NFP Day!

Boy, I picked a hell of a couple of days to be unplugged. I leave my desk, and the market screams higher. Well, I’m back in the saddle, and just in time for everyone’s favorite BLS report, Non Farm Payrolls.

As usual, I will be taking "the Under."

Bloomberg consensus is for about ~123,000 new jobs. The range of predictions for the increase in payrolls runs from 50,000 to 200,000 new jobs. The average payroll gain this year, according to Bloomberg, has been 141,000/month. That’s down from just over 200k/mo last year.

There are several factors that imply a weak jobs number. The only question about consensus is how much of these  are worked into the various guesstimates.

The ADP preview shows ‘sluggish’ gains of 78,000 jobs; (I have yet to be convinced that the ADP report is either consistent or precise, so take this data point with a grain of salt).   

• It is now taking more time for displaced workers to land jobs; 4.2 months in the third quarter of 2006, up from 3.6 months the prior quarter;

• There has been a surge of layoffs in September — up 54% vs. August;

None of these suggest robust hiring in September.

The biggest job related "conundrum" has been the lack of hiring in Retail. Given the decrease in gasoline prices, and the corresponding uptick in consumer spending (see: Falling Gas Prices Help Low End Consumer), one might think retail would be adding bodies.

In addition to weak surprisingly weak retail job numbers, the WSJ points to weak temp hiring, as well as weak retail hiring, as a current employment trend that is less than encouraging.  In the past, these two groups have been significant early indicators:

Year_over_year_employment"Temporary help is a leading indicator of broader
job trends. Temp jobs started contracting before the economy sank in
2001 and kicked in before employment started growing again."

Lou Crandall, economist at Wrightson ICAP, a bond-research firm, calls them a gauge of corporate energy levels. "When they’ve got a lot of new projects that ultimately lead to expanded economic activity, [companies] suck up temps," he says. Troublingly, year-over-year growth in temp employment has slowed from more than 6% last year to 2.5% in August, a possible sign of brewing corporate retrenchment.

Retail employment might send similar signals. The last two times it dropped — in the early 1990s and the early 2000s — it was accompanied by a recession. In August, it was down 0.7% from a year earlier."

With Retail sales and profits still strong, it remains puzzling as to why this sector is not expanding more rapidly. Some in the industry are blaming the "lack of qualified workers" for the weak retail housing, but I don’t but it. Entry level retail sales is a low skill job; Even handling the register requires only the most basic of skills.

I am sticking with the under . . . 


Stop Signs
October 6, 2006; Page C1

Category: Economy, Employment

Blog Spotlight: Mish’s Global Economic Trend Analysis

Another edition of our new series:  Blog Spotlight.

We put together a short list of excellent but somewhat overlooked
blog that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
around 7pm.

Second up in our Blogger Spotlight:  Michael Shedlock and Mish’s Global Economic Trend Analysis. Mike is one of the editors of The Survival Report, covering stocks and the economy. He also writes for the Daily Reckoning, and co-edits Whiskey & Gunpowder. He also runs stock boards on the Motley Fool, Silicon Investor, and TheMarketTraders. He is an avid photographer, when not writing about stocks or the economy, with over 80 magazine and book covers to his credit.


Today’s focus commentary is called Falling Dominoes and addresses the impact of Housing’s decline on the economy:


The Sentinel is reporting State targeting abusive lenders.

The [Massachusetts] state Division of Banks is cracking down this month on what it sees as abusive business practices by mortgage lenders and brokers.

The agency issued a series of new emergency regulations earlier this month, requiring better documentation from lenders and prohibiting them from pressuring consumers into taking out mortgages they can’t afford or working without their own independent lawyers. It also forced four companies — two of them located Worcester — to close immediately and place all pending mortgages with another, more established lender.

Commissioner of Banks Steven L. Antonakes said in a recent interview that division examiners found a pattern of deceptive business practices by some lenders during their most recent round of company inspections.

