9:27 (Dow Jones) It seems Stephen Roach, the Morgan Stanley economist, has been relatively quiet of late, but the payrolls report certainly caught his attention:

“With headcounts falling another 93,000 in August, the case for sustainable recovery in a post-bubble U.S. economy remains a real stretch. While policy stimulus seems to be working temporarily on the demand side of the equation, there’s been little follow-through on the supply side. As long as the jobless bias persists, the macro multipliers that normally convert policy stimulus into sustainable recoveries could prove surprisingly impotent.”

Source: DJ MARKET TALK 09/09 9:28A (DJ)

That attitude sounds familiar . . . where have I heard that before?

Update: 12:23pm, Sept 9 A friend at Bear Sterns pointed me to this Reuters article:

Data: EPS Forecasts Soar but Revenue Lags
Monday, September 8, 2003; 8:16 PM

NEW YORK (Reuters) – While U.S. corporate earnings seem to be rebounding following a three-year-long slump, the gains appear to be driven by streamlining initiatives rather than a boom in sales, recent data shows.

For the third quarter, earnings per share among components of the Standard & Poor’s 500 index are expected to be up roughly 12 percent from year-ago levels, according to Wall Street analyst estimates compiled by Reuters Research.

Revenue forecasts, however, are only up about 1.2 percent. On average for the fourth quarter, EPS estimates are up nearly 20 percent, while revenue forecasts are up only 2.3 percent. (Emphasis added)

“While 2003 revenue is somewhat improving, it is not at the rate corporate profits are growing, which have benefited mostly from cost cutting initiatives,” said Jerry Czarzasty, global estimates manager at Reuters Research.

On a more encouraging note, however, profit warnings are down from year-ago levels, and more companies are raising profit forecasts. Last month, about 20 percent of earnings pre-announcements were negative, down from nearly 25 percent in the year-ago period. At the same time, 19.2 percent of earnings pre-announcements in August were positive, up from 16.8 percent last year.

Category: Finance

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