When all you read is gloom, turn here for a much different perspective.

Thursday, December 31, 2009

The 25 Best "Economic Good News" Articles of 2009

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!

Wednesday, December 30, 2009

Jobs Growth in Chicagoland

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 payroll expansion this December -- likely confirmed in next week's employment report.

Tuesday, December 29, 2009

Mister Sunshine Predictions

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."

Monday, December 28, 2009

Christmas Week Data Points to Rosy 2010

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

Saturday, December 19, 2009

Texas Adds Nearly 70,000 Jobs

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 jobs growth rate by mid-2010.

Friday, December 18, 2009

Nasdaq Now Up Nearly 75% From 2009 Low

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.

Thursday, December 17, 2009

FedEx Reports Jump in Package Deliveries

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.

Wednesday, December 16, 2009

Fed Continues Upbeat Tenor

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."

Monday, December 14, 2009

Feasting on Dead Cat

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 bounce this high this fast...

(Click to enlarge chart)

Sunday, December 13, 2009

Consumers Are Driving Heady Q4 GDP

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.

Thursday, December 10, 2009

U.S. Trade Deficit Down; Exports Up

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.

Tuesday, December 8, 2009

Obama Jobs Plan Advances

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 inWashington on Tuesday.
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.

Monday, December 7, 2009

Bernanke Underscores Improving Financial Conditions

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.

Saturday, December 5, 2009

Obama's Brilliant Jobs Move

President Obama convened a "jobs summit" at the White House Thursday morning. It was likely one of the more brilliant moves of his presidency.

One of the most notable early promises from Obama was that the massive stimulus measure signed into law earlier this year would save or create 3.5M American jobs. The President and the White House have continued to defend that claim vigorously since stimulus spending began.

The biggest challenge for them has been that even though spending has reduced the number of jobs losses, net job losses have continued and thus the unemployment rate continued to rise... until this week.

For months business groups, financial blogs, labor leaders, think tanks and lawmakers were lining up to offer the President their ideas about creating jobs. The Left arguing that more spending is required, while those on the Right argue that the government intervention and spending programs have been wrong all along.

So why hold a "jobs summit," and underscore a 10.2% unemployment rate right at the dawn of an congressional election year? The move is brilliantly timed.

Based on the job loss data that we've been tracking here, we've said repeatedly that a return to net jobs growth will be real and measurable in the data by Christmas. This week showed more evidence that economic activity has now resumed to such a level that the unemployment rate has peaked, joblessness has started to fall, and jobs growth is now resuming.

So the timing could not have been better for Obama to go on record on Thursday: "We are going to be bringing together people from all across the country -- business, labor, academics, not-for-profits, entrepreneurs, small and large businesses -- to explore how we can jump-start the hiring that typically lags behind economic growth, but we don't want to wait. We want to see if we can accelerate it."

The summit came one day ahead of the government's latest jobs report, which showed job losses all but ended during November and that the unemployment rate is now starting to fall from its peak level of 10.2%. Congressional Democrats who have been bracing for a rough election year in 2010 (owing in part to the weak jobs market), could not be more pleased to see a trend line that now clearly points to jobs creation in the months leading up to those elections.

The $787 billion economic stimulus package has now conservatively saved more than one million jobs -- a point highlighted again by Vice President Joe Biden on Tuesday. And more projects are in the pipeline that will put Americans to back to work, including very exciting new infrastructure, Internet broadband, and high-speed rail initiatives.

As these new programs actually ramp up, as economic recovery continues to gain momentum, and as jobs growth resumes, Obama can now point to a stimulus plan that got the economy back on track, a TARP program that saved our large banks, and a December 2009 jobs summit that was the catalyst to employment creation in 2010. Perfectly timed.

Thursday, December 3, 2009

Beige Book Summary is the Best of 2009

On Wednesday the Fed released its summary of comments received from its 12 regional districts in the November time-frame. The notes represent a collection of comments from businesses and other contacts outside the Federal Reserve and does not necessarily represent the views of Federal Reserve officials.

The regional reports indicate that economic conditions continue to improve across the U.S. since the last report and in general represent the best economic reports of 2009.

The good news highlights are summarized below:

Boston--results show signs of improvement. Some firms are starting to hire or plan to do so next year. Most businesses expect the recovery to take hold in 2010.

New York--The economy has gotten better. No indications of significant price pressures. General merchandise retailers say sales have improved. Signs of a pickup in tourism in New York City. District auto dealers reported a rebound in sales.

