Let’s keep our eye on the ball. We have predicted more vigor than is expected for 2011 and given the reasons why. We can actually narrow that window to H1.
If we are right, discretionary spending will expand. Those whose income is linked to this sector may at this time purchase a case of medium priced champagne, to be traded for the finer stuff perhaps once odds approach 85%.
Samuelson once said that, “to be published is to be found out,” referring to economists’ terror of what most of us call a track record; you know, a plumber whose joints leak, a physicist who can’t get his measurements straight, a doc who tossed out the wrong organ. Most of us are held accountable. Not economists. We want to separate ourselves from this bunch, which is why we will regularly visit this topic, to see if we are right or wrong in our earlier prediction.
Let’s stay ahead of the crowd if we can; let’s close the pattern earlier than most. If we’re wrong, we’ll find out pretty quick and print the same in caps. For now, we reported that the last payroll report cooperated with our view. And the Inst. For Supply Management Oct reports for manuf and services were above expectations. And vehicle sales have blown through expectations. From Larry Kudlow, “According to Auto Nation CEO Mike Jackson, rising pickup sales show that small businesses and entrepreneurs are going to work.” Thank you very much.
Finally, we noted earlier that company earnings are surprising to the upside.
So we are set pretty well we think. We don’t know exactly what numbers the economy will print, and really don’t care. All we care is that results eclipse expectations, blow through conventional wisdom. This will cheer the consumer. So far so good.
Robert Craven
Tuesday, November 9, 2010
Friday, November 5, 2010
Today's Key Payroll Release
We noted earlier that the error to the consensus forecast, both for economic activity in general and for payrolls particularly, is to the weak side. That is, there will be more vigor ahead than expected. This will be the trend.
Today’s payroll release for Oct cooperated nicely. Payroll rose 161M vs expectations of +60M. Importantly, private sector jobs rose by 159M, the 10th straight monthly gain.
Also of note this am was that the average workweek (a leading indicator for new hiring) rose to 34.3 hours vs expectations of no change from 34.2. This is its highest level since Nov/08.
We’re no where near recovering all the lost jobs naturally; in fact, many will never be recovered. They’re history. But the economy is generating sustained, modest increases in employment folks, a near miracle considering the hindrances placed upon it by Obama and other levelers.
We need only to get past the lame duck Dem’s, many of whom will be up to no good.
Employers and consumers alike will be cheered by what they hear from the new Congress.
Robert Craven
Today’s payroll release for Oct cooperated nicely. Payroll rose 161M vs expectations of +60M. Importantly, private sector jobs rose by 159M, the 10th straight monthly gain.
Also of note this am was that the average workweek (a leading indicator for new hiring) rose to 34.3 hours vs expectations of no change from 34.2. This is its highest level since Nov/08.
We’re no where near recovering all the lost jobs naturally; in fact, many will never be recovered. They’re history. But the economy is generating sustained, modest increases in employment folks, a near miracle considering the hindrances placed upon it by Obama and other levelers.
We need only to get past the lame duck Dem’s, many of whom will be up to no good.
Employers and consumers alike will be cheered by what they hear from the new Congress.
Robert Craven
Monday, November 1, 2010
A Lesson From Abroad
If the masses were all fresh out of Econ 1-A, then Frank, Dodd, Clinton and Obama would have been hung by their thumbs for protecting the twins (Our Heart of Darkness), thus igniting a firestorm, one which came within an inch of consuming the world economy. If McCain could have made the point, he would have won.
But there is easier economic stuff that most of us now do understand; key among these - the massive spending to spark jobs; it was a flop.
Background: A few of us knew the stimulus would fail before the horse left the barn. Last year we called it a tragedy. These things don’t work; they can’t.
Recall that unemployment peaked at 9% two months after the Oct/29 crash, and then began to drift lower, down to 6.3% by June/30 when the first big federal intervention occurred. Within six months, the trend reversed and hit double digits in Dec/30. Hoover's interventions were followed by FDR's massive interventions and unemployment stayed in double digits for the rest of the decade.
BO got in the act and deja vu.
Most reasonable folk know the gov’t cannot and never has created jobs on net. We’ve explained just why in numerous past blogs. The left’s pandering helps out the unions big time, but not measured US unemployment.
However, others of the developed world are not so stupid, or in BO’s case, so cowardly. Chris Caldwell of the Weekly Standard notes that, “Germany has been scolded, even browbeaten, by Obama administration officials, from Treasury Secretary Timothy Geithner on down, for saving too much and spending too little. It has refused to stimulate its economy as the United States has done, on the grounds that the resulting budget deficits would not be sustainable and the policies themselves would not work.”
