The U.S. unexpectedly added 166k (consensus 85k) new jobs in October. This was the largest monthly increase since May, and is primarily due to a surprising increase in service sector labor demand. September's figure was revised down to 96k from the 110k originally reported. The unemployment rate held steady at 4.7%, after bottoming at 4.4% in March.
Factory payrolls fell -21k, a slight acceleration in job losses from the -17k of the prior month. Builders shed fewer jobs in October, -5k versus -14k the prior month. Retailers eliminated 21.5k jobs. Surprisingly, service industries, which include the finance sector (+2k in Oct), added 190k new jobs in October after growing by only 127k in September. Business service jobs grew by 65k, including 20k new temporary jobs, plus education and health grew by 43k and leisure/hospitality rose by 56k. The government added 36k jobs last month.
Wage growth slowed to only +.2% MoM and 3.8% YoY as the workweek held constant at 33.8 hours. Average hourly earnings for employees in October was $17.58. The manufacturing workweek fell to 41.2 hours from 41.3 hours in September, but overtime held steady at 4.1 hours for the third month in a row.
In contrast to the employer survey, the household survey showed a -250k loss of jobs. The only reason the unemployment rate didn't rise is because 200k people left the workforce last month. The labor force participation rate fell to 65.9%, and the share of companies hiring fell over 2% to 53.4% in October.
Friday, November 2, 2007
Thursday, November 1, 2007
Today's Tidbits
November 1, 2007 TIDBITS
Stock Market Tumbles, Lead by Financials
From AP: “Wall Street plunged Thursday, pulling the Dow Jones industrial average down more than 360 points as investors found themselves confronted by two uncomfortable prospects: an end to interest rate cuts and a slowing economy. Mindful of a warning from the Federal Reserve Wednesday about inflation, the market nervously watched the price of oil, which passed $96 a barrel overnight for the first time before dipping on profit-taking. The Fed, which cut interest rates a quarter point, said in a statement that inflation remained a concern, and oil's ascent to another record raised the possibility not only that the Fed might stop cutting rates, but that it might even consider raising them if inflation accelerates. Meanwhile, Wall Street also had to contend with concerns about a slowing economy. A report from the Commerce Department indicated consumers scaled back their spending in September as worries mounted about a worsening housing market and further credit market turmoil. And a trade group reported that manufacturing in the U.S. grew in October at the weakest pace since March.
The combination of factors led investors to pull back sharply from Wednesday's rally, in which the Dow climbed 137 points after the Fed said the economy had weathered the summer's credit crisis…Financial stocks were pummeled after Citigroup Inc. and Bank of America Corp., the two biggest U.S. banks, were downgraded by CIBC World Markets on worries about the credit markets. Investors pulling money out of stocks turned to the safe haven of the Treasury market. The yield on the 10-year Treasury note dropped to 4.34 percent from 4.47 percent late Wednesday.”
From Bloomberg: “U.S. stocks tumbled after analyst downgrades of Citigroup Inc. shares spurred speculation the nation's largest bank may have to shore up its capital, sending financial companies to their biggest drop in five years. Citigroup slid the most since 2002 after CIBC World Markets said its dividend may be cut and Credit Suisse Group reduced its rating. Bank of America Corp. had its steepest decline in four
years. Retailers fell, led by Target Corp., after consumer spending slowed more than economists forecast. The Standard & Poor's 500 Index lost 40.94, or 2.6 percent,
to 1,508.44, erasing about $369 billion of market value from the benchmark for American equities. Financial shares, this year's worst-performing industry, led the slide with a 4.6 percent retreat, the most since September 2002. The Dow Jones Industrial Average decreased 362.14, or 2.6 percent, to 13,567.87. The Nasdaq Composite Index slipped 64.29, or 2.3 percent, to 2,794.83. More than 13 stocks fell for every one that rose. ``There is more downside in financials,…We just don't know what the ultimate impact is going to be for all the subprime difficulties.'' The S&P 500 lost the most since Aug. 9.”
Mortgage Insurers Under Pressure As Concerns Rise About Sub-Prime Risks
From Dow Jones: “Derivatives traders see bond and mortgage insurers as speculative-
grade, or junk, companies, underscoring the market’s deepening uncertainty about their exposure to the subprime crisis. The credit default swaps of solidly rated investment-grade insurers such as Ambac, MBIA Inc. and PMI Group Inc. are trading 10 to 14 notches below the ratings assigned to them by Moody’s Investors Service, according to the agency’s implied ratings service. While the insurers generally trade lower than their agency ratings, the gaps widened even more after the companies posted dismal third-quarter earnings because of significant mark-to-market losses on their credit derivatives portfolios. Radian Group Inc. was the latest to report a third quarter loss due, and noted that the mortgage-insurance credit losses will continue to impact their results “for the foreseeable future.” Such losses are based on trading levels at the end of the quarter and don’t mean cash is actually flowing out of the company. The insurers say they only need to make payments in the event of an actual default of the securities they insure. “It remains to be seen how much they’re going to pay at the end of the day,” said Walter Schmidt, manager of structured product strategy at at FTN Financial Capital Markets.
Still, since the securities are so difficult to value, some insurers are “getting ahead of the curve” by writing down heavy losses, he said. The credit default swaps continued to widen Thursday, as the market braces for more losses related to subprime mortgages
that have rocked the financial world.”
End-of-Day Market Update
Three month T-Bill yield fell 11bp to 3.80%.
Two year T-Note yield fell 19 bp to 3.76%
Ten year T-Note yield fell 12bp to 4.35%
Dow fell 362 to 13,568
S&P 500 fell 41 to 1508
Dollar index rose .24 to 76.71
Yen strengthened by .79 yen to 114.65 per dollar
Euro fell .006 to 1.443
Gold fell $9 to $787
Oil fell $1.35 to $93.18, after reaching another all-time high of $96.24 overnight
*All market prices as of 4:55pm
Stock Market Tumbles, Lead by Financials
From AP: “Wall Street plunged Thursday, pulling the Dow Jones industrial average down more than 360 points as investors found themselves confronted by two uncomfortable prospects: an end to interest rate cuts and a slowing economy. Mindful of a warning from the Federal Reserve Wednesday about inflation, the market nervously watched the price of oil, which passed $96 a barrel overnight for the first time before dipping on profit-taking. The Fed, which cut interest rates a quarter point, said in a statement that inflation remained a concern, and oil's ascent to another record raised the possibility not only that the Fed might stop cutting rates, but that it might even consider raising them if inflation accelerates. Meanwhile, Wall Street also had to contend with concerns about a slowing economy. A report from the Commerce Department indicated consumers scaled back their spending in September as worries mounted about a worsening housing market and further credit market turmoil. And a trade group reported that manufacturing in the U.S. grew in October at the weakest pace since March.
The combination of factors led investors to pull back sharply from Wednesday's rally, in which the Dow climbed 137 points after the Fed said the economy had weathered the summer's credit crisis…Financial stocks were pummeled after Citigroup Inc. and Bank of America Corp., the two biggest U.S. banks, were downgraded by CIBC World Markets on worries about the credit markets. Investors pulling money out of stocks turned to the safe haven of the Treasury market. The yield on the 10-year Treasury note dropped to 4.34 percent from 4.47 percent late Wednesday.”
From Bloomberg: “U.S. stocks tumbled after analyst downgrades of Citigroup Inc. shares spurred speculation the nation's largest bank may have to shore up its capital, sending financial companies to their biggest drop in five years. Citigroup slid the most since 2002 after CIBC World Markets said its dividend may be cut and Credit Suisse Group reduced its rating. Bank of America Corp. had its steepest decline in four
years. Retailers fell, led by Target Corp., after consumer spending slowed more than economists forecast. The Standard & Poor's 500 Index lost 40.94, or 2.6 percent,
to 1,508.44, erasing about $369 billion of market value from the benchmark for American equities. Financial shares, this year's worst-performing industry, led the slide with a 4.6 percent retreat, the most since September 2002. The Dow Jones Industrial Average decreased 362.14, or 2.6 percent, to 13,567.87. The Nasdaq Composite Index slipped 64.29, or 2.3 percent, to 2,794.83. More than 13 stocks fell for every one that rose. ``There is more downside in financials,…We just don't know what the ultimate impact is going to be for all the subprime difficulties.'' The S&P 500 lost the most since Aug. 9.”
