http://www.nytimes.com/2013/03/31/your-money/a-muted-recovery-may-mean-a-longer-bull-market.html?ref=business
***************
"You are today where your thoughts have brought you. You will be tomorrow where your thoughts take you." (James Allen)
***************
So, on Thursday, at the end of a trading week shortened by the Good Friday holiday, the S&P 500 Stock Index closed at a record high. According to Paul Lim, the current "Bull Market" turned 4 years old this month.
This usually means a "market correction" except that the average bull market "peak" since WW II saw GDP growth at an average annual rate of 4.2%. That does not correlate with the most recent GDP growth rate of .4%.
Market peaks also tend to show other characteristics like unemployment falling below 5%. Well, that doesn't work either since the current rate is at 7.7%. The Fed has a goal of keeping interest rates practically non-existent until the unemployment rate hits 6.5%. Normally, it's the Fed that kills bull markets by raising interest rates.
U.S. consumers increased spending in February. More spending by consumers should boost economic growth in the January thru March quarter. After seeing Friday's report on consumer spending, Paul Ashworth, chief U.S. economist at Capital Economics, raised his growth forecast for the first quarter by a full percentage point. Ashworth now expects U.S. growth in the first quarter to increase at an annual rate of 3%.
Happy Easter!
Saturday, March 30, 2013
Friday, March 22, 2013
The Invisible Boom
http://www.nytimes.com/interactive/2013/03/22/business/The-Invisible-Boom.html?_r=0
***************
"The truth is that you can spend your life any way you want, but you can spend it only once." (John C. Maxwell)
***************
Housing starts are rising at the fastest rate in more than 25 years. But, the level is so low that the gains are having only a minor impact on the economy: the number of new homes on the market remains at historical lows.
So, good news in the bad news. And, the direction is dramatically "up" for the good news.
Over the last 12 months, 551,000 single-family units were started, and an additional 255,000 multifamily units. As shown in the charts attached, that was an increase of 28% from a year earlier. That's good but it needs to keep going.
Some of the top economists from Moody's Analytics were in Dallas yesterday and their perspective was that the housing rebound will counterbalance the effects of the Washington budget problems and the European debt issues. They also indicated that Texas would "continue" to outperform the rest of the country when it comes to adding jobs and economic growth.
Moody's predicts that economic growth will remain modest nationwide in 2013 before ramping up next year. They are more positive about the economy in 2014 & 2015 in large part due to the housing market.
Mark Zandi, the Moody's economist most well known for having predicted the overheated housing market and the worldwide recession, now is very positive about housing and the economy. He says of himself that he is more "optimistic than the consensus" (of economists). He sees record corporate profits and a resurgence in the housing market as supportive of increased consumer confidence.
Now, we just need to watch the Fed. And, the Fed is watching the unemployment rate. Money stays "easy" until the unemployment rate gets down to 6.5%. Then, interest rates start up. We'll see what happens then.
***************
"The truth is that you can spend your life any way you want, but you can spend it only once." (John C. Maxwell)
***************
Housing starts are rising at the fastest rate in more than 25 years. But, the level is so low that the gains are having only a minor impact on the economy: the number of new homes on the market remains at historical lows.
So, good news in the bad news. And, the direction is dramatically "up" for the good news.
Over the last 12 months, 551,000 single-family units were started, and an additional 255,000 multifamily units. As shown in the charts attached, that was an increase of 28% from a year earlier. That's good but it needs to keep going.
Some of the top economists from Moody's Analytics were in Dallas yesterday and their perspective was that the housing rebound will counterbalance the effects of the Washington budget problems and the European debt issues. They also indicated that Texas would "continue" to outperform the rest of the country when it comes to adding jobs and economic growth.
Moody's predicts that economic growth will remain modest nationwide in 2013 before ramping up next year. They are more positive about the economy in 2014 & 2015 in large part due to the housing market.
Mark Zandi, the Moody's economist most well known for having predicted the overheated housing market and the worldwide recession, now is very positive about housing and the economy. He says of himself that he is more "optimistic than the consensus" (of economists). He sees record corporate profits and a resurgence in the housing market as supportive of increased consumer confidence.