Germany got hit as bad or worse that we did, Q4' 08. But guess what? Germany is growing at roughly 9% / yr. It’s unemployment rate is 7.5%, the lowest in 18 years. Need we say more?
Kennedy had some idea, Reagan knew exactly - you inherit a recession, then cut taxes and stand back. Your job is to do what you know is right, to do your constitutional duty and to hell with the political consequences. As a leader, you’ve got to have courage to do this, to stand alone. BO didn’t.
Robert Craven
But there is easier economic stuff that most of us now do understand; key among these - the massive spending to spark jobs; it was a flop.
Background: A few of us knew the stimulus would fail before the horse left the barn. Last year we called it a tragedy. These things don’t work; they can’t.
Recall that unemployment peaked at 9% two months after the Oct/29 crash, and then began to drift lower, down to 6.3% by June/30 when the first big federal intervention occurred. Within six months, the trend reversed and hit double digits in Dec/30. Hoover's interventions were followed by FDR's massive interventions and unemployment stayed in double digits for the rest of the decade.
BO got in the act and deja vu.
Most reasonable folk know the gov’t cannot and never has created jobs on net. We’ve explained just why in numerous past blogs. The left’s pandering helps out the unions big time, but not measured US unemployment.
However, others of the developed world are not so stupid, or in BO’s case, so cowardly. Chris Caldwell of the Weekly Standard notes that, “Germany has been scolded, even browbeaten, by Obama administration officials, from Treasury Secretary Timothy Geithner on down, for saving too much and spending too little. It has refused to stimulate its economy as the United States has done, on the grounds that the resulting budget deficits would not be sustainable and the policies themselves would not work.”
Germany got hit as bad or worse that we did, Q4' 08. But guess what? Germany is growing at roughly 9% / yr. It’s unemployment rate is 7.5%, the lowest in 18 years. Need we say more?
Kennedy had some idea, Reagan knew exactly - you inherit a recession, then cut taxes and stand back. Your job is to do what you know is right, to do your constitutional duty and to hell with the political consequences. As a leader, you’ve got to have courage to do this, to stand alone. BO didn’t.
Robert Craven
Wednesday, October 27, 2010
Employment - 2011
We know, you’ve already begun to doze off. Don’t. Stick with us. You need to know this stuff; then come 2011, tell the kids or spouse it’s how you had it figured all along.
We noted in an earlier sketch that the error to the consensus forecast for near term economic activity is to the weak side, our view. That is, there will be more vigor than expected in 2011, particularly more vigor in payrolls.
Let’s take a look at where we are now. The Fed recently surveyed all 12 of its districts so we don’t have to. The Fed compiles this survey ahead of each FOMC meeting.
Here’s what the districts reported: Overall economic activity continued to rise, but at a modest pace. Manufacturing continued to expand with production and new orders rising in most districts. Consumer activity was up modestly; even travel and tourism picked up a bit. (Did we not just read discretionary activity - travel and tourism? I think we did!)
Vehicle sales were up a tad. Housing remained weak with most districts reporting sales below year ago levels. Same for commercial construction.
Prices of goods and services - mostly stable. Wage pressures were minimal. No surprise as we know the labor market is weak (thanks, BO) which naturally dampens wage pressures. But the weak labor market does not reflect weak employers. Read on.
Reported company earnings for Q3 are blowing through expectations, both consumer and industrial related (ex, MacDonald’s & Caterpillar). And it’s not just due to cost cutting; it’s also due to increased sales. Granted, much of the sales improvement is offshore, esp emerging markets, but fine, we’ll take that too.
Companies are hugely more efficient now than they were two years ago. But the changes they have made will in fact reduce the number of employees needed to get the job done. Why not? There are too many BO-imposed burdens attached.
We read from this week’s UK Telegraph, “This lack of investment in new jobs isn't because companies lack the resources. Corporate America, as in the UK, has an embarrassment of riches on its collective balance sheet. But having come through the crisis lean and mean, chief executives intend to stay that way.”
The Telegraph continues, “When it comes to investing, the risk and reward equation is skewed away from creating jobs and more towards buying rival companies to boost growth (while often cutting jobs) or buying back a company's own equity to enhance shareholders' returns and management's own share-based incentive schemes. After all, according to corporate America, what's the point of starting a business to create jobs when it will be weighed down by health care costs, taxes and red tape?” Thanks again BO.
