to expand a bailout fund to stem the region’s debt crisis. The 20 percent monthly advance for the Dow Jones Transportation Average, a proxy for the economy, is the biggest since 1939. The S&P 500 rose to its highest level in almost three months and has rebounded 17 percent since Oct. 3.

In addition to remembering 1974, Economic growth strengthened in the third quarter and the component mix is more favorable than expected. GDP growth improved to a 2.5 percent annualized increase in the third quarter. The advance estimate matched market expectations for a 2.5 percent gain. (For once the majority was right!)

Optimism is clearly now appearing as the consumer sentiment index jumped to 60.9 compared to 57.5 at mid-month to imply a 64.3 level for the final two weeks of the month. The improvement the last two weeks is centered in the leading component of expectations which jumped 4.8 points to 51.8. The current conditions component also rose, up 1.3 points to 75.1. Inflation expectations show no change from mid-month, at 3.2 percent for the one-year outlook and 2.7 percent for the five-year.

And on the job front, initial jobless claims are holding steady in a narrow range just above 400,000. Claims came in at 402,000 in the October 22 week, a bit better than expectations. The four-week average of 405,500 is 10,000 below the month-ago period to point to continued improvement and a positive October employment report.

Europe Uncertainty Plummets - Deal is Done

European Union leaders unveiled a deal early Thursday on debt crisis measures that includes a 50% loss on Greek bonds.

The agreement came at the end of a series of talks to finalize the details of a comprehensive policy response to the government debt and banking problems threatening the stability of the euro currency and global economy.

The deal will likely resolve three related problems: the debt crisis in Greece, instability in the banking sector and an under-capitalized bailout fund.

Under the new plan, Greek bondholders voluntarily agreed to write down the value of Greek bonds by 50%, which translates into €100 billion and will reduce the nation's debt load to 120% of economic output from 150%.

The agreement also calls for the creation of a new financing program with the International Monetary Fund worth up to €100 billion.

Stronger bailout fund: The leaders agreed on two ways to increase the firepower of the EU bailout fund, known as the European Financial Stability Facility. The methods will each leverage the fund by four or five fold, the statement said, boosting its resources to about €1 trillion.
The fund will be used to partially ensure new issues of government bonds. In addition, it will be supplemented by the creation of one or more special investment vehicles, which will be open to private sector players such as sovereign wealth funds.

The EU heads of state also agreed to raise capital requirements for banks vulnerable to losses on euro-area government bonds.

Banks would be required to sharply increase core capital levels to 9% to create a buffer against potential losses.

New Unemployment Claims at 2-1/2 Year Low

No one can really deny that the job market is really starting to kick in now.

This past week provided economists a very positive jobless claims report for the February 5 week. It showed a steep 36,000 decline in initial claims to 383,000 for the lowest total in 2-1/2 years.

The Labor Department -- which released the report -- suggested in their comments that the latest level is likely free of seasonal or weather related distortions.

The four-week average, which helps even out weekly distortions, fell a very substantial 16,000 to 415,500.

Adding further fuel to the positive jobs report was the news on Friday that the Reuter's/University of Michigan's Consumer sentiment index continues to improve and is approaching its mid-year 2010 recovery high.

The two positive reports added an exclamation point to a week that begin by showing retail sales numbers skyrocketing into February.

Retail Sales Likely Skyrocketing into February

According to the ICSC-Goldman's retail sales report on Tuesday, same-store sales skyrocketed in the February 5 week, up 2.2 percent.

It was the largest weekly gain since the Easter surge of last March.

The year-on-year the rate jumped nearly one full percentage point to plus 2.5 percent.

The Redbook report, also released on Tuesday, was right in line with a measure that showed a 2.7 percent year-on-year same-store sales growth in the February 5 week.

Additionally Redbook offers a month-to-month comparison which registered a blistering 1.7 percent gain. Keep in mind that annualized that would point to a 20.4 percent retail gain in one year!

Early next week the government will post the January retail sales report amid most predicting a solid gain.

The economy accelerated at the end of 2010 as consumer spending climbed by the most in more than four years. Gross domestic product grew at a 3.2 percent annual rate, Commerce Department figures showed on Jan. 28.

And remember last week the ISM Manufacturing Index pointed to an overall economy in the month of January growing at a GDP annualized rate of 6.4 percent.

Job Cuts Lowest In January Since Report Began

On Wednesday the Challenger Job-Cut Report registered the fewest layoff announcements for any January since the measurement began in 1993. The Challenger Job-Cut Report is produced by Challenger, Grey & Christmas and tracks layoffs by industry and region.

According to the report, January 2011 cuts are down 46 percent from those announced in January 2010.

It is more common actually to see job cuts increase in January said John Challenger, CEO of Challenger, Gray & Christmas, said in the company's news release. "But what made this January figure so unusual is that it was so low. Even in the 1990s, when annual job cuts were relatively low, January still averaged more than 74,000 job cuts.", Challenger said.

In a separate positive report, payrolls among private employers rose by 187,000 in January, payroll processor ADP said. Analysts polled by Briefing.com were predicting 145,000 jobs added for the month and ahead of the Friday jobs report from the government, economists surveyed by CNNMoney are predicting the economy added 149,000 jobs in January.

The data adds to several of the first credible reports on the health of the job growth in the U.S. Those earlier reports point to significant additions ahead in the labor market for 2011.

U.S. Manufacturing Activity Surges in January to Seven Year High

As noted here many times, the manufacturing sector continues to lead this recovery. And there was more good news at the factories in January.

On Tuesday the Institute for Supply Management released its latest manufacturing report on business and its headline composite index jumped to a rare 60.8 reading. The index is now at its highest level since May 2004 when the reading was 61.4 percent.

Every reading included in the index registered accelerating growth.

New orders spiked up nearly six points to an astonishing level of 67.8! And employment in the sector continues to accelerate -- now posting its 16th straight month of growth.

Manufacturing is clearly the economy's leading driver in this recovery. But the overall economy will likely continue to benefit. In fact, the ISM correlated its Tuesday report (like it does each month) with an annualized GDP estimate:

"The past relationship between the PMI and the overall economy indicates that the PMI for January (60.8 percent) corresponds to a 6.4 percent increase in real gross domestic product (GDP) on an annual basis."

No doubt the jobs picture will continue to improve and the recovery is gaining traction.

Jobs Outlook Continues to Improve

Three reports this past week continue to point to healthy jobs growth in the U.S.

On Tuesday the New York region posted healthy activity with the Empire State general business conditions index rising more than two points to 11.92. New orders showed significant acceleration and new orders accelerated to 25.39.

The report registered accelerating employment numbers during the month.

On Thursday, the Philly Fed reported general manufacturing business conditions of significant month-to-month growth. New orders, the life blood of business, show a doubling in growth. Shipments nearly tripled.

Economic strength was across the board in this report which showed a sharp rise for employment, a build in inventories, and a rise in unfilled orders. Price data confirm the strength showing significant pressure for input prices and emerging power for output prices which jumped to 17.1 following 9.4 in December and minus 3.3 in November. Momentum in the manufacturing sector continues to build.

And finally -- initial jobless claims dropped an unexpectedly sharp 37,000 to 404,000 from a revised 441,000 the prior week. The four-week average likely provides the best insight. The average is down 4,000 to 411,750 and is down more than 14,000 from a month ago.

Bernanke and Fed: Recovery Gaining Traction

The U.S. economy is hitting its stride and gaining traction. That summarized comments by Fed Officials as Chairman Bernanke testified to the Senate Budget Committee on Friday.

"We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold," said the Chairman.

Other Fed officials quickly echoed his tone.

Fed Board Governor Elizabeth Duke said in a separate speech that the recovery appeared to be revving up. "I am encouraged by signs that the recovery may have gained traction recently," Duke said.

Chicago Fed President Charles Evans -- a big proponent of keeping monetary accommodation in place -- also reported, "More recent data have been coming in somewhat stronger."

Although the recovery still is not as strong as many officials would like, the majority now point evidence of slow to moderate economic improvement in their districts.

In fact just recently several districts have introduced "stress indexes" to quantify the severity of economic shocks along with the associated rebound from such episodes. The measures are based on 11 financial market variables, each
of which captures one or more key features of financial stress.

Current readouts were recently release for the Kansas City and St. Louis Districts. Both show stress indexes that have now returned to historically "normal" levels.

Global Aluminum Demand Rebound is Largest in Nearly 15 Years

Aluminum demand rebounded 14 percent in 2010, the biggest increase since at least 1996, according to data compiled by Bloomberg and reported on Monday. The worlds largest aluminum producer, Alcoa also reported that global consumption will likely continue to increase in 2011 -- probably by at least 12 percent.

Alcoa also reported its highest profit in nine quarters revealing that the price of its product is now approaching pre-recession levels.

Additionally, Chief Financial Officer Chuck McLane said, "Each of our businesses was able to significantly improve their performance." Demand strengthened in most of the Alcoa markets and productivity gained.

And the good news for jobs in the industry? The company said it will restore idled production at three U.S. plants in 2011. More evidence that the 2011 labor market is on the mend.

2011: A Year of Significant Job Growth?

Several of the first credible reports on the health of the job growth in the U.S. point to significant additions ahead in the labor market for 2011.

On Wednesday, the ADP employment report indicated a gigantic 297,000 surge for December private payrolls. This gain is far outside even the most high-end of expectations for most economist's forecasts.

The ADP report came minutes before an additional Challenger Job cut report which showed the best reading in almost 11 years! Fewer layoffs are being announced -- the fewest since June 2000 according to Challenger's count which fell to 32,004 in December vs November's 48,711. The drop confirms last week's report on continued improvement in jobless claims where fewer claimants are filing for unemployment benefits.

The news is no doubt welcome for many and underscores the health of a recovery that is delivering on jobs growth more quickly than any recovery in recent history.

First 2011 Business Headlines Mostly Merry

Facebook, the popular social networking site, has raised $500 million from Goldman Sachs and a Russian investor in a deal that values the company at $50 billion.

China's manufacturing activity eased slightly in December, although it remained in expansion mode, according to a survey of the country's purchasing managers.

In response, Asian stock markets were higher on the first trading day of 2011, with investor confidence boosted by signs that China's efforts at keeping a lid on inflation may be working.

Singapore's economy returned to growth in the fourth-quarter as strength in manufacturing helped offset weakness in the construction sector.

The dollar began the New Year on a stronger note against other major currencies in Asia Monday as investors bought the greenback to position for an expected strong reading in US economic data due later in the day.

Loan refinance rates are declining again with Citibank, Chase and Bank of America all lowering their mortgage rates.

And on Monday, we are likely to see a moderately healthy headline number for the ISM Manufacturing Index for December as the new orders index remains on a recent rebound, posting at 56.6 in November, indicating solid month-to-month growth and a sector that continues to lead a recovery that is now 20 months old.