Now, we just need to watch the Fed. And, the Fed is watching the unemployment rate. Money stays "easy" until the unemployment rate gets down to 6.5%. Then, interest rates start up. We'll see what happens then.
Thursday, March 14, 2013
Why Technology Is No Longer Creating Jobs
http://knowledge.wharton.upenn.edu/article.cfm?articleid=3211#.UUHA34mR40w.email
***************
"Good thinkers are always in demand. A person who knows how may always have a job, but the person who knows why will always be his boss." (John C. Maxwell)
***************
In an article published yesterday, "K@W" recounts the result of a recent panel discussion involving four prominent economists assembled to explore the link between technology and job creation: the consensus outlook was "bearish."
Quoting Eric Brynjolfsson (a professor at MIT's Sloan School of Management and director of the MIT Center for Digital Business): he "...compared the market capitalization and payrolls of four of the biggest tech companies. His conclusion: While the companies had astronomical values on Wall Street, their job production was minimal...The four -- Apple, Amazon, Facebook and Google -- at the time had a market cap in the neighborhood of $1 trillion, which is roughly 6.25% of the combined market cap of all U.S. companies. But the four employ about 190,000 people, fewer than the number of jobs the U.S. economy needs to add approximately every six weeks to just keep pace with population growth." The implication is that "...even hugely successful tech companies cannot be counted on to create the kinds of jobs the economy needs."
One of my favorite concepts is "creative destruction." It's from Joseph Schumpeter, an economist who created that term long ago. His idea was that technology causes some jobs to disappear while bringing others into existence, but, quoting Brynjolfsson again: "...the last 10 years have been different. Technology simply hasn't been creating jobs as it did before...It's a double-barreled effect ... Not only are today's technology companies creating fewer jobs, but the products they make, notably computerized automation equipment, often lead to further job losses in other parts of the economy. These second-effect job losses are further encouraged by off-shoring and the declining power of labor unions."
I might add here that there is also "creative non-destruction" which is a term I use to describe government regulators who want to intervene to keep proposed mergers from happening because the combination might cause "monopolistic" behavior. How about price optimization and productivity improvement which, incidentally, helps everybody?! Of course, government regulators have a tendency to practice "Zombie Economics" which emphasizes such principles as: there should be a certain "number" of companies in any industry otherwise it's a "de facto" monopoly situation. Check the American/U.S. Airways merger where the new company will be told it has to get rid of certain "routes" or the government will fight the deal.
Michael Chui, another participant in the Wharton conference, and a key player at the McKinsey Global Institute, said that "employment transparency" has become a crucial issue for college students attempting to pick a field of study: "They need to know where the jobs of tomorrow are likely to be, but the data is not available to them during the period of their lives when they are making decisions that will weigh most heavily on their career options."
Chui went on to make a couple of other crucial points: he said the U.S. needs to increase the number of college graduates studying science, technology, engineering and mathematics, the so-called "STEM" curriculum: "More than 40% of China's college population are in a STEM field, and the figure in Germany is 28%. But in the United States, it's 15%." Further, "Even within STEM ... priorities may need to be re-adjusted. For example, a traditional elite education typically includes a healthy dose of calculus. But perhaps statistics should receive more attention because of the need for future managers to be able to more intelligently use the huge mountains of data now being routinely collected by businesses."
Wharton does an exceptional job of summarizing the discussions at this conference and I will be spending time reviewing a new book by Enrico Moretti (an economics professor at the University of California, Berkeley), one of the panelists, called The New Geography of Jobs where he breaks down the labor markets in the United States into winners, losers and fate yet to be determined.
The bottom line is that these people are coping with the future and the article is worth reading!
***************
"Good thinkers are always in demand. A person who knows how may always have a job, but the person who knows why will always be his boss." (John C. Maxwell)
***************
In an article published yesterday, "K@W" recounts the result of a recent panel discussion involving four prominent economists assembled to explore the link between technology and job creation: the consensus outlook was "bearish."
