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Friday, November 6, 2009

Weekend Good News Wrapup

  • Cisco Joins Many Others: Recovery Is Gaining Momentum

    Posted: Fri, 06 Nov 2009 03:44:00 +0000

    John Chambers ignited markets on Thursday. The Cisco CEO joined other leading firms like Apple, Amazon, Alcoa, Intel, and others by stating that, "the quarter was very strong. The recovery is gaining momentum." Earlier in the week, the institute for supply management speculated that the US GDP is likely now growing at an annualized rate of 4.5%.

    Chambers continued, "what we saw is a clear tipping point as our business continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times."

    Elsewhere on Thursday the US Labor Department said the output per hour of nonfarm workers rose at an annual rate of 9.5% in the quarter, more than four times the average productivity growth rate of the past quarter-century. When taken together with the second quarter's 6.9% rise, it was the strongest productivity growth rate over a six-month period since 1961.

    While unemployment remains high, initial claims for unemployment continue to fall and corporate profits have bounced back significantly from the strong downturn in Q1. As output keeps climbing, employment gains will follow shortly.

    Such large productivity gains are quite common at the end of deep recessions and the beginning of recoveries. A healthy pattern is that productivity grows first, then employment rises, and finally wages increase.

    It continues to be clear that this recovery will not be a jobless one. In fact on Thursday the government also reported that jobless claims dropped to a 10-month low raising speculation that the national unemployment rate has peaked will begin to fall as soon as next month.

    Employment gains have already sparked reasons for optimism in many states.

    As jobless rates continue to decrease nationally, almost all economic indicators will have turned positive:leading, coincident and lagging.

    And as we've published here since February (and as was witnessed on Thursday), the stock market will continue its move -- swift and steep.

  • Announced Job Cuts Are Now At Below Average Levels

    Posted: Thu, 05 Nov 2009 07:00:00 +0000

    Challenger, Gray & Christmas, Inc. announced on Wednesday that planned layoffs at U.S. firms fell for a third straight month in October to a 19-month low.

    As we've noted the labor market is continuing to improve as US economic activity rebounds.

    Planned job cuts announced by U.S. employers fell to 55,679 in October, down 16 percent from 66,404 in September.

    The October job cuts represent the lowest level since March 2008, and are now at or below levels that were normally seen throughout all of 2006 and 2007.

    In fact at a 55,679 monthly rate, the cuts are now well below the monthly average cuts for the last three years.

    The Challenger report is one more indication that a return to US job growth is just around the corner.
  • Auto Sales Cruise Ahead in October

    Posted: Wed, 04 Nov 2009 02:40:00 +0000

    On Tuesday major auto manufacturers indicated that their October sales rebounded significantly following a weak September.

    The increase to the US annualized sales rate was nearly 20 percent better than September's measure. Early estimates show the bump adding $5 billion, or roughly 1.5% to October's retail sales numbers versus September's readings.

    It now appears as though consumers no longer needed cash-for-clunker rebates to commit to new auto acquisitions in October.

    GM, Ford and Nissan all reported that their sales are now up from a year ago.

    Jessica Caldwell, senior analyst at auto industry tracker Edmunds.com said, "We are trending in the right direction," and "it should be easier for auto companies to report year-over-year growth from this point on."

    Ford -- which reported a strong profit on Monday -- claims that increased production in October will help to replenish diminished supplies on dealer lots. Further, Ford sales management points to strong restocking demand through the end of 2009.
  • US Growth Probably Now at 4.5 percent

    Posted: Tue, 03 Nov 2009 01:32:00 +0000

    The economy continues to rebuild itself and the manufacturing sector has now grown for three consecutive months. According to the Institute for Supply Management, their PMI registered 55.7 percent. That is 3.1 percentage points higher than the 52.6 percent reported in September. It was the highest reading for the index in over 3 years and manufacturing output month over month rose at the fastest pace in 63 months.

    This year, the PMI has correlated extremely accurately with the growth in the overall economy. When annualized the current reading corresponds to a 4.5 percent GDP growth rate.

    In more good news on Monday, the National Association of Realtors said its Pending Home Sales Index, rose 6.1 percent -- the index is now at its highest level in nearly three years.

    An additional report from the US Commerce Dept showed that U.S. construction spending made its largest gain in a year in September. The report reflected a huge increase in private residential building -- the largest increase in more than six years.

    In continued positive earnings news: For the first nine months of the year, Ford has now posted a $1.8-billion profit. That’s a $10.6-billion improvement from the same period a year ago. Surprisingly, Ford said that even without Clunkermania, it would have showed a profit. Further, Ford said it “expects to be solidly profitable in 2011, with positive operating-related cash flow.”

    On the jobs front, the ISM's Employment Index registered 53.1 percent in October, which is 6.9 percentage points above the reading reported in September. This indicates the first month of growth in US manufacturing employment in over a year. Eight of the ISM's 18 manufacturing industries surveyed reported growth in employment in October.

    To recap, the overall economy is now growing robustly, the housing market continues to recover steadily, earnings news continues to be extremely positive, and it now appears that we've seen the early concrete indications of employment growth.

    While there continues to be fallout from the deep recession earlier in the year, it is becoming clearer by the day that upward economic momentum will persist and that this will not be a jobless recovery.

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