Saturday, March 24, 2007

Just The Facts Please

Here are some interesting statistics from Larry Kudlow's latest show also posted from his blog Link Here

Kudlow's February's Facts that shows the "Goldilocks" economy is still in play:

- This week stocks had their best peformance in 4 years

- 152,000 jobs were created in the U.S. just slight below the last 6 mos average

- Industrial Production was up 1% last month alone

- Housing starts were up 9%

- The National Association of Realtors reported existing home sales were up 3.9% , the largest monthly gain in three years and the third consecutive monthly gain.

- The National housing affordability index is the most affordable in 2 years

Friday, March 23, 2007

California Job Market Keeps Rolling

For those of you who were ready to write off the California economy and job growth because of last months seasonal aberration wait........................................

Don't count your chickens before they hatch. The 5th largest economy in the world added 27,600 jobs last month for a total of 261,000 new jobs in the last twelve months. With all of those jobs, is it possible that we are near the end of the housing slump? Could a buyer's pent up demand bubble be forming from short term fear and pessimism due in part to media fear mongering? Time will tell................

For the Official Stats from the California Emplyment Development Department click Link Here

Wednesday, March 21, 2007

Time for the Fed to Cut

Memo to the Fed. Inflation is a lagging indicator, job growth is a lagging indicator. It's becoming obvious that the only thing that could derail this Goldilocks economy is an overzealous Fed worrying about non existent inflation. The last six months average of core inflation is 2%, well within the Fed's comfort level. For greater articulation read below........

Why the Fed Didn't Raise Interest Rates
Inflation is running above the levels that Bernanke has targeted, but he's holding off on hiking rates because of the risks

From Peter Coy - Businessweek 3/21/07

Imagine you're driving a car with a blacked-out windshield and a loose steering wheel. Now imagine that your car is the $13 trillion U.S. economy. That should give you some idea of what it feels like to be Federal Reserve Chairman Ben S. Bernanke. Yes, in a word: scary.

Bernanke and the other members of the Fed's Open Market Committee pleased the stock market Mar. 21 when they voted to keep the federal funds rate at 5.25%, and slightly softened their anti-inflation stance in the accompanying statement.....

...Accounting for Lag Time

Give credit to Bernanke: He still wants to get inflation back under 2%, but he's willing to let it happen a little more slowly than he expected when he took over as chairman in February, 2006.
The U.S. economy really is like that car with the blacked-out windshield (so you can't see ahead) and with loose steering (so there's a big delay between the time you turn the steering wheel and the time you get results).

Inflation, in particular, responds with a long lag to whatever the Federal Reserve does. It stays high for awhile even after the economy has begun to slow. If the Fed didn't compensate for the lag, it might oversteer and put the economy in a ditch. Recognizing that, Bernanke and the other FOMC members are willing to allow some extra time to see if the tightening to date, from a funds rate of 1% to a current rate of 5.25%, will gradually cool inflation.

The last recession shows how long you sometimes have to wait to see inflation finally fall. In the late 1990s, the Fed raised rates nearly two percentage points to stamp out inflation. But the first victim of the rate hikes was growth. The economy tipped into a recession in March, 2001. Even then inflation stayed stubbornly high. Core inflation excluding food and energy prices didn't fall below 2% until January, 2003, notes David Rosenberg, chief North American economist of Merrill Lynch (
MER). By then the Fed had already slashed interest rates more than five percentage points. A good thing, too—if the Fed had waited to cut rates until inflation had already fallen, the 2001 recession would have been much longer and deeper.

Wednesday, March 14, 2007

Subrime Bigger Hoax than Y2K?

Put me in the camp that agrees this subrime headline grabbing issue is a big hoax to get eyeballs and sell fear..........

Subprime concerns overblown, fund manager says
Shakeout will be 'most hyped disaster that never occurred since Y2K'

SAN FRANCISCO (MarketWatch) -- The shakeout in the subprime-mortgage business won't escalate into a disaster capable of undermining the U.S. housing market and the economy, the chief investment strategist at fund-management firm DWS Scudder said Monday. ...

The subprime sector is too small to have such a big impact, according to Robert Froehlich, who is chairman of the investor-strategy committee at DWS Scudder, a division of Deutsche Bank AG ....

...."For all this to occur, the subprime-mortgage collapse has to be big enough and important enough to set the wheels in motion. And the fact is that it isn't," he wrote in a market commentary Monday. "It will be the most hyped disaster that never occurred since Y2K."

....Froehlich said Monday that, like Y2K, investors are worrying too much about a subprime-fueled disaster that probably won't happen.

"The subprime-mortgage market is big, but it's not big enough to push the U.S. economy into a recession by causing a credit crunch," he added.

By Alistair Barr, MarketWatch

Read this story Link Here

Friday, March 09, 2007

Soft Landing or No Landing at all?

From the Wall Street Journal

U.S. Payrolls Grow by 97,000As Jobless Rate Slips to 4.5%

"U.S. payrolls expanded last month at their slowest pace in two years as a steep drop in construction payrolls offset strength in the service sector.

However, employment in previous months was revised higher, the unemployment rate fell and hourly wages posted a strong gain, suggesting that the economy remains in solid shape despite a recent spate of weak data. The jobs figures should dampen expectations of any Federal Reserve rate cut in the near term. Fed funds futures contracts have recently priced in a rate cut as early as the second quarter........