Quoting Eric Brynjolfsson (a professor at MIT's Sloan School of Management and director of the MIT Center for Digital Business): he "...compared the market capitalization and payrolls of four of the biggest tech companies. His conclusion: While the companies had astronomical values on Wall Street, their job production was minimal...The four -- Apple, Amazon, Facebook and Google -- at the time had a market cap in the neighborhood of $1 trillion, which is roughly 6.25% of the combined market cap of all U.S. companies. But the four employ about 190,000 people, fewer than the number of jobs the U.S. economy needs to add approximately every six weeks to just keep pace with population growth." The implication is that "...even hugely successful tech companies cannot be counted on to create the kinds of jobs the economy needs."
One of my favorite concepts is "creative destruction." It's from Joseph Schumpeter, an economist who created that term long ago. His idea was that technology causes some jobs to disappear while bringing others into existence, but, quoting Brynjolfsson again: "...the last 10 years have been different. Technology simply hasn't been creating jobs as it did before...It's a double-barreled effect ... Not only are today's technology companies creating fewer jobs, but the products they make, notably computerized automation equipment, often lead to further job losses in other parts of the economy. These second-effect job losses are further encouraged by off-shoring and the declining power of labor unions."
I might add here that there is also "creative non-destruction" which is a term I use to describe government regulators who want to intervene to keep proposed mergers from happening because the combination might cause "monopolistic" behavior. How about price optimization and productivity improvement which, incidentally, helps everybody?! Of course, government regulators have a tendency to practice "Zombie Economics" which emphasizes such principles as: there should be a certain "number" of companies in any industry otherwise it's a "de facto" monopoly situation. Check the American/U.S. Airways merger where the new company will be told it has to get rid of certain "routes" or the government will fight the deal.
Michael Chui, another participant in the Wharton conference, and a key player at the McKinsey Global Institute, said that "employment transparency" has become a crucial issue for college students attempting to pick a field of study: "They need to know where the jobs of tomorrow are likely to be, but the data is not available to them during the period of their lives when they are making decisions that will weigh most heavily on their career options."
Chui went on to make a couple of other crucial points: he said the U.S. needs to increase the number of college graduates studying science, technology, engineering and mathematics, the so-called "STEM" curriculum: "More than 40% of China's college population are in a STEM field, and the figure in Germany is 28%. But in the United States, it's 15%." Further, "Even within STEM ... priorities may need to be re-adjusted. For example, a traditional elite education typically includes a healthy dose of calculus. But perhaps statistics should receive more attention because of the need for future managers to be able to more intelligently use the huge mountains of data now being routinely collected by businesses."
Wharton does an exceptional job of summarizing the discussions at this conference and I will be spending time reviewing a new book by Enrico Moretti (an economics professor at the University of California, Berkeley), one of the panelists, called The New Geography of Jobs where he breaks down the labor markets in the United States into winners, losers and fate yet to be determined.
The bottom line is that these people are coping with the future and the article is worth reading!
Friday, March 8, 2013
Job Creation
http://www.nytimes.com/2013/03/09/business/economy/us-added-236000-jobs-in-february.html?ref=business&_r=0
***************
"Every child is an artist. The problem is how to remain an artist once he grows up." (Pablo Picasso)
***************
We have to be grateful for the "good news" in whatever form it takes when dealing with the U.S. economy. According to today's "Times," the American economy created 236,000 positions in February and the unemployment rate was 7.7% (compared with 7.9% for January). "Economists," and I use that term loosely, had expected 165,000 jobs to be added in February with no movement in the unemployment rate.
The problem is that the federal budget cuts went into effect March 1, so they are not reflected in the February data. The "236,000" number above reflects an actual private payroll addition of 246,000 jobs minus 10,000 public sector jobs that have already been eliminated.
The Hamilton Project has created a "Jobs Gap" chart which tracks what a real recovery would entail: the U.S. faces a jobs gap of 11.4 million jobs, 5.2 million from jobs lost since 2007, and another 6.1 million jobs that should have been created in the absence of the recession. Looking at The Hamilton Project trend line projections, if the economy adds about 208,000 jobs per month, which was the average monthly rate for the best year of job creation in the 2000s, it will take until February, 2020 - 8 years - to close the jobs gap. Given a more optimistic rate of 321,000 jobs per month, which was the average monthly rate for the best year of job creation in the 1990s, the economy will reach pre-recession employment levels by April, 2016 - not for another 4 years.
