Posts filed under “Economy”

NF Payrolls Disappointment

I have to disagree with the assessment of job growth as "steady."  Its not — its been erratic, weak and disappointing. NFP rose by a mere 78,000 in May (April’s outlier 274k was unrevised ). March was revised down by 44,000 to 122K.  Weakness in May was across the board, but notable was the poor service sector growth (+64K versus an imaginary +232K in April).

How bad was this report? April’s +274k outlier included (w/o seasonal adjustments) a birth/death improvement of 257k. May’s birth/death adjustment contributed +207k; the bottomline was, even with this fat b/d number, we only got +78k new jobs. Despite the spinning you heard on TV, there’s no way to avoid reality:  This Nonfarm payrolls report stunk the joint up.

Look:  The consumer has held up their part — they’ve spent steadily, despite weak personal income improvement, and even weaker real income after inflation. But they are not the problem — Corporate Business hiring and spending is. This recovery has been unable to generate anything other than stimulus based momentum. There’s been little in the way of   organic (read non-stimulus based) growth.

Unless and until business starts hiring and spending aggressively, the best we can hope for is an anemic, real estate fueled economy.

Category: Economy

NonFarm Payrolls: 78,000 new jobs

Category: Economy, Markets

Taking the Under, once again, on NFP

Category: Economy

PMI disappoints

Category: Economy

Weekend Wrap Up

Category: Economy, Markets, Trading

Half of New Jobs Are Real Estate Related

Category: Economy, Real Estate

Conundrum Revisited

Category: Economy, Markets

What’s the U.S. Savings Rate Really?

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Are we spenders or savers?

That’s a significant question looked at by Dan Gross in the Sunday NY Times. Its an issue that has significant ramifications for the economy, interest rates, and the ongoing social security debate.

Gross references Bear Stearns Economist David Malpass:

"Some say that a flaw may exist not in our national character but in the way the government calculates savings: because the bureau’s method of tallying income and consumption doesn’t take into account structural changes in the finances of Americans, it may systematically understate income and overstate consumption.

For example, income includes wages and salaries, interest on bonds, and stock dividends. But it doesn’t include capital gains on stocks, profits from selling a house, or withdrawals from 401(k) plans. Nearly 70 percent of families own homes, nearly half of all households own stocks and mutual funds, and an increasing number of baby boomers are turning to 401(k)’s for income. Those trends, some say, can make a big difference. "The structure of the household portfolio has changed over time," said David Malpass, chief economist at Bear Stearns.

Convinced that Americans aren’t frittering away all their income, Mr. Malpass plumbed the Federal Reserve’s Flow of Funds data, a trove of information on Americans’ spending and saving habits. In 2004, he found that the net worth of all households – their assets minus their liabilities – stood at $48.525 trillion, up 9.6 percent from 2003. Sure, rising home prices helped. "But even if you take out houses completely, it still shows huge savings," he said.

The problem with Malpass’ analysis is that he is taking a mathematical approach to what is essentially a behavioral issue. (Hey, it happens) Call it a rationalization. We tend to see those from both the Bullish and Bullish contingencies, as way to feel comfortable with those ideologies.

Let’s state this another way:  As a nation, are we spenders or savers?

It raises a host of issues, some net positive, others more troubling. How does our behavior as consumer impact economic downturns? (It seems to smooth them out, at least recently). Why haven’t Businesses been as spendthrift as Consumers this recovery?  (My theory is execs are afraid to see their options go underwater again). And the $64,000 question, how might this low savings rate impact retirees when the Baby Boom generation starts playing shuffleboard?   

I believe we are not savers. The fact that so many pension plans, 401ks and IRAs go unfunded is a big clue as to that. (It also reveals how Tax ignorant all too many people are).

But stop for a moment to contemplate this: That people would rather spend their money consuming, rather than put it into a 401K where their employer does dollar-for-dollar matching is proof positive of our savings mindset.

That’s right, as opposed to GETTING FREE MONEY, many Americans still prefer to shop — rather than save.

I’m curious today iof Malpass is correct. So here’s a suggestion for what would be a signifcant and useful analysis:  Use Malpass’ methodology for calculating the national savings rate — and then apply it to as many countries we can get data for. I’d like to see a list that includes at least: the U.S., Japan, Great Britain, Norway, Sweden, France, South Korea, Italy, Germany, Australia, Canada, Spain, Israel and South Africa. That’s a short list, but we want it as extensive and complete as possible.

The goal is to determine whether or not, as judged against a planet of our peers, we Americans are — relatively speaking — savers or spenders.

Should be a rather interesting discussion . . .

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UPDATE May 22, 2005 4:20pm
There’s a long but fascinating discussion on related topics at Whiskey and Gunpowder. You can see excerpts and related graphics below.

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Source:
Is It a Savings Crisis or a Math Error?
By Daniel Gross
NYT, May 22, 2005
http://www.nytimes.com/2005/05/22/business/yourmoney/22view.html

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Category: Economy

How Housing Lowers CPI

Tony Crescenzi had an interesting article on RealMoney this week. In it, he notes that as the housing market soars, it ends up knocking rents lower. After all, why rent if ultra low real interest rates allow you to buy for the same price, and with nearly no money down? So what’s the problem with…Read More

Category: Economy, Real Estate

Interest Only Loans, 1.00% Mortgages

Category: Economy, Real Estate