Mortgage Insurers Under Pressure As Concerns Rise About Sub-Prime Risks
From Dow Jones: “Derivatives traders see bond and mortgage insurers as speculative-
grade, or junk, companies, underscoring the market’s deepening uncertainty about their exposure to the subprime crisis. The credit default swaps of solidly rated investment-grade insurers such as Ambac, MBIA Inc. and PMI Group Inc. are trading 10 to 14 notches below the ratings assigned to them by Moody’s Investors Service, according to the agency’s implied ratings service. While the insurers generally trade lower than their agency ratings, the gaps widened even more after the companies posted dismal third-quarter earnings because of significant mark-to-market losses on their credit derivatives portfolios. Radian Group Inc. was the latest to report a third quarter loss due, and noted that the mortgage-insurance credit losses will continue to impact their results “for the foreseeable future.” Such losses are based on trading levels at the end of the quarter and don’t mean cash is actually flowing out of the company. The insurers say they only need to make payments in the event of an actual default of the securities they insure. “It remains to be seen how much they’re going to pay at the end of the day,” said Walter Schmidt, manager of structured product strategy at at FTN Financial Capital Markets.
Still, since the securities are so difficult to value, some insurers are “getting ahead of the curve” by writing down heavy losses, he said. The credit default swaps continued to widen Thursday, as the market braces for more losses related to subprime mortgages
that have rocked the financial world.”
End-of-Day Market Update
Three month T-Bill yield fell 11bp to 3.80%.
Two year T-Note yield fell 19 bp to 3.76%
Ten year T-Note yield fell 12bp to 4.35%
Dow fell 362 to 13,568
S&P 500 fell 41 to 1508
Dollar index rose .24 to 76.71
Yen strengthened by .79 yen to 114.65 per dollar
Euro fell .006 to 1.443
Gold fell $9 to $787
Oil fell $1.35 to $93.18, after reaching another all-time high of $96.24 overnight
*All market prices as of 4:55pm
Manufacturing ISM Slows to Near Stagnant Growth Level
Manufacturing ISM fell more than expected in October to 50.9 (consensus 51.5) from 52 the prior month. This indicates that manufacturing growth slowed, but did not contract. A reading below 50 indicates negative growth. This was the lowest reading in seven months. Sluggish demand growth is especially apparent for construction equipment, furniture and appliances, due to the housing slump.
New orders fell a point to 52.5, showing an accelerating pace of slowing over the past four months. Production slipped into contraction for the first time since January, posting a reading of 49.6 (down 5 points from the prior month). The backlog of orders also fell below 50, declining five points to 46. Inventory stockpiles are being replenished as the inventory index rose from 41.6 to 47.2. It is not clear if this is voluntary ( trying to buy before prices rise) or involuntary. Export orders remain a bright spot, expanding to 57 from 54.5. Imports fell to 47.5 from 53. Prices rose, as expected, mainly due to higher energy and commodity input costs.
Net, manufacturing is still growing, but at a very weak pace.
New orders fell a point to 52.5, showing an accelerating pace of slowing over the past four months. Production slipped into contraction for the first time since January, posting a reading of 49.6 (down 5 points from the prior month). The backlog of orders also fell below 50, declining five points to 46. Inventory stockpiles are being replenished as the inventory index rose from 41.6 to 47.2. It is not clear if this is voluntary ( trying to buy before prices rise) or involuntary. Export orders remain a bright spot, expanding to 57 from 54.5. Imports fell to 47.5 from 53. Prices rose, as expected, mainly due to higher energy and commodity input costs.
Net, manufacturing is still growing, but at a very weak pace.
Personal Income Growing Faster Than Spending Pushing Savings Rate Higher
Personal spending growth slowed below income growth in September. Personal spending rose +.3% MoM (consensus +.4%), with August's growth revised down to +.5% from the previously reported +.6% gain. Personal income has been growing at a faster pace, rising +.4% MoM (at consensus) in September, with August's level improved to +.4% from the originally reported +.3% MoM increase. Since spending grew more slowly than incomes, the savings rate improved to +.9% from +.8% in August.
The slowdown in spending is likely tied to consumer hesitation (or inability) to take on more debt as the housing market stumbles and credit conditions tighten. Over the past few years, each new dollar of GDP growth has been accompanied by an even fast rise in debt growth, as consumers have used the rising values of their homes as an easy way to borrow and access more funds for spending. This cycle is likely to begin breaking down as home prices depreciate. The consumer has been the engine of growth so far this decade, and accounts for over 2/3rds of GDP spending. So, a slow down in consumer consumption will be watched very closely. A survey released this morning indicates 41% of consumers expect to reduce holiday expenditures this year. This is the largest decline in 7 years.