Looked at in this perspective, any good news is welcome but there is much progress that's needed. Cutting government jobs would not appear to be in the interest of reducing unemployment rates or increasing GDP growth. Of course, I'm not an economist or a politician, thankfully.
***************
"Every child is an artist. The problem is how to remain an artist once he grows up." (Pablo Picasso)
***************
We have to be grateful for the "good news" in whatever form it takes when dealing with the U.S. economy. According to today's "Times," the American economy created 236,000 positions in February and the unemployment rate was 7.7% (compared with 7.9% for January). "Economists," and I use that term loosely, had expected 165,000 jobs to be added in February with no movement in the unemployment rate.
The problem is that the federal budget cuts went into effect March 1, so they are not reflected in the February data. The "236,000" number above reflects an actual private payroll addition of 246,000 jobs minus 10,000 public sector jobs that have already been eliminated.
The Hamilton Project has created a "Jobs Gap" chart which tracks what a real recovery would entail: the U.S. faces a jobs gap of 11.4 million jobs, 5.2 million from jobs lost since 2007, and another 6.1 million jobs that should have been created in the absence of the recession. Looking at The Hamilton Project trend line projections, if the economy adds about 208,000 jobs per month, which was the average monthly rate for the best year of job creation in the 2000s, it will take until February, 2020 - 8 years - to close the jobs gap. Given a more optimistic rate of 321,000 jobs per month, which was the average monthly rate for the best year of job creation in the 1990s, the economy will reach pre-recession employment levels by April, 2016 - not for another 4 years.
Looked at in this perspective, any good news is welcome but there is much progress that's needed. Cutting government jobs would not appear to be in the interest of reducing unemployment rates or increasing GDP growth. Of course, I'm not an economist or a politician, thankfully.
Friday, March 1, 2013
Hold the Presses
http://www.nytimes.com/2013/03/01/business/economy/us-economy-barely-grew-in-fourth-quarter-revision-shows.html
http://www.nytimes.com/interactive/2013/02/22/business/Growth-Vanishes-in-Developed-Economies.html
***************
"A strategy that doesn't take into account resources is doomed to failure." (John C. Maxwell)
***************
Hold the presses! Wait for it! The Commerce Department has "revised" 4th quarter 2012 U.S. economic growth from its initial estimate of -0.1% (annual rate of GDP growth) to +0.1%. I, for one, cannot contain myself!
But, as Catherine Rampell pointed out: "...at least the economy did not shrink..."
If you place the U.S. data into the 34 country O.E.C.D. "Change In Real GDP" chart attached, "Growth Vanishes" is the perfect title for the situation. The combined economies of those 34 countries shrank in the fourth quarter of 2012. That's the first time since the worldwide financial crisis and only the 13th quarter with such a downturn since 1961.
Fortunately, I posted Jeremy Siegel's perspective yesterday from K@W where he observed, among other things, that the U.S. economy could be growing at 3% to 4% by the fourth quarter of this year even with the "sequester." With corporate earnings at all time record levels and a Dow that could go as high as 15,000 by year end, it's hard to argue with his perspective.
I choose to think positive.
http://www.nytimes.com/interactive/2013/02/22/business/Growth-Vanishes-in-Developed-Economies.html
***************
"A strategy that doesn't take into account resources is doomed to failure." (John C. Maxwell)
***************
Hold the presses! Wait for it! The Commerce Department has "revised" 4th quarter 2012 U.S. economic growth from its initial estimate of -0.1% (annual rate of GDP growth) to +0.1%. I, for one, cannot contain myself!
But, as Catherine Rampell pointed out: "...at least the economy did not shrink..."
If you place the U.S. data into the 34 country O.E.C.D. "Change In Real GDP" chart attached, "Growth Vanishes" is the perfect title for the situation. The combined economies of those 34 countries shrank in the fourth quarter of 2012. That's the first time since the worldwide financial crisis and only the 13th quarter with such a downturn since 1961.
Fortunately, I posted Jeremy Siegel's perspective yesterday from K@W where he observed, among other things, that the U.S. economy could be growing at 3% to 4% by the fourth quarter of this year even with the "sequester." With corporate earnings at all time record levels and a Dow that could go as high as 15,000 by year end, it's hard to argue with his perspective.
I choose to think positive.
Subscribe to:
Posts (Atom)