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.

  
  

  
  

  
  
  

  Feel free to repost this story on your favorite social network...

  

  

• 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.

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• 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.

  Feel free to repost this story on your favorite social network...

  

  

• 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.

  Feel free to repost this story on your favorite social network...

  

  
• 
  

Cisco Joins Many Others: Recovery Is Gaining Momentum

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

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

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

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.

Colorado Governor: "Reason For Optimism"

An open letter from Colorado Governor Bill Ritter:

Here in Colorado, we're seeing encouraging signs of success and reason for optimism.

Last week we learned Colorado's unemployment rate has dipped to 7%, now nearly 3 full points below the national average of 9.8% -- and lower than all but a dozen states' unemployment rates.

We're still not out of the woods. Too many Coloradans are still struggling to find work, as businesses and families tighten their belts and adjust to the new economic reality. We continue to face a very difficult budget situation in the capitol. We're making tough choices from limited options, requiring everyone from state employees to those who rely on public services to make even more sacrifices in the months ahead.

While challenging, this new economic reality presents us with a fresh opportunity to think ahead, adapt and create new pathways to grow and prosper in the 21st Century.

That's why we're building New Colorado Partnerships that better connect government with businesses, schools, and our research facilities to invest in our people and attract the industries of tomorrow to Colorado. We're transforming government to keep pace with the rapid changes each Colorado business and family must face today, while making it tighter, more entrepreneurial, and more nimble to meet the challenges of these new economic times. We're offering tax incentives to businesses that create jobs in Colorado, providing access to capital, making revolutionary changes to improve our education system, and strengthening our public universities.

That's why Forbes.com and CNBC both rank Colorado among the top five states in which to do business. It's why Colorado schools are well-positioned to receive millions of dollars in federal "Race to the Top" funding. And it's why many experts believe our diverse economy will help Colorado emerge from the national recession sooner and stronger than other states.

Our bold strategy is already paying dividends, as last week's unemployment report confirms. We are setting an example for the rest of the nation to follow. The challenges ahead are great, but they are not impossible, and Coloradans have a reason for optimism.

Please join me to share this simple message of hope:

While unemployment continues to creep upwards of 10% or even 15% in other states, Colorado is open for business and attracting new jobs every day. This month alone, two major New Energy Economy companies -- SunRun and SMA Solar Technology -- have announced plans to open their doors and hire more than 700 new workers here in Colorado.

They join dozens of other new energy, aerospace, bioscience, and technology companies adding thousands of new jobs and forever re-orienting Colorado's economy to be more innovative, more prosperous, and more sustainable.

Government can't do everything, and our New Colorado Partnerships aren't the only reason companies and entrepreneurs are choosing to open their doors in Colorado. But government can do a lot to build a brighter future for families and businesses and help all of us achieve the Colorado Promise, and so long as I'm governor, it will.

Sincerely,

Bill Ritter, Jr.
Governor of Colorado

Q4 Growth Likely to be Stronger than Q3

Thursday we got another indication that the U.S. economy is returning to strong growth. The government's first estimate for the third quarter came in at a 3.5 percent annual pace.

Again most economists were wrong. The consensus was for only a 3.2% jump. In fact several analysts had actually lowered their estimates yesterday in advance of the report.

The quarter was the first to experience the positive effects of emergency government stimulus programs put in place earlier in the year.

Growth in consumer spending and confidence, which accounts for about 70 percent of the economy, contributed significantly to the rebound.

Purchases of durable goods, which include autos, jumped 22 percent, the biggest increase since 2001. The governments $3B Clunkermania program obviously contributed significantly to that huge durable goods jump. But what was perhaps more encouraging was the data that showed that even excluding sales, production and inventories of automobiles, the economy grew 1.9 percent in the quarter. The stimulus programs are acting as a catalyst and not just the only source of growth.

Many economists now agree that the recession ended earlier in the year. As we have said for quite sometime, when the National Bureau of Economic Research officially marks the recession's end, they will likely point to June 2009. And that prediction was made by professor Mark Hirschey back in November of 2008.

In the 3rd quarter, residential construction also jumped at a 23 percent annual rate. It was the first quarterly gain in almost four years and the largest jump since 1986.

The home-building market -- which as be ailing for several years -- surged as sales climbed, propelled in part by an $8,000 tax credit for first-time buyers. The credit (also part of the emergency stimulus past by the US government earlier this year) will likely be extended with the support of the majority of the Senate.

And Q3 earnings continue to be strong -- pointing to not only moderate growth in Q3 -- but extremely strong growth in Q4 and into 2010.

Amazon in particular has used the past year of recession to continue to decimate it's brick and mortar competition. Amazon, which is reorganizing the retail market value chain continues to produce strong results. “You should see more expansion in the categories we’re in, as well as more geographical expansion over time,” said Amazon's Chief Financial Officer Thomas Szkutak last Thursday.

In the overall manufacturing sector, total inventories in Q3 continue to drop precipitously. The only conclusion: factory production will need to keep pace with significant upward momentum.

As stockpiles decrease and demand continues to grow more factories will need to come back online quickly. The gains required to produce such output will now lead to a quick rebound in hiring.

In September, the unemployment rate likely reached it's peak and with growth now ramping significantly in the 4th quarter, overall job growth is just around the corner.

You'll remember that we warned back in August to not be surprised by robust Q3 growth. Don't be caught off guard again with Q4 growth that will prove to be even stronger.

A Jobless Recovery? Not this Time

Early this week a survey release by the National Association for Business Economics (NABE) provided new evidence that the U.S. recovery is solidly under way and will be sustained well into 2010. The best news of the survey is that now a majority of companies surveyed are planning to boost their payrolls this year and next.

