Economists React to NFP

The WSJ reports: 

The Labor Department announced Friday morning that U.S. employers added 207,000 jobs to nonfarm payrolls and that hiring in the previous two months was stronger than original thought, by a net 42,000 jobs. Meanwhile, the unemployment rate held steady at 5% and wages jumped 0.4%, the strongest increase for hourly earnings in a year. With the Federal Reserve prepared to deliberate on interest rates next week, what does the employment report tell us about the economy? Economists from Wall Street and beyond weigh in:

* * *

A strong reading across the board with the oversized gain in average hourly earnings, at least partially if not mostly, due to an oversized 1.7% increase in earnings within the utility sector. The exact size of its contribution cannot be determined at this point.  The gain in nonfarm payroll, the upward revisions to June and May, and the ability of the unemployment rate to hold at 5%, despite it having fallen there due to a 1k increase in the labor force in June, also points to healthy employment growth (employment in the household measure was up 438K and the labor force did jump 450K).  All signs point to strong growth in the second half of 2005.
– David Resler and Gerald Zukowski, Nomura Securities International

Most measures of the labor market indicate that the degree of slack is slowly disappearing. The official unemployment rate is the most positive. Although other measures indicate that there are more available labor resources, they too are also slowly improving. As labor market slack disappears, the FOMC will continue to boost short-term interest rates.
– Steven Wood, Insight Economics

The economy is accelerating after a mild slowdown in the second quarter. Third-quarter growth should be above 4%. For consumers, employment and earnings gains are outweighing the drag from high gasoline prices. The solid growth picture indicates that the Fed’s measured tightening has some way to run. We expect the federal funds rate to reach 4.5% in the first quarter of 2006.
– Nigel Gault, Global Insight

The small dip in manufacturing employment was a mild surprise. For some reason, the factory job tally over the past two months does not reflect the recent solid gains in motor vehicle assemblies. In fact, autoworker employment is down 28,000 over this interval. … The hours worked index came in a tick lower than anticipated. Given the strong GDP number that is expected in Q3 (+5.0%), we could see a sharp rise in productivity if hours do not show some upside in Aug & Sept.
– David Greenlaw and Ted Wieseman, Morgan Stanley

The problem for the "bond dudes and dudettes" was the surge of wage inflation that came from the Average Hourly Earnings, which doubled the previous month’s number at up 0.4%. I want to make one thing perfectly clear: if this is the beginning of a wave of labor cost increases, all bets are off on the long end of the bond market. There will be little to stop the 10-year from going to 4.50%, in the short-run.
– Kevin Giddis, Morgan Keegan & Company

What needs to be watched is the wage situation. Was the jump in wages a one-shot wonder or does it portend accelerating labor costs? That is the unknown right now. But if it does say the tightening labor market is finally flowing through to workers in terms of higher payroll costs, then the Fed may find even more reasons to continue the rate hike program.
– Joel L. Naroff, Naroff Economic Advisors


Economists React
August 5, 2005 10:05 a.m.,,SB112324872837406088,00.html

Category: Economy

Is the Bond Market Hampering the Fed?

Category: Economy, Fixed Income/Interest Rates

207k New Jobs

Category: Economy

Its that Time Again: NFP

Category: Economy

Media Appearance: Power Lunch (8/04/05)

Category: Media

Are CD Prices Getting More Dynamic?

One of the more interesting items we’ve discussed has been the different pricing strategies that studios use with DVDs versus what the labels do with CDs.

The studios, to their credit, use a form of dynamