US Non-Farm payrolls came in at -20,000 jobs for April. The consensus was -80,000, matching the previous numbers for March.
Translation from EconoSpeak™ to regular English: The US economy had fewer layoffs for jobs that don’t involve working on a farm, the government or a private house, for the month of April than those in the towers of Wall Street expected. The data represents 80% of the workforce involved in the economy.
This is different from the job numbers from yesterday, where a private firm announced its research on announced layoffs. Yesterday’s data was far less broad, and focused on only announced cuts and primarily in the financial sector.
What does this all mean?
Well, it’s good that the numbers beat expectations, although this is the longest string of consecutive declines since Feb-June 2003. So there are pluses and minuses. The data will definitely add fuel to the camp who believe that we are near the end of the downturn, and that recovery is on the way. (via U.S. Bureau of Labor Statistics)
I don’t know why Kermit the Frog is the first thought that crossed my mind after reading that US consumer spending was up 0.4% for the month of March. Maybe it was because the news was positive. Maybe it’s because today has been stressful and I need a release. Probably I’m just going a little bit insane.
Anyhoo, The numbers are a bit exaggerated until you adjust for inflation. Taking inflation into account, spending increased just 0.1%
Consumption, for those who don’t remember their economics classes, is the biggest contributor to GDP. What will be really interesting is to see the spending numbers in June for the month of May. Those numbers will include the Government’s rebate cheques and the verdict will finally be out if they were of any use to the economy.
“Job cuts announced by U.S. employers increased 27 percent in April from a year earlier, reflecting the crisis in financial markets, according to a report by a private placement firm.
Firing announcements rose to 90,015 last month, the most since September 2006, from 70,672 in April 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today.” (Via Bloomberg)
There is no real surprise here. Financial firms are the hardest hit by the “Credit Crunch™” and have been announcing layoffs for the past few weeks. These jobs are very cyclical and workers are usually aware of the risk as the downside to the high salary.
If we begin seeing big increases in layoffs in core industies like manufacturing and retail, then there will be cause for alarm.
So much for that decoupling theory where Canada would not be affected as much as its American neighbors during this economic downturn. Canada posted a 0.2% negative growth GDP statistic for the month of February. Today, the US announced a small positive gain in GDP for their first quarter. Looks like the old adage that when the US economy sneezes, Canada catches a cold is true this time around.
All is not lost. This data reflects the state of the economy a couple of months ago, and the Bank of Canada has made a couple of big cuts since then. We’ll be keeping a close eye on Canada’s GDP to see if the trend continues, or if February was just a blip.
Breaking News Via Reuters:
-RTRS-U.S. FED CUTS BENCHMARK FED FUNDS RATE 1/4 POINT TO 2 PCT, DISCOUNT RATE 1/4 TO 2.25 PCT
-RTRS-FED SAYS UNCERTAINTY ABOUT INFLATION OUTLOOK REMAINS HIGH
-RTRS-FED SAYS READINGS ON CORE INFLATION SOMEWHAT IMPROVED, BUT ENERGY, COMMODITY PRICES UP
-RTRS-FED SAYS SOME INDICATORS OF INFLATION EXPECTATIONS HAVE RISEN RECENTLY
-RTRS-FED SAYS EXPECTS INFLATION TO MODERATE IN COMING QUARTERS
-RTRS-FED SAYS ENERGY, COMMODITY PRICES TO LEVEL OUT, PRESSURES ON RESOURCE UTILIZATION TO EASE
-RTRS-FED SAYS SUBSTANTIAL EASING OF POLICY, LIQUIDITY MEASURES SHOULD HELP PROMOTE GROWTH, MITIGATE RISKS
-RTRS-FED SAYS RECENT ECONOMIC ACTIVITY REMAINS WEAK, HOUSEHOLD, BUSINESS SPENDING SOFTENED FURTHER
-RTRS-FED SAYS FINANCIAL MARKETS REMAIN UNDER STRESS, TIGHT CREDIT, HOUSING DOWNTURN TO WEIGH ON GROWTH
US Gross Domestic Product grew at an annualized rate of 0.6 percent, beating the median forecast of 0.2 percent for the first quarter.