Nonfarm payrolls increased 97,000 in February after growing an upwardly revised 146,000 in January and 226,000 in December, the Labor Department said Friday. Last month's gain was the slowest since January 2005. Previous reports showed job growth of 111,000 in January and 206,000 in December.

The unemployment rate fell 0.1 point last month to 4.5%. Average hourly earnings increased six cents, or 0.4%, to $17.16. That was up 4.1% from a year earlier.

The February payroll gain was in line with Wall Street expectations of a 100,000 rise. Other parts of the report were stronger than expected, however. Economists had expected a 4.6% unemployment rate and 0.3% rise in wages.

The jobs data should ease fears that a recent soft patch in data will turn into a more pronounced downturn. Gross domestic product grew just 2.2% during the fourth quarter, and recent data have pointed to similar sub par growth in the first quarter as well. ..........."


Tuesday, March 06, 2007

California No. 2 for worldwide exports

From the Sacramento Business Journal

California set a record for its export sales in 2006, Northern California World Trade Center officials said Monday.

California exported merchandise last year valued at $127.7 billion, a 9.3 percent increase over 2005. The amount does not include export of services. The Golden State's four largest export sectors were computer products, machinery, transportation equipment and chemical products, the local trade group reported. Computer and electronic products came in with a value of $44.5 billion. Machinery was next with $14.8 billion and transportation equipment and chemical products followed with $13.5 billion and $8.6 billion, respectively.

California's top export markets were Mexico, Canada, Japan and China. Mexico held its top spot for California exports with sales of $19.6 billion. This was the first time Canada, with $14.2 billion, surpassed Japan in the state's export market rankings. Japan ranked third with $13.9 billion, and China finished fourth with $9.9 billion. Exports from California to China have nearly tripled since 2000, expanding from $3.5 billion. California is the top U.S. exporting state to China......

For rest of arcticle click Here

U.S. Wages Skyrocketing

Like past economic cycles strong economic and corporate growth leads to higher wage growth. So all the naysayers have relingquished first the "jobless recovery", and now the "unequal recovery" arguments that are going the way of the dodo bird.

Worker Productivity, Salaries Increase

Worker Productivity Jumps 1.6 Percent; Employee Wages, Benefits Climb 6.6 Percent

WASHINGTON (AP) -- The efficiency of workers rose at a modest pace in the final three months of last year, far below the gain originally estimated, while worker wages and benefits soared.

....The report showed that labor costs for each unit of output soared by 6.6 percent, far higher than the 1.7 percent increase initially reported.....

.....It was the biggest quarterly increase in labor costs since a 9.1 percent surge in the first three months of 2006. Both gains were attributed in large part to big bonuses paid to high-income workers....

Associated Press - By Martin Crutsinger, AP Economics Writer

Link to story here

Monday, March 05, 2007

Fed Officials Reiterate Confidence in U.S. Economy, Markets

From Bloomberg Financial News:

March 5 (Bloomberg) -- Federal Reserve officials reiterated the U.S. central bank's confidence in the economic outlook today and played down last week's decline in share prices.

The three officials, who all vote on interest rates this year, reinforced Chairman Ben S. Bernanke's message at a Feb. 28 congressional hearing that there's a ``reasonable possibility'' growth will pick up later this year.

....The Fed's expectations for growth have ``not materially changed,'' Fed Governor Randall Kroszner said in Washington. Governor Kevin Warsh said ``the U.S. economy continues to demonstrate extraordinary resilience, no doubt supported by the ability of financial markets to absorb substantial shocks.''

St. Louis Fed President William Poole said history may prove that last week's slump was ``hardly a wiggle in the value of equities.'' He added that financial markets indicate that investors, like the Fed, don't anticipate a recession.........

....``We do not see a recession on the horizon,'' Poole said to the Global Interdependence Center Abroad in Chile conference in Santiago, Chile today. He said the current slump in the housing industry has yet to affect the broader economy. ``We have seen little fallout from the end of the housing boom,'' he said. ....

By Steve Matthews and Anthony Massucci

Article Link Here

Saturday, March 03, 2007

CA and So Cal Job Market En Fuego

Job Market hot, hot, hot!

The California job market was even stronger than most thought in 2006. The state revised the job numbers and "found" an additional 70,000 jobs statewide to bring the revised total to over 274,000 jobs created in 2006. Especially buoyant was Los Angeles County and the ascent of high paying jobs.

Quotes from this morning's LA Times article
Link Here

"Southern California's job engine performed much better than previously believed last year, with a good portion of the growth in skilled, high-paying positions,....."

"..The sectors that grew the fastest in Los Angeles County, including accounting, scientific and technical consulting, and engineering, strained an already tight labor market for highly skilled, high-wage workers....."

"Overall, I see this revision as a very positive one for the future of where L.A. is going," he said. "I think the L.A. economy overall is still creating high-end jobs."

"Now you have the international trade sector going like a house on fire," Kyser said. "And it was an extremely strong year in travel and tourism

From LA Times 3/03/07
By Lisa Girion, Times Staff Writer

Thursday, March 01, 2007

The Prosperity Boom

Larry Kudlow discussed the "greatest story never told" in an Op Ed piece in today's Wall Street Journal. It's a great read.........

Link Here