According to a new Bloomberg survey, the world wide CreditCrunch™ appears to be slowly fading away.

You might be wondering what the heck is this CreditCrunch? There has been a lot written on the subject, but not too much explained at a basic level. So here goes…..

The current issues with credit is that it has become more expensive. What does that mean? Well, essentially it means that the funding of lower credit investments have become more expensive. Why? Because people were afraid of risk and wanted only the safest investments. Treasury Bills (T-Bills).  Read more

Some curious US economic numbers were released this morning. April’s retail sales fell 0.2%, however, when excluding auto sales the number becomes an increase of 0.5%, beating forecasts calling for a 0.2% rise.

The first curious observation is that retail sales were up, even with the recent drop in consumer confidence numbers. This can partly be explained by strong sales in defensive retailers like Wal-Mart and Costco that were reported for the same period.

The second curious observation is not that car sales dropped, as that has to be a no brainer given gas prices and the auto industry’s snail pace at responding to changing market conditions.  It is that sales at filling stations also dropped. One would think that it would be very difficult to produce lower sales when your product is in-elastic and at record prices. This has to be the most compelling evidence that people are changing their driving habits. Specifically, they are driving less. Car companies should take note, as less driving will undoubtedly lead to even lower sales.

This will be a slow week on the economic front, as the only economic data out of Canada today is the release of data on the price of new homes in March. Prices rose 0.2% compared to a month earlier, matching economists’ expectations.

Year over year, new home prices are up 6.1%, a healthy number, although the market is appearing to slow down a bit as the increase this year is slightly lower than last year’s.

Overall this is good news. Continued strong sales in new homes will encourage developers to begin new projects, employing laborers and strengthening the economy. Eventually we’ll meet a point where we’d expect to see a decrease in sale prices as inventories of new homes pass the number of people looking to purchase them. This is normal in a market economy and there is no evidence to suggest the type of collapse that happened south of the border.

One of the classic indicators that determine if people believe they are in a recession is retail sales. This ties into consumer confidence and jobs data that help determine the health of the economy.

Today we learn that both Wal-Mart & Costco reported sales data that increased more than analysts estimated. How does this show that we’re in a recession? (or at least acting like we are)

When consumers believe that times are tough, they will make decisions that help them build an economic cushion. Luxury goods will be cut, frivolous spending reduced, and penny pinching will begin.

Where do consumers go to penny pinch? Wal-Mart & Costco!

These companies are often coined as defensive stocks because they tend to hold their own during economic downturns. People still need to consume, just at bargain prices.

So ultimately this shows that consumers are tightening their belts and therefore behaving as if times are tough. And that’s the bottom line, isn’t it? Do you need an economist of government official proclaim that you’re in a recession to feel it? No. All that maters is how you feel and currently, Americans clearly feel like they are.

Another day, another round of layoffs at an investment bank. Today’s casualties are the employees of UBS AG, a Swiss based bank that has come onto hard times.

The firm’s investment banking division lost $17.3 billion in the first quarter. You can bet that the majority of job cuts will be from that division.

The 5,550 jobs represent about 7% of UBS’s 83,800 worldwide employees. That number is actually less than the rumored 10% cut that was floating around the market yesterday.  

This newest round of layoffs brings the total reductions in the industry to over 53,000 since this whole mess began. There is still no sign that the credit market has turned around, so expect more cuts to come during the next few months.

With all the recent negative press on the economy, I’ll forgive you for not noticing that the Dow Industrial Average had a really good month in April. Super Really Good. 4.6% returns good.

May is not doing too shabby either. Two days into the month and the Dow is up 1.4%. Aren’t we supposed to be in the middle of a Bear Market with a looming recession? What gives??!?!

What gives is that prior to April, the market went down too much, too quickly, thereby attracting buyers. From October 1st to March 31st, the Dow tumbled almost 13%. That’s quite a haircut for a 6 month period. Based on where we are today, the market still needs another 8.3% in gains just to break even with October’s numbers.

So here’s the big question: Is this just a blip correction, or do we call out the bulls and shout recovery?

 Lets take a look at what we know based on data from the last few weeks:

- The US Federal Reserve has been slashing rates. This usually leads to a boost to stocks, as companies will be able to borrow for less, and consumer get access to cheaper money (so that they can spend it).

- Job numbers for the month of April weren’t as bad as expected. The results were a quarter of the street consensus.

- GDP also topped analysts expectations in April.

- Oil & Food prices continued to rise rapidly, with no real end in sight.

So overall there’s been more positive than negative economic news this past month. However, and this is a BIG however, the continued rise in oil and food prices can lead to high inflation, which can undo a lot of the positives from the past month.

The good news is that things aren’t so bad after all, but we’re not out of the woods yet.

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)

“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.

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.