PCE inflation figures came in as expected in September. Headline inflation rose from 1.8% YoY to 2.4% YoY in September as higher commodity prices, especially for oil feed through. Core PCE, which excludes food and energy costs, which are considered to be more volatile from month to month, rose +.2% MoM and held steady at +1.8% YoY. Annual changes in core PCE, at +1.8%, remain at the lowest level since Feb 2004, and within the Fed's perceived comfort band of 1-2% annual growth.
When adjusted for inflation, spending rose +.1% MoM in September, the smallest increase since June. This compares to a rise of +.6% MoM in August. Disposable income (income after taxes) increased +.4% MoM in September.
Over the past year, personal income has risen +6.8%, disposable income has risen +6.3%, and personal spending has risen +3.2%.
*********
Initial jobless claims were 327k last week, remaining near the elevated 330k level of the past few weeks. Continuing claims rose almost 60k, much more than expected. Consensus is for a gain of 81k jobs for Friday's change in non-farm payrolls.
The slowdown in spending is likely tied to consumer hesitation (or inability) to take on more debt as the housing market stumbles and credit conditions tighten. Over the past few years, each new dollar of GDP growth has been accompanied by an even fast rise in debt growth, as consumers have used the rising values of their homes as an easy way to borrow and access more funds for spending. This cycle is likely to begin breaking down as home prices depreciate. The consumer has been the engine of growth so far this decade, and accounts for over 2/3rds of GDP spending. So, a slow down in consumer consumption will be watched very closely. A survey released this morning indicates 41% of consumers expect to reduce holiday expenditures this year. This is the largest decline in 7 years.
PCE inflation figures came in as expected in September. Headline inflation rose from 1.8% YoY to 2.4% YoY in September as higher commodity prices, especially for oil feed through. Core PCE, which excludes food and energy costs, which are considered to be more volatile from month to month, rose +.2% MoM and held steady at +1.8% YoY. Annual changes in core PCE, at +1.8%, remain at the lowest level since Feb 2004, and within the Fed's perceived comfort band of 1-2% annual growth.
When adjusted for inflation, spending rose +.1% MoM in September, the smallest increase since June. This compares to a rise of +.6% MoM in August. Disposable income (income after taxes) increased +.4% MoM in September.
Over the past year, personal income has risen +6.8%, disposable income has risen +6.3%, and personal spending has risen +3.2%.
*********
Initial jobless claims were 327k last week, remaining near the elevated 330k level of the past few weeks. Continuing claims rose almost 60k, much more than expected. Consensus is for a gain of 81k jobs for Friday's change in non-farm payrolls.
Wednesday, October 31, 2007
FOMC Statement
U.S. Federal Open Market Committee Statement: Text2007-10-31 14:15 (New York)
Oct. 31 (Bloomberg) -- The following is the full text ofthe statement released today by the Federal Reserve:
The Federal Open Market Committee decided today to lowerits target for the federal funds rate 25 basis points to 4 1/2percent.
Economic growth was solid in the third quarter, and strainsin financial markets have eased somewhat on balance. However,the pace of economic expansion will likely slow in the nearterm, partly reflecting the intensification of the housingcorrection. Today's action, combined with the policy actiontaken in September, should help forestall some of the adverseeffects on the broader economy that might otherwise arise fromthe disruptions in financial markets and promote moderate growthover time.
Readings on core inflation have improved modestly thisyear, but recent increases in energy and commodity prices, amongother factors, may put renewed upward pressure on inflation. Inthis context, the Committee judges that some inflation risksremain, and it will continue to monitor inflation developmentscarefully.
The Committee judges that, after this action, the upsiderisks to inflation roughly balance the downside risks to growth.The Committee will continue to assess the effects of financialand other developments on economic prospects and will act asneeded to foster price stability and sustainable economicgrowth.
Voting for the FOMC monetary policy action were: Ben S.Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; CharlesL. Evans; Donald L. Kohn; Randall S. Kroszner; Frederic S.Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh.Voting against was Thomas M. Hoenig, who preferred no change inthe federal funds rate at this meeting.
In a related action, the Board of Governors unanimouslyapproved a 25 basis point decrease in the discount rate to 5percent. In taking this action, the Board approved the requestssubmitted by the Boards of Directors of the Federal Reservebanks of New York, Richmond, Atlanta, Chicago, St. Louis and SanFrancisco.
Oct. 31 (Bloomberg) -- The following is the full text ofthe statement released today by the Federal Reserve:
The Federal Open Market Committee decided today to lowerits target for the federal funds rate 25 basis points to 4 1/2percent.