And this is exactly where Nov/2 comes in. Given the seers are correct (recall Harry Truman holding up the copy of the Chicago Trib to know that they might not be) then we will have a great wave of fiscal conservatism sweep the country. Efforts to slash perhaps $100 bln from the federal budget will commence in January. And personal initiative will be celebrated as 1) tax cuts are maintained and 2) business tax cuts initiated. Next, the health heist will be repealed. Cap & trade, comatose anyway, will be sent to sleep with the fishes. Employer and consumer alike will be cheered by all of this.
In short, already healthy employers will see the risk of government interference, the risk of sudden change to their operating theater, sharply reduced. Jobs will follow.
Robert Craven
We noted in an earlier sketch that the error to the consensus forecast for near term economic activity is to the weak side, our view. That is, there will be more vigor than expected in 2011, particularly more vigor in payrolls.
Let’s take a look at where we are now. The Fed recently surveyed all 12 of its districts so we don’t have to. The Fed compiles this survey ahead of each FOMC meeting.
Here’s what the districts reported: Overall economic activity continued to rise, but at a modest pace. Manufacturing continued to expand with production and new orders rising in most districts. Consumer activity was up modestly; even travel and tourism picked up a bit. (Did we not just read discretionary activity - travel and tourism? I think we did!)
Vehicle sales were up a tad. Housing remained weak with most districts reporting sales below year ago levels. Same for commercial construction.
Prices of goods and services - mostly stable. Wage pressures were minimal. No surprise as we know the labor market is weak (thanks, BO) which naturally dampens wage pressures. But the weak labor market does not reflect weak employers. Read on.
Reported company earnings for Q3 are blowing through expectations, both consumer and industrial related (ex, MacDonald’s & Caterpillar). And it’s not just due to cost cutting; it’s also due to increased sales. Granted, much of the sales improvement is offshore, esp emerging markets, but fine, we’ll take that too.
Companies are hugely more efficient now than they were two years ago. But the changes they have made will in fact reduce the number of employees needed to get the job done. Why not? There are too many BO-imposed burdens attached.
We read from this week’s UK Telegraph, “This lack of investment in new jobs isn't because companies lack the resources. Corporate America, as in the UK, has an embarrassment of riches on its collective balance sheet. But having come through the crisis lean and mean, chief executives intend to stay that way.”
The Telegraph continues, “When it comes to investing, the risk and reward equation is skewed away from creating jobs and more towards buying rival companies to boost growth (while often cutting jobs) or buying back a company's own equity to enhance shareholders' returns and management's own share-based incentive schemes. After all, according to corporate America, what's the point of starting a business to create jobs when it will be weighed down by health care costs, taxes and red tape?” Thanks again BO.
And this is exactly where Nov/2 comes in. Given the seers are correct (recall Harry Truman holding up the copy of the Chicago Trib to know that they might not be) then we will have a great wave of fiscal conservatism sweep the country. Efforts to slash perhaps $100 bln from the federal budget will commence in January. And personal initiative will be celebrated as 1) tax cuts are maintained and 2) business tax cuts initiated. Next, the health heist will be repealed. Cap & trade, comatose anyway, will be sent to sleep with the fishes. Employer and consumer alike will be cheered by all of this.
In short, already healthy employers will see the risk of government interference, the risk of sudden change to their operating theater, sharply reduced. Jobs will follow.
Robert Craven
Wednesday, October 20, 2010
Forecasts
It is true that the crowd is usually looking in the wrong direction. This occurred Q4, ‘08, when most were expecting more of the same - the good times.
Now, the majority of forecasters (to whom the crowd looks for direction) expect more of the same once again; that is, a sluggish and weak economy. For those who do see a light at the end of the tunnel, most fear it’s a headlight, or a “double dip.”
Times have been tough on these folk, these forecasters. The Q4 ‘08 crisis rolled them over, flattening them into crow bait. Now they’re about to get up but are about to be flattened again, wrong again in their forecast.
Background:
Research analysts and economic scholars create a barrier of intimidating words (a favorite trick of Greenspan, perhaps the worst forecaster ever) to hide their insecurity. The fact is they don’t have any better idea than most of us. And the greater the uncertainty, the more their predictions seem to cluster, the forecasters shouting out together in the dark. Thus, when there is another unexpected major event, the more the consensus misses the mark.
Most economic forecasters are, well..... economists. But they’re not trained for the task. They’re trained to analyze, not forecast. They cannot sense intuitively. They invariably miss major turns in the road because they’re looking in the rear view mirror.
The error to the present consensus forecast is an under-estimation of economic vigor just ahead, our view.
In the present situation a great spark will be provided by the US masses, suddenly aware that they’ve been taken. That spark to be provided through the voting booth. This is not accounted for in forecasting models! Neither is the celerity with which the process will be accomplished, the overturning of BO’s agenda with the health heist first in line. Neither is the thoroughness in the de-lousing of an economy for two years contaminated by statists. All of this provides fire. Most see a rout by the Republicans but few understand the economic traction to come of it.
