Putting the Bow on a Positive 2010

U.S. retailers put a bow on a positive 2010 and registered their best performance in five years according to preliminary reports released on Monday.

Holiday sales jumped 5.5 percent as consumers returned to retailers across the board including high-end Macy’s Inc., Tiffany's. and Bloomingdale's.

Consumers were out in full forces at most every chain and also increased their spending on the Web. Their spending, which accounts for about 70 percent of the U.S. economy, is a further positive sign for a sustained recovery heading into 2011.

"Increasing confidence has freed up more money from savings," said Michael McNamara, a vice president at New York-based SpendingPulse. "We are seeing this momentum building and being sustained."

Apparel sales grew the fastest in the 50 days before Christmas, with an 11 percent gain, more than 10 times the pace of last year.

Reports just before Christmas showed that consumer confidence climbed in December to the highest level in six months and that U.S. jobless claims continue to fall with job openings on the rise.

TARP Payback Outlook Brightens Even Further

On Wednesday, taxpayers received additional paybacks from their investments in the Troubled Asset Relief Program (TARP).

General Motors Corp., which went public last month, repurchased it's preferred shares in the program to the tune of $2.1B.

Additionally, common shares held by the Treasury are now valued at nearly $17B based on GM's closing price of $33.61 on Wednesday. The Treasury continues to hold a stake of 500,065,254 shares of common stock in GM via the TARP program investment.

Monday's transaction is further evidence of the success of the $700B program that has now not only helped stabilize the U.S. Banking system, but also the U.S. auto industry.

The government investment -- which initially was viewed as a cost burden to U.S. taxpayers -- has now stabilized two large U.S. industries and has some analysts wondering if the investments might even turn a profit. Cost estimates over the last several months have the break-even gap narrowing nearly every month, with the last estimate closing to within $25 billion.

Holiday Retail Season Running At Strong Pace

Retail revenues probably rose in November for a fifth consecutive month as American shoppers began their holiday purchases. Reports later this week will show consumers are returning to the stores in greater numbers and spending more than in recent holiday shopping seasons.

The consensus among economists surveyed is for a 0.7 percent gain in November. That would follow a 1.2 percent October increase.

"The holiday season is running at a pretty strong pace," said Guy LeBas, of Janney Montgomery Scott LLC in Philadelphia. "There’s a broad-based uptick in sales helped by aggressive discounts."

The National Retail Federation has forecast November- December holiday sales will rise by 2.3 percent from a year ago, the most since 2006. A Bloomberg survey taken Dec. 2 to Dec. 8 showed economists raised projections for consumer purchases, the biggest part of the economy, to 2.6 percent for next year, up from their 2.3 percent estimate the prior month.

Retailers will also benefit from consumer confidence, which rose in December to the highest level in six months -- that according to the Reuters/University of Michigan report released last week.

"As we look at November into December, we see strength across the store," says Chief Financial Officer Carol Tome of Home Depot.

A strong holiday showing by retailers will be additional evidence that the U.S. economic recovery is starting to fire on multiple cylinders.

Average Household Net Worth Increased by over $10,000 in Q3

The average U.S. household net wealth worth rose by over $10,000 in the third quarter according to Federal Reserve data released on Thursday and an estimate on the number of total households in the U.S. Collectively that resulted in a net worth increased of $1.2 trillion dollars for all households.

The increase is largely due to financial investments such as stocks and mutual fund holdings and represents even more evidence that the U.S. economy is beginning to fire on multiple cylinders.

Job Openings On The Rise; Up 44% Since July 2009

Businesses and government advertised nearly 3.4 million jobs at the end of October, up about 12 percent from the previous month, the Labor Department said Tuesday in its Job Openings and Labor Turnover survey.

That reverses two months of declines and is the highest total since August 2008, just before the financial crisis intensified.

Overall, the number of advertised jobs has increased by about 1 million, or 44 percent, since the low point of July 2009, a month after the recession ended.

And the new job postings continue at a rapid rate. According to Job Search on CNN Money.com, 151,950 new jobs were added to the site on Wednesday alone.

And there are more positive signs for jobs... according to the Manpower Employment Outlook Survey for Q1 2011:

When seasonal variations are removed from the data, the Outlook is +9%, the most promising hiring expectations reported since Quarter 4 2008... U.S. employers have now expressed
a positive Outlook for five straight quarters.

Source (Manpower.com)

Income Tax Cuts, Unemployment Benefits, and Social Security Relief

A deal appears near with President Barack Obama and congressional leaders. The pending bill will essentially give U.S. taxpayers a pay raise which will in turn pump money into the recovering economy almost immediately. The deal will also boost the creation of hundreds of thousands of jobs over the next two years.

The big surprise in the legislation: a one-year 2% tax cut in Social Security withholdings. That cut alone will result in significant take-home upside for most wage earners.

Other income-tax cuts, that were set to expire at the end of 2010, will now remain for at least another year. Those cuts will continue to encourage small businesses to continue to hire as they have been in recent months.

The president and congressional leaders also agreed to extend benefits for the long-term unemployed for 13 more months. That aid had expired Nov. 30 and up to 2 million unemployed people would have run out of benefits by the end of the year.

One year examples for the extent of the cut in Social Security taxes
For worker earning $40,000 a year the Social Security tax cut will result in an additional $800 in take home pay next year. A employee earning $100,000 will take home $2,000 more.