The news will do little to sway any decisions at today’s Federal Reserve policy meeting, where it is widely expected that a 25 basis point rate cut will arrive at the 2:15pm announcement.
There is much talk about what qualifies as a recession and whether you can technically have one if growth remains positive. All that is irrelevant. A recession is something that is felt. It is an atmosphere of uncertainty and worry. It is also very personable. You can feel in recession while your neighbor is in boom. Who cares if the GDP is positive/negative or if housing is up or down. All that matters is whether or not you’re stressed about your economic future when you’re laying in bed at night.
“Consumer confidence fell to a five-year low this month as Americans confronted the grimmest jobs outlook since late 2004, while data also showed a record drop in home prices in February.
Contributing to their slumping confidence in April, consumers expected that inflation would accelerate to a pace last seen in the early 1980s. The news cemented the prevailing view that the Federal Reserve, which is to open a two-day policy meeting later on Tuesday, would signal an end to its aggressive campaign of lowering interest rates.” (Via Reuters)
The fact that consumer confidence is at a 5 year low is not that alarming as it has been roughly six years since the last US downturn.
What is very interesting is that consumers are already thinking about high inflation similar to that of the 1980s. There hasn’t been any hard economic evidence that inflation is going to get out of control, although there are some warning signs that it *could* eventually happen in this cycle.
One thing is for certain, if consumers perceive inflation and are not confident, the stimulus cheques mailed out to millions of Americans will end up in bank accounts instead of the economy. Hindsight is beginning to make that decision look very irrelevant indeed.
US President Bush is currently holding a news conference addressing the US economy at the White House.
One of his main points was to call out Congress for blocking his proposals to address the (economic) problems.
He called on Congress to pass sensible and effective bills in order to keep the economy moving forward through focusing on energy, food prices, mortgage payment and student loans.
Bravo, Mr. Bush. In essence you have just stated that “I tried, you wouldn’t listen! So now it’s your problem Congress, deal with it!”. Energy, inflation, the housing mess & student loans are no longer the problem of the President. So what exactly will you be doing, Mr. Bush, for the next 8 months?
The chart on the left shows that rice prices are up. WAY WAY WAY UP. That’s more than 3X the price per tonne in the past few months.
Rice is the food staple of the world. More people eat rice than anything else. So when the price moves in such a material fashion, we should definitely be taking notice.
Rice, like oil, is used as an input for many goods (and we’re not just talking about Rice Krispies). With such a dramatic move, it won’t take long before prices for many products begin to move higher in tandem.
Crude oil prices are hovering close to $120/bbl, at record highs. With the low interest rates currently being pursued in North America, it is no longer a question of if we’ll see inflation, but how soon.
If we do begin to see inflation before the economy recovers, expect to hear a whole lot about Stagflation.
Here’s the good news: It looks like a bubble. Not a quick shock like in the 70s, but a bubble. A bubble just like Tech in the 90s. A bubble just like Real Estate from the past few years. Bubbles can last for years, but eventually will pop and bring relief to an inflated market. The only concern is how long will we have to suffer, and at what cost?
Reuters has an article on President Bush’s recent comments at a summit with Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon.
He said: “We’re not in recession, we’re in a slowdown”
This, ladies and gentlemen, is reason number #452 that Mr. Bush will go down in history as one of the worst US presidents.
Now, technically he’s right (ghastly, I know). The textbook definition of a recession is at least two quarters of negative growth in an economy. We’re not there yet, but all the signs on the road point are pointing to one, perhaps even a deep one.
The reason that this comment strikes me so hard, is the tone. He knows a recession is on the horizon. His advisers have shurley briefed him on that. He could have made a statement on things every day americans need to do in order to protect themselves during tough times. He could have made a statement calling for americans to rally and support the economy. Instead, he asked Congress not to raise taxes. That might be a good idea, but not an inspiring one.