There is a malaise which has settled on this country. Reagan righted the last one. The majority will see to this one, and sooner than most expect.
Robert Craven
Now, the majority of forecasters (to whom the crowd looks for direction) expect more of the same once again; that is, a sluggish and weak economy. For those who do see a light at the end of the tunnel, most fear it’s a headlight, or a “double dip.”
Times have been tough on these folk, these forecasters. The Q4 ‘08 crisis rolled them over, flattening them into crow bait. Now they’re about to get up but are about to be flattened again, wrong again in their forecast.
Background:
Research analysts and economic scholars create a barrier of intimidating words (a favorite trick of Greenspan, perhaps the worst forecaster ever) to hide their insecurity. The fact is they don’t have any better idea than most of us. And the greater the uncertainty, the more their predictions seem to cluster, the forecasters shouting out together in the dark. Thus, when there is another unexpected major event, the more the consensus misses the mark.
Most economic forecasters are, well..... economists. But they’re not trained for the task. They’re trained to analyze, not forecast. They cannot sense intuitively. They invariably miss major turns in the road because they’re looking in the rear view mirror.
The error to the present consensus forecast is an under-estimation of economic vigor just ahead, our view.
In the present situation a great spark will be provided by the US masses, suddenly aware that they’ve been taken. That spark to be provided through the voting booth. This is not accounted for in forecasting models! Neither is the celerity with which the process will be accomplished, the overturning of BO’s agenda with the health heist first in line. Neither is the thoroughness in the de-lousing of an economy for two years contaminated by statists. All of this provides fire. Most see a rout by the Republicans but few understand the economic traction to come of it.
There is a malaise which has settled on this country. Reagan righted the last one. The majority will see to this one, and sooner than most expect.
Robert Craven
Sunday, October 17, 2010
November/2 - Implications
It is expected that we may all look for relief, for a break from the desultory polices of the far-left after Nov/2. That being the case, let’s consider the aftermath (leaving bond and equity prices, gold and the dollar to the seers).
Certainly major employers will be cheered as uncertainties and hindrances are removed, or appear likely to be removed. The more the odds increase in 2011 for this event, the more payroll will increase and the greater the transition from temporary to permanent help. That’s a good thing.
Next, US business investment spending (which for the last 2 qts has outpaced consumer spending, a good thing) will expand further because business confidence will grow. That’s a another good thing.
Next, consumer spending will increase. Recall that retail sales are not in the tank but have been fairly strong, considering. But consumers with a new job, or, at least relieved of the threat of higher near-term tax burdens might even buy a discretionary item or two or three, something they are not doing now.
Finally, major world credits will take note; most have come to understand that statism means failure. They learned the hard way and now they’re wondering what we’re up to, a one-time beacon now moving left as they’ve moved right?! Thanks to Obama they’ve lost respect.
Michael Boskin writes following the G-20 summit, “Obama was soundly rebuffed by Canadian Prime Minister Stephen Harper, Great Britain’s new prime minister, David Cameron, and German Chancellor Angela Merkel, among others, on his demand for additional fiscal stimulus (more government spending). They are instead pursuing fiscal consolidation...”
Once the paladin of free markets, once the world’s champion meritocracy we have become suddenly hostile to initiative and innovation, looking instead for bureaucrats, for levelers to plan our economy, and, as world leaders now predict, kill us with debt. Everyone else can see this is the road to serfdom except Obama. When his policies are thoroughly rejected Nov/2, when voters stop the damage and then look for repairs, foreign investors will once again flock to the US as a place for safe and sound investment. We will all prosper as a result.
Robert Craven
Certainly major employers will be cheered as uncertainties and hindrances are removed, or appear likely to be removed. The more the odds increase in 2011 for this event, the more payroll will increase and the greater the transition from temporary to permanent help. That’s a good thing.
Next, US business investment spending (which for the last 2 qts has outpaced consumer spending, a good thing) will expand further because business confidence will grow. That’s a another good thing.
Next, consumer spending will increase. Recall that retail sales are not in the tank but have been fairly strong, considering. But consumers with a new job, or, at least relieved of the threat of higher near-term tax burdens might even buy a discretionary item or two or three, something they are not doing now.
Finally, major world credits will take note; most have come to understand that statism means failure. They learned the hard way and now they’re wondering what we’re up to, a one-time beacon now moving left as they’ve moved right?! Thanks to Obama they’ve lost respect.