And on the jobs front, the Center for American Progress predicts that extending the unemployment benefits through next year will generate an additional 520,000 jobs -- further undergirding an labor market that is steadfastly improving.

Democrats and Republicans Appear Likely to Extend Unemployment Benefits

Politicians went on Sunday talk shows and made it clear that both sides are ready to extend benefits to the unemployed -- no matter their party affiliation.

President Obama is pressuring both parties to extend unemployment insurance and it appears a Congressional deal could be reached this week.

"I think most folks believe the recipe would include at least an extension of unemployment benefits for those who are unemployed and an extension of all of the tax rates for all Americans for some period of time," said Republican Senator Jon Kyl of Arizona.

"Without unemployment benefits being extended, personally, this is a nonstarter," said Democratic Senator Dick Durbin of Illinois.

Durbin and Kyl were speaking on the CBS Sunday show "Face the Nation."

On CNN's "State of the Union" Republican Senator Orrin Hatch, R-Utah, said, "Let's take care of the unemployment compensation... We've got to do it. So let's do it."

The movement toward a possible compromise came after Republicans blocked Democratic efforts in the Senate on Saturday to extend the current tax rates on all but the highest income levels. Republicans prefer extending all the tax rates permanently, a prospect that also can't win legislative approval and that Obama would be sure to veto.

The debate comes amidst an 18-month recovery that is beginning to add jobs more quickly than any other recovery from recession in recent memory. But because of the depth of the recession just past, many in the U.S. continue to rely on government benefits as they seek to find permanent work as the recovery begins to fire on multiple cylinders.

Strong Retail, Healthy Housing Report Net Rising Stock Averages

Two new reports on Thursday added additional good news to that already reported Wednesday.

Strong retail sales and a healthy reading on the housing market further boosted investor confidence in a recovery that is finding its footing and starting to fire on many cylinders.

Monthly sales volumes from individual department, chain, discount, and apparel stores are usually reported on the first Thursday of each month. This month, that report registered a surge in retail sales for November. Gains appear across the spectrum of stores: big to small, high-end to low-end, general merchandise to apparel.

Year over year sales gains for these stores have now shifted from the low to mid single digit percentage gain to the mid to high single digit percentage gain. Today's results combined with yesterday's strong report for vehicle sales points to a U.S. consumer is solidly participating in the recovery.

And on the housing front, the pending home sales index jumped 10.4 percent in October to indicate gains ahead for existing home sales. The index at 89.3 is up 18 percent from its post-stimulus low in June. Low home prices and low rates appear to be stimulating demand. The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes.

In response to these additional pieces of good news, the Dow Jones industrial average rose 106 points. Combined with the 249-point gain Wednesday, the index has now had its best two-day run since July 7-8.

Where the market will go from here and the stock market trend in 2011, is of course anyone's guess.

U.S. Recovery Now Firing on Multiple Cylinders

Many reports out on Wednesday point to a U.S. recovery that is exhibiting healthy signs on many different fronts.

Motor vehicle sales are now enjoying a strong run. U.S.-made vehicle sales held unchanged in November at a 9.1 million unit annual rate. The results surprised many recovery skeptics who were calling for a fizzle in November. Anecdotal reports on used car sales point to strength as do indications on sales at auto-parts retail chains. Motor vehicle sales make up 18 percent of total retail sales.

Private-sector employment increased by +93,000 from October to November on a seasonally adjusted basis, according to the latest ADP National Employment Report released today. The best news in the report shows that small businesses (the heart of job producers) actually accounted for more than half of the net additions. (+54,000) The report bodes well for the government's report released later this week which will also include government job additions. Some analysts now believe net additions in November may have reached close to +200,000 jobs for the month.

Manufacturing continues to grow at a healthy pace, according to the ISM report for November. The growth has now been persistent for 16 straight months with the sector now adding jobs for 12 straight months.

Construction spending surprisingly jumped in October, rising 0.7 percent, following a 0.7 percent rebound the month before. The market expectation was for a 0.4 percent decrease. Strength was in multifamily housing. (Also a surprise to many)

The Beige Book prepared for the December 14 Fed meeting gave the economy a modest upgrade.
Quotes included:

- Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries. Reports also showed steady to increasing activity for professional and nonfinancial services.

- Retail spending showed improvement across most Districts.

- Lending activity is picking up somewhat for businesses in most Districts.

- Hiring activity showed some improvement across most Districts.

- Inflation remains subdued.

The Economic Cycle Research Institute, ECRI, a New York-based independent forecasting group, upgraded their projection for future economic growth. Earlier in the week, ECRI's managing director and cofounder, Lakshman Achuthan, was on CNBC Monday to discuss the enhancement of their Oct 28, 2010 prediction. Last month the Institute declared that "The much-feared double-dip recession is not going to happen". This month they go several steps further to say:

- There will be a revival of US Economic growth in the near future.

- When you are at this stage of the [recovery] cycle, a shock won't derail us and put us into a new recession.

- In October they said "no second recession." Now they are saying economic growth is likely to accelerate to a 3-4% annualized rate.

Achuthan went on to indicate that although we are a long way off from recovering the 8.5M jobs lost in the recession, the economy has now added back 1M and we are on track for to begin to see significant job gains again.