Economic growth was solid in the third quarter, and strainsin financial markets have eased somewhat on balance. However,the pace of economic expansion will likely slow in the nearterm, partly reflecting the intensification of the housingcorrection. Today's action, combined with the policy actiontaken in September, should help forestall some of the adverseeffects on the broader economy that might otherwise arise fromthe disruptions in financial markets and promote moderate growthover time.
Readings on core inflation have improved modestly thisyear, but recent increases in energy and commodity prices, amongother factors, may put renewed upward pressure on inflation. Inthis context, the Committee judges that some inflation risksremain, and it will continue to monitor inflation developmentscarefully.
The Committee judges that, after this action, the upsiderisks to inflation roughly balance the downside risks to growth.The Committee will continue to assess the effects of financialand other developments on economic prospects and will act asneeded to foster price stability and sustainable economicgrowth.
Voting for the FOMC monetary policy action were: Ben S.Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; CharlesL. Evans; Donald L. Kohn; Randall S. Kroszner; Frederic S.Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh.Voting against was Thomas M. Hoenig, who preferred no change inthe federal funds rate at this meeting.
In a related action, the Board of Governors unanimouslyapproved a 25 basis point decrease in the discount rate to 5percent. In taking this action, the Board approved the requestssubmitted by the Boards of Directors of the Federal Reservebanks of New York, Richmond, Atlanta, Chicago, St. Louis and SanFrancisco.
Demand for schools and factories pushed construction demand back into positive growth/ Chicago Manufacturing Slows
Construction spending rose +.3% MoM (consensus -.5%) in September after seeing August's original gain of +.2% MoM revised into a loss of -.2% MoM. Construction contracted in June, July, and August, so this was the first gain in four months. Residential continues to contract, declining -1.4% MoM and -16.4% YoY in September. Non-residential growth accelerated to +1.8% MoM in September, and rose +16.7% YoY. Essentially, non-residential construction has offset the slack in homebuilding over the past year. Homebuilding fell for the 19th straight month.
Public non-residential construction had the largest gain last month of +2.1% MoM (+15.8% YoY) followed closely by private non-residential at +1.5% MoM (+17.4% YoY). Federal spending actually fell 7.9% MoM in September, but is up 12.4% YoY, which is lagging the +16.3% YoY gain in state and local spending.
Net impact on third quarter GDP will be minimal due to prior month revisions lower.
******************
Chicago Purchasing Managers Index unexpectedly dropped into contractionary territory in October, falling to 49.7 from 54.2 in September. This is the lowest level the index has been since last February, when companies were working through their inventory overhangs. It appears that companies are growing increasingly reluctant to invest in capital equipment as concerns rise about a slowing economy. Slowing auto and housing demand have been an especially heavy blow on the midwest, which specializes in vehicle production, including construction and agricultural equipment. Manufacturing represents about 12% of the U.S. economy.
While the new orders and production gauges both fell, with production falling over 10 points to 46.9. Prices paid surged to 74.7 from 59 the prior month, presumably due to surging oil prices. Employment also fell below 50, indicating contraction.
Public non-residential construction had the largest gain last month of +2.1% MoM (+15.8% YoY) followed closely by private non-residential at +1.5% MoM (+17.4% YoY). Federal spending actually fell 7.9% MoM in September, but is up 12.4% YoY, which is lagging the +16.3% YoY gain in state and local spending.
Net impact on third quarter GDP will be minimal due to prior month revisions lower.
******************
Chicago Purchasing Managers Index unexpectedly dropped into contractionary territory in October, falling to 49.7 from 54.2 in September. This is the lowest level the index has been since last February, when companies were working through their inventory overhangs. It appears that companies are growing increasingly reluctant to invest in capital equipment as concerns rise about a slowing economy. Slowing auto and housing demand have been an especially heavy blow on the midwest, which specializes in vehicle production, including construction and agricultural equipment. Manufacturing represents about 12% of the U.S. economy.
While the new orders and production gauges both fell, with production falling over 10 points to 46.9. Prices paid surged to 74.7 from 59 the prior month, presumably due to surging oil prices. Employment also fell below 50, indicating contraction.
First Look at Third Quarter GDP Indicates Surprising Acceleration in Growth
Third quarter real GDP was stronger that expected, growing +3.9% annualized (consensus 3.1%), and surprisingly, at a faster pace than the 3.8% growth in the second quarter. This was the strongest growth since the first quarter of 2006. The improvement was due to growing exports (+16%), and stronger than expected consumer spending and business investment. Residential construction remains a drag on growth, falling for the seventh consecutive quarter, and declining a further 20% in the third quarter. This is the initial estimate of third quarter growth, and the figure will be revised over the next two months as more data becomes available.