Philadelphia--Manufacturers reported an increase in shipments. Retailers indicate sales have been rising.

Cleveland--Staffing firm representatives report an uptick in job openings across a swath of industries.

Richmond--Housing, retail and banking economic activity increased. The residential real estate sector continues to benefit from tax credits for home buyers.

Atlanta--A majority of retailers described activity as exceeding their modest expectations. Office, industrial markets, and commercial construction finally showed signs of bottoming out at low levels. The pace of layoffs has slowed.

Chicago--Economic activity is up. Business spending included an increase in temporary hires.

St. Louis--Economic activity showed signs of improvement. The sales outlook among the retailers for the rest of the year shows 58 percent of the retailers expect sales for the rest of the year to increase or remain unchanged over 2008 levels.

Minneapolis--Overall economic activity was up. Services, manufacturing, energy, mining and residential real estate actually saw moderate increases and consumer spending has stabilized. Labor markets showed signs of improvement.

Kansas City--The economy expanded modestly in October and early November. Retail sales increased and were expected to keep doing so. Manufacturing grew moderately. Residential real estate recovered further.

Dallas--Economic conditions have firmed over the past six weeks. Activity improved in several industries, such as high-tech manufacturing, paper, petrochemicals, staffing services, housing and energy.

San Francisco--Economic activity appeared to pick up modestly. Consumer demand showed signs of improvement. Agricultural producers reported stable sales. Demand for housing showed further modest improvement and banking contacts reported largely stable loan demand.

Overall the economic recovery continues to build momentum.

Tuesday, December 1, 2009

Dubai Fears Fade: Positive Economic Data Builds

What a difference a few days have made in the mainstream headlines.

Overblown concerns about Dubai defaults are quickly shifting to the into the shadows. On Tuesday clarity on the extent of the loan restructuring indicated that Dubai World likely would restructure debt worth $26 billion against earlier talk of a possible $59 billion default.

Moving to center stage was a string of economic good news on Monday and Tuesday.

To kick off the week, gains in new orders were the highlight of November's Chicago purchasers' report. Chicago's PMI rose nearly 2 points to 56.1 to indicate another strong month-to-month increase in the pace of overall business activity in that area of the country. New orders rose 1.4 points to a very strong 62.8. The Chicago survey includes both service and manufacturing segments of the economy in its report.

Contrary to a more gloomy consensus forecast, reports Tuesday showed a continued rebound for the auto sales even in the absence of government incentives. Sales of domestic-made vehicles came in at an 8.2 million annual rate in November, considerably above the 7.9 million rate in October.

On the retail front, Redbook reported strong results for the Nov. 28 shopping week. Redbook's year-on-year measure for the week is up 3.8 percent and week over week up 1 full percentage point! (That's 52% annualized). No doubt this is the strongest retail rate of the year and Redbook projects an exceptionally strong 5.2 percent rise in November vs. October. (That's a heady 62% annualized)

Indications in the manufacturing sector continue to point to strength with ISM's report showing continued momentum. The manufacturing new orders component of the index (the report's leading indication for future activity) continues higher to 60.3 for a 1.8 point gain. Acceleration in new orders and gains in backlogs show a healthy mix pointing to rising production and rising employment ahead. Employment continues much improved from earlier in the year, holding above 50 in November from October's very strong level of 53.1. You'll remember the past relationship between ISM's PMI and the overall economy. If the correlation to the PMI for November is annualized, it corresponds to a 3.9 percent increase in real GDP annually.

Then home sales reports were released. You may remember that existing home sales got a giant boost in October as speculation increased that the homebuyer's credit expiration would pull sales forward and then dip in subsequent months. But to the contrary Tuesday's report points to continued strength ahead. Pending home sales jumped nearly 4% in October adding to September's 6% gain. Year-on-year pending home sales are now up a robust 32%.

Then early Tuesday afternoon, Philadelphia Federal Reserve Bank President Charles Plosser gave his views on monetary policy. Plosser (like us) sees economic recovery to be a little more modest than many gloomy economists. Said Plosser, "Looking ahead to next year, I expect real GDP growth from the fourth quarter of this year to the fourth quarter of 2010 to be about 3 percent. I expect similar real GDP growth in 2011. These rates of growth are more modest than what some forecasters anticipate."

This economic recovery continues to build momentum. No surprise here.

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