For the first time in over a year, the percentage of businesses expecting to hire workers over the next half year exceeds the share that project more layoffs.

Additionally the majority of firms now foresee that they will spend more on new capital equipment in the next six months adding more fuel to the growing recovery in 2010.

The survey shows that companies are generally becoming more optimistic about the future. As initial claims for unemployment continue to fall, the survey results are one strong signal that a return to job growth for the US economy is just around the corner.

The NABE survey's select group of retailers, health-care providers, hotels, restaurants, finance firms, insurance companies, and real estate employers all forecast job growth in 2010.

Much of the fuel for optimism has come from much better than expected results in Q3. Earlier in the year many economists had forecast lackluster results for Q3, but most firms have smashed those meager expectations. Since the start of the third-quarter reporting period, 80 percent of the companies in the S&Ps 500 Index have released better-than-expected results, according to Bloomberg, First Call, and Thomson earnings data. As a percentage so far, that's the best quarterly showing in 16 years.

Not only are a majority of firms beating Q3 expectations, forecasting job creation, and upping capital expenditures, but every single company polled this month anticipates the economy will expand in 2010.

Surprise, surprise, surprise!

Buffett: "Enormous Progress"

This past week Warren Buffett said that it is now very clear that the low point in the US economy has already passed, with "enormous" progress being seen over the past year.

Buffett attributes much of the strong uptick to swift government action last fall and winter. The actions were paramount in keeping the economy from complete collapse.

"We made enormous progress since a year ago... What happened in September and October of 2008 will particularly be remembered for a long, long time," Buffett said in an interview with Business Wire CEO Cathy Baron Tamraz that was released late in the day Tuesday.

Buffett continued, "And while the governmental authorities malign things sometimes, they fortunately did some very right things, very important things. They did them properly, and they kept us from going over the cliff."

Senate Likely to Extend $8,000 Home-Buyer Tax Credit

Senate Majority Leader Harry Reid has proposed a new version of a popular home-buyer tax-credit extension. Folks close to the matter claim a vote on the proposal is coming shortly.

Another recent Senate alternative would continue the $8,000 credit for four months and then gradually phase it out after that. Current law has the credit expiring at the end of November.

The value of the credit would drop by $2,000 every quarter until it halted completely by the end of 2010.

The National Association of Realtors supports the extension of the credit though at least the first two quarters of 2010 to assure that recent new home sales is firmly on a recovery track. They claim that home-buying activity in that six-month period could be crucial for new stability in the housing market again.

On the contrary, the Reid proposal wouldn't be nearly as effective at stimulating home sales, Mr. Salvant said, because it would start winding down during the second quarter.

The debate comes as a Treasury auditor revealed this week that the Internal Revenue Service improperly issued millions of refunds related to the credit.

At a House panel hearing this week, an IRS official said it is reviewing 100,000 returns to determine if credits were paid appropriately. Given the popularity of the credit, however, experts say the allegations are unlikely to derail the push to extend it in some form.

Spurred on by the credit home sales have been recovering nicely in the past six months. On Friday home sales were report to jump significantly in September. Existing home sales rose 9.4 percent. The West was the strongest region, up 13.0 percent. In an extremely encouraging sign, supply on the market fell back sharply -- down 7.5 percent in the month. Supply is now at its lowest level in 2-1/2 years.

Q3 earnings continue to impress, major firms are surprising to the upside, and markets are continuing their break-neck bounce. With second half growth coming on strong, an extension of the tax credit can mean nothing but good news for the 2010 housing market.

Jobless Claims Decline for Seven Straight Weeks

Data release Thursday shows seven straight weeks of decline in the four-week moving average of initial claims for unemployment. The moving average is widely seen as the best gauge of underlying initial claims trending.

Additionally, the number of people collecting long-term unemployment benefits in the week ended October 10 dropped to the lowest since March. This measure has also trended lower for five straight weeks.

These two are clear signs that unemployment is close to peaking and that the October employment report will likely show improvement over Septembers report.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, also edged down to 4.5 percent in the week ended October 10 from 4.6 percent the prior week.

Another hopeful sign was that the number of mass layoffs, defined as job cuts involving at least 50 people from a single employer, fell by 129 to 2,561 last month.

Bad News Bears Battle Break-Neck Bounce

Phrases like dead-cat bounce, house of cards, stagflation, W-shaped, U-shaped, lackluster, sucker's rally, deflation spiral, run-away inflation, and great depression were all in their pronouncements.

The bad news bears have pointed to a fearful, unemployed consumer who has cut up her credit card, has no more savings, and a government that has only racked up more national debt -- the dollar is dead -- they claim.

But the Q3 business realities continue to paint a starkly different picture.

Stimulus programs are firing up. Inflation is under control. Manufacturing lines are back on-line. Equities are on a roll. Optimism is accelerating.

So what are the doomsters missing?

Here's what Barton Briggs (Managing Partner of Traxis Partners Investment Fund) writes in Newsweek:

"First and foremost, they are betting against America, the greatest entrepreneurial engine ever created. History says buy America when it's down. In addition, emerging economies may well be the new dynamo of growth. They now account for 35 percent of world GDP and are growing two to three times faster than the developed world. S&P 500 companies now collect almost 50 percent of their revenues from overseas, and almost half of that portion comes from these fast-growing developing countries. Another factor could be that stocks currently despite the rally are still deeply undervalued. The rule of thumb is that stocks should sell at a price/earnings ratio equal to 20 less the inflation rate. Assume S&P 500 operating earnings are $70 to $75 next year and inflation is 1 percent, you get a theoretical price far higher than the current level of 1060."

Not only will the second half of 2009 continue to be strong, but 2010 will likely reap the benefits of this new international growth dynamo. It will be interesting to see where and when the dead cat lands.