Michael Boskin writes following the G-20 summit, “Obama was soundly rebuffed by Canadian Prime Minister Stephen Harper, Great Britain’s new prime minister, David Cameron, and German Chancellor Angela Merkel, among others, on his demand for additional fiscal stimulus (more government spending). They are instead pursuing fiscal consolidation...”
Once the paladin of free markets, once the world’s champion meritocracy we have become suddenly hostile to initiative and innovation, looking instead for bureaucrats, for levelers to plan our economy, and, as world leaders now predict, kill us with debt. Everyone else can see this is the road to serfdom except Obama. When his policies are thoroughly rejected Nov/2, when voters stop the damage and then look for repairs, foreign investors will once again flock to the US as a place for safe and sound investment. We will all prosper as a result.
Robert Craven
Thursday, October 14, 2010
Retardant #1
We return to that primary retardant hampering this recovery. Those immune to economic cycles or those who may consider themselves so situated perhaps don’t care. For the rest of us, especially for those of us who depend on discretionary consumer activity for sustenance (restauranteurs, plastic surgeons, nurserymen) business is off; our guess, after our own crude survey - 40% vs H1, 2008 for this segment of the economy.
This is not a complex issue (although lefty economists want you to believe that it is). Banks are not the answer; they have nothing to do with it. Corporate liquidity in not a problem. Nor is consumer demand moribund; that won’t work for an excuse either. Of course they're not buying vacation homes or new plants or getting face lifts, that's for sure, but in fact consumers’ core retail spending is 4.8% ABOVE its year ago level, its tenth straight year-on-year increase. What’s that you say? Can’t be? Yes it can. It's spending on necessary items. Retail sales may be 3.5% below their 7/08 peak, but they’re not in the tank. Key - there is enough there to encourage employers.
So what is it? Simple. Major employers are unwilling to sign permanent help, even though they sense the demand, domestic and foreign. But it is only permanent employees who really spend $. There is no trickle down without them.
There are two reasons for the employers' reluctance: First, the very real burdens placed on the employer by Obama -something we and others have detailed endlessly. Next, and carrying even more horsepower, the major uncertainty that goes with a bona fide statist in the WH. Even the IMF senses BO’s fiscal recklessness. What might be next?
This conclusion is not ours (although most any fool could figure it out). No, we have it from the employers directly.
We can’t call every major employer although we have quoted the likes of Intel, GE and most recently, Federal Express. Their message is the same. But to gather more in just one call we spoke today to the owner of a major employment firm in CA, actually in Marin. This guy talks to the employers so we don’t have to. His business is booming, but, for temps only. And from every single major employer, from LA to Redding, Dem or Rep, the message is the same. Until BO’s agenda is reversed, we’re not doing a thing.
Now if this doesn’t tell you something folks then you live under a rock.
Most of these potential employers look as we do to Nov for relief. Anybody who owns a business - perhaps our nursery pals - had better hope they’re right.
Robert Craven
This is not a complex issue (although lefty economists want you to believe that it is). Banks are not the answer; they have nothing to do with it. Corporate liquidity in not a problem. Nor is consumer demand moribund; that won’t work for an excuse either. Of course they're not buying vacation homes or new plants or getting face lifts, that's for sure, but in fact consumers’ core retail spending is 4.8% ABOVE its year ago level, its tenth straight year-on-year increase. What’s that you say? Can’t be? Yes it can. It's spending on necessary items. Retail sales may be 3.5% below their 7/08 peak, but they’re not in the tank. Key - there is enough there to encourage employers.
So what is it? Simple. Major employers are unwilling to sign permanent help, even though they sense the demand, domestic and foreign. But it is only permanent employees who really spend $. There is no trickle down without them.
There are two reasons for the employers' reluctance: First, the very real burdens placed on the employer by Obama -something we and others have detailed endlessly. Next, and carrying even more horsepower, the major uncertainty that goes with a bona fide statist in the WH. Even the IMF senses BO’s fiscal recklessness. What might be next?
This conclusion is not ours (although most any fool could figure it out). No, we have it from the employers directly.
We can’t call every major employer although we have quoted the likes of Intel, GE and most recently, Federal Express. Their message is the same. But to gather more in just one call we spoke today to the owner of a major employment firm in CA, actually in Marin. This guy talks to the employers so we don’t have to. His business is booming, but, for temps only. And from every single major employer, from LA to Redding, Dem or Rep, the message is the same. Until BO’s agenda is reversed, we’re not doing a thing.
Now if this doesn’t tell you something folks then you live under a rock.
Most of these potential employers look as we do to Nov for relief. Anybody who owns a business - perhaps our nursery pals - had better hope they’re right.
Robert Craven
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