Personal consumption growth more than doubled from the prior quarter, increasing by 3% versus 1.4%, in spite of the tightening lending standards in the mortgage market. Consumer spending is expected to slow in future quarters, as declining home prices reduce wealth. Business investment grew 7.9% on increased purchases of business equipment and software, as well as continued demand for commercial construction projects (+12%). The 5.9% increase on business equipment was the largest in a year and a half, and indicates that capex continues to grow.
The smallest trade deficit since 2003 was achieved through growing export demand as the dollar weakens. Companies like GE have seen a surge in demand for power plant equipment, and similar products around the world as global growth remains robust. Inventory growth added +.4% to GDP.
The inflation report was a mixed bag. The headline deflator rose considerably less than expected at +.8% (consensus +2%), and down notably from the +2.8% pace of the second quarter. This drop is due to technical factors tied to how the government accounts for rising import costs (which are counted as a negative for this figure). But Core PCE rose to 1.8% annualized from 1.4% the prior quarter, and was higher than the 1.5% consensus estimate. The core PCE, which excludes food and energy prices, is considered to be the Fed's preferred gauge of consumer inflation because it is the broadest measure, covering both goods and services. Today's figure leaves year-over-year core PCE at +1.9%, and within the Fed's desired 1-2% growth band.
Employment cost index growth remains stable, growing at +.8% versus +.9% in the second quarter. Over the past year, benefits and wages and salaries have risen around 3.5%.
Fourth quarter GDP now estimated to be around 1.75%.
Treasury prices sold off following the report on expectations this improves to odds of the Fed remaining on hold today, and not cutting rates again immediately following their 50bp "pre-emptive " cut last month.
Personal consumption growth more than doubled from the prior quarter, increasing by 3% versus 1.4%, in spite of the tightening lending standards in the mortgage market. Consumer spending is expected to slow in future quarters, as declining home prices reduce wealth. Business investment grew 7.9% on increased purchases of business equipment and software, as well as continued demand for commercial construction projects (+12%). The 5.9% increase on business equipment was the largest in a year and a half, and indicates that capex continues to grow.
The smallest trade deficit since 2003 was achieved through growing export demand as the dollar weakens. Companies like GE have seen a surge in demand for power plant equipment, and similar products around the world as global growth remains robust. Inventory growth added +.4% to GDP.
The inflation report was a mixed bag. The headline deflator rose considerably less than expected at +.8% (consensus +2%), and down notably from the +2.8% pace of the second quarter. This drop is due to technical factors tied to how the government accounts for rising import costs (which are counted as a negative for this figure). But Core PCE rose to 1.8% annualized from 1.4% the prior quarter, and was higher than the 1.5% consensus estimate. The core PCE, which excludes food and energy prices, is considered to be the Fed's preferred gauge of consumer inflation because it is the broadest measure, covering both goods and services. Today's figure leaves year-over-year core PCE at +1.9%, and within the Fed's desired 1-2% growth band.
Employment cost index growth remains stable, growing at +.8% versus +.9% in the second quarter. Over the past year, benefits and wages and salaries have risen around 3.5%.
Fourth quarter GDP now estimated to be around 1.75%.
Treasury prices sold off following the report on expectations this improves to odds of the Fed remaining on hold today, and not cutting rates again immediately following their 50bp "pre-emptive " cut last month.