"We want to spell out in very plain English to send a message to lenders and brokers that these specific acts, whether they’re very obviously unfair or deceptive, or more subtle, they weren’t going to be tolerated," he said. "And you would put your license at risk by engaging in this kind of activity."

Abusive lending practices can destabilize the entire real-estate market. As an example, he described a hypothetical street containing 10 homes, each worth a certain amount of money.

"If loans were originated for two of those homes, in which the loan was made that the broker knows the consumer has no hope of repaying those loans, very likely the borrower will become delinquent," he said. "In the worst case, the home will be foreclosed upon, and that kind of activity could result in the home being sold for less than its value and before you know it, you have a domino effect."

But the slowdown has also put lenders in a tough position, said Christopher J. Iosua, president of the Mortgage Connection Inc. "When business slows down the way it has in the past six to nine months, new loan originators and those without a strong base of customers do things they probably wouldn’t normally do," he said.

The idea that lenders are doing things they may not have done in "normal conditions" may have some merit for some lenders but when 40% of the loans sold in California before the bust were either stated income loans or pay option arms, I think the idea if more fiction than fact. Anything and everything was done to keep the bubble booming, and that was as I said happening well before the bust.

With every bubble comes fraud. The two go hand in hand and housing is not unique in this respect. We are only beginning to scratch the surface of the fraud that supported this bubble. Lending standards are going to tighten as a result, and will continue to tighten as more and more of the fraudulent activity is exposed. I consider fraud and tightening of lending standards to be two big dominoes that are now falling. Tightening of lending standards was previously discussed in Lending Guidelines / Credit Squeeze and The Blame Game.

Read More

Category: Blog Spotlight, Corporate Management, Economy, Real Estate, Retail, Weblogs

The Return of Goldilocks?

Category: Economy, Federal Reserve, Markets

Category: Data Analysis, Investing

Light Posts Due to Fast Laps

Due to a very thoughtful birthday present from Mrs. Big Picture, there will be somewhat lighter posting the today and tomorrow due to travel — mostly in broad and curvy circles: > Lime Rock CT / Skip Barber UPDATE:  October 5th, 11:14pm This was an awesome trip — I’ll try to do a full update…Read More

Category: Weblogs

Dow Components

Category: Technical Analysis

Blog Spotlight: The Mess That Greenspan Made

Today we start a new series:  Blog Spotlight.

We put together a short list of excellent but somewhat overlooked blog that deserves a greater audience. Expect to see a post from a different featured blogger here every Tuesday and Thursday evening, around 7pm.

First up in our Blogger Spotlight:  Tim Iacono and The Mess That Greenspan Made. Tim is a software engineer in his mid-forties, living in Southern California. He calls his blog is a "vain attempt to stave off a mid-life crisis, and here’s hoping that it’s going to work."



Today’s focus commentary is called Friends in High Places? and it address the controversey we discussed last week.



Friends in High Places?

Life is always much more fun when there’s a good
conspiracy theory to kick around. When the New York Times starts kicking it
around too, then it can really be

Such is the case with the recent plunge
in the price paid for gasoline by formerly dour consumers leading up to an
election where the party in power is clearly having difficulty wooing the
electorate. It just so happens that the newly appointed Treasury Secretary used
to run the investment bank that controls the world’s most important commodity
index, which seven weeks ago cut the weighting of unleaded gasoline by nearly 75
percent, causing all commodity investments based on this index to sell their
unleaded gasoline futures.

For the same number of buyers, a glut of
sellers means lower prices, and voila! Prices at the pump drop precipitously,
consumer confidence rebounds, and the electorate develops a new spring in their

Or at least, that’s what some would have you believe. . .

Read More

Category: Blog Spotlight, Commodities, Corporate Management, Federal Reserve, Finance, Politics

Media Appearance: Kudlow & Company (10/03/06)

Category: Media

New Features at The Big Picture

Category: Blog Spotlight, Weblogs

New Home Starts? Don’t Make Me Laugh!

Category: Data Analysis, Economy, Real Estate