Monday, October 29, 2007
Weekly Economic Calendar October 29 – November 2, 2007
Monday, 10/29
No Data
Tuesday, 10/30
August S&P Case Shiller 20-City Home Price
Consensus Prior
YoY -4.2% -3.9%
October Consumer Confidence
Consensus Prior
99.4 99.8
Has fallen 12.2 points over past two months as credit conditions tightened and housing deteriorated
Recent stock market weakness also likely to negatively impact optimism
Expected to hover around lowest levels since hurricane Katrina in 2005
Final October Univ of Michigan weaker than expected
Wednesday, 10/31
October ADP Employment Change
Consensus Prior
60k 58k
Assume additional 20k for government jobs to equal non-farm figure
3rd Qtr Real GDP (Inflation Adjusted and Annualized)
Consensus Prior
3.1% 3.8%
Wider range of estimates than I normally see, some as high as 4%
Strong export demand helping offset weak housing market
Exports likely growing 2-3x faster than imports
Government and consumer consumption expected to grow
Business investment expected to slow to half of last quarter’s 11% pace
3rd Qtr Personal Consumption
Consensus Prior
3.1% 1.4%
Personal consumption likely to be robust, but residential construction expenditures likely to decline by another 15%
3rd Qtr Price Index
Consensus Prior
2% 2.6%
Because imports subtract from GDP, the 10% surge in import prices actually helps lower GDP prices
The gross domestic purchases deflator is expected to be higher at 2.1%
3rd Qtr Core PCE
Consensus Prior
1.6% 1.4%
Core inflation expected to fall to a 3.5 year low of 1.8% YoY, which is below the Fed’s forecast range for this year
3rd Qtr Employment Cost Index
Consensus Prior
+.9% +.9%
3rd qtr +1.1% average hourly earnings growth fastest pace in over a year
Benefits costs no longer declining
Wages and benefits each rising around 3.4% YoY
October Chicago Purchasing Manager
Consensus Prior
53 54.2
Risk of higher number as export and agricultural demand remains strong for construction machinery even as domestic residential market cools
September Construction Spending
Consensus Prior
-0.5% 0.2%
Non-residential no longer able to fully offset depressed housing demand
FOMC Meeting
Fed is in a tough spot. No cut would disappoint equity markets but leave room for a bigger cut later (if needed) and reduce expectations of automatic Fed bail-outs while helping support the weak dollar. A 50bp cut might indicate panic (recession fears). So, the consensus 25bp cut to 4.5% looks most likely, but there are a lot of supporters of the other two outcomes.
Everyone looking for a cut in the discount rate to “address financial plumbing risks”
Thursday, 11/1
Initial Jobless Claims
Consensus Prior
325k 331k
Continuing Jobless Claims
Prior
2530k
September Personal Income
Consensus Prior
0.4% 0.3%
Aggregate weekly payrolls increased in September
Average hourly earnings rose +.4%
September Personal Spending
Consensus Prior
0.4% 0.6%
Solid growth in non-auto spending expected
Savings rate expected to hold steady at .7%
September PCE Deflator
Prior
YoY 1.8%
Core PCE
Consensus Prior
MoM 0.2% 0.1%
YoY 1.8% 1.8%
Core PCE expected to increase slightly less than core CPI because of smaller weighting of owners equivalent rent in PCE
Medical costs expected to rise more slowly
October ISM Manufacturing
Consensus Prior
51.5 52
Prices Paid
Consensus Prior
63 59
Most regional surveys weakened
Watch new orders and export orders to gauge demand
Higher oil prices likely to feed through to higher prices paid
October Total Vehicle Sales
Consensus Prior
16M 16.2M
Domestic
Consensus Prior
12.3M 12.5M
Total auto sales weakened this year, ranging between 16.6M per month in January to 15.3M in July
Friday, 11/2
October Change in Non-Farm Payrolls
Consensus Prior
85k 110k
Manufacturing Change
Consensus Prior
-10k -18k
Three month average monthly growth 97k, 6m at 112k, and 12m at 136k
Housing market weakness hurting growth in construction, durable goods, and finance, which may accelerate employment losses in these sectors
State data indicates September’s figure may be revised lower
October Unemployment Rate
Consensus Prior
4.7% 4.7%
Unemployment rate has been steadily rising from 4.5% in June and 4.6% in July to 4.7% in September
Risk of continued rise to 4.8% as initial claims rise (historically a .3% gain in the unemployment rate has been a recession indicator)
October Average Hourly Earnings
Consensus Prior
MoM 0.3% 0.4%
Prior
YoY 4.1%
September grew an above trend +.4% MoM due to increases in transportation, warehousing and professional services which are not expected to continue
Annual growth should fall back to 4% versus Dec 2006 peak of 4.3%
October Average Weekly Hours
Consensus Prior
33.8 33.8
September Factory Orders
Consensus Prior
0.2% -3.3%
Durable goods orders fell -1.7% due to a 39% drop in defense purchases
Risk is toward a weaker number than expected for factory orders too
No Data
Tuesday, 10/30
August S&P Case Shiller 20-City Home Price
Consensus Prior
YoY -4.2% -3.9%
October Consumer Confidence
Consensus Prior
99.4 99.8
Has fallen 12.2 points over past two months as credit conditions tightened and housing deteriorated
Recent stock market weakness also likely to negatively impact optimism
Expected to hover around lowest levels since hurricane Katrina in 2005
Final October Univ of Michigan weaker than expected
Wednesday, 10/31
October ADP Employment Change
Consensus Prior
60k 58k
Assume additional 20k for government jobs to equal non-farm figure
3rd Qtr Real GDP (Inflation Adjusted and Annualized)
Consensus Prior
3.1% 3.8%
Wider range of estimates than I normally see, some as high as 4%
Strong export demand helping offset weak housing market
Exports likely growing 2-3x faster than imports
Government and consumer consumption expected to grow
Business investment expected to slow to half of last quarter’s 11% pace
3rd Qtr Personal Consumption
Consensus Prior
3.1% 1.4%
Personal consumption likely to be robust, but residential construction expenditures likely to decline by another 15%
3rd Qtr Price Index
Consensus Prior
2% 2.6%
Because imports subtract from GDP, the 10% surge in import prices actually helps lower GDP prices
The gross domestic purchases deflator is expected to be higher at 2.1%
3rd Qtr Core PCE
Consensus Prior
1.6% 1.4%
Core inflation expected to fall to a 3.5 year low of 1.8% YoY, which is below the Fed’s forecast range for this year
3rd Qtr Employment Cost Index
Consensus Prior
+.9% +.9%
3rd qtr +1.1% average hourly earnings growth fastest pace in over a year
Benefits costs no longer declining
Wages and benefits each rising around 3.4% YoY
October Chicago Purchasing Manager
Consensus Prior
53 54.2
Risk of higher number as export and agricultural demand remains strong for construction machinery even as domestic residential market cools
September Construction Spending
Consensus Prior
-0.5% 0.2%
Non-residential no longer able to fully offset depressed housing demand
FOMC Meeting
Fed is in a tough spot. No cut would disappoint equity markets but leave room for a bigger cut later (if needed) and reduce expectations of automatic Fed bail-outs while helping support the weak dollar. A 50bp cut might indicate panic (recession fears). So, the consensus 25bp cut to 4.5% looks most likely, but there are a lot of supporters of the other two outcomes.
Everyone looking for a cut in the discount rate to “address financial plumbing risks”
Thursday, 11/1
Initial Jobless Claims
Consensus Prior
325k 331k
Continuing Jobless Claims
Prior
2530k
September Personal Income
Consensus Prior
0.4% 0.3%
Aggregate weekly payrolls increased in September
Average hourly earnings rose +.4%
September Personal Spending
Consensus Prior
0.4% 0.6%
Solid growth in non-auto spending expected
Savings rate expected to hold steady at .7%
September PCE Deflator
Prior
YoY 1.8%
Core PCE
Consensus Prior
MoM 0.2% 0.1%
YoY 1.8% 1.8%
Core PCE expected to increase slightly less than core CPI because of smaller weighting of owners equivalent rent in PCE
Medical costs expected to rise more slowly
October ISM Manufacturing
Consensus Prior
51.5 52
Prices Paid
Consensus Prior
63 59
Most regional surveys weakened
Watch new orders and export orders to gauge demand
Higher oil prices likely to feed through to higher prices paid
October Total Vehicle Sales
Consensus Prior
16M 16.2M
Domestic
Consensus Prior
12.3M 12.5M
Total auto sales weakened this year, ranging between 16.6M per month in January to 15.3M in July
Friday, 11/2
October Change in Non-Farm Payrolls
Consensus Prior
85k 110k
Manufacturing Change
Consensus Prior
-10k -18k
Three month average monthly growth 97k, 6m at 112k, and 12m at 136k
Housing market weakness hurting growth in construction, durable goods, and finance, which may accelerate employment losses in these sectors
State data indicates September’s figure may be revised lower
October Unemployment Rate
Consensus Prior
4.7% 4.7%
Unemployment rate has been steadily rising from 4.5% in June and 4.6% in July to 4.7% in September
Risk of continued rise to 4.8% as initial claims rise (historically a .3% gain in the unemployment rate has been a recession indicator)
October Average Hourly Earnings
Consensus Prior
MoM 0.3% 0.4%
Prior
YoY 4.1%
September grew an above trend +.4% MoM due to increases in transportation, warehousing and professional services which are not expected to continue
Annual growth should fall back to 4% versus Dec 2006 peak of 4.3%
October Average Weekly Hours
Consensus Prior
33.8 33.8
September Factory Orders
Consensus Prior
0.2% -3.3%
Durable goods orders fell -1.7% due to a 39% drop in defense purchases
Risk is toward a weaker number than expected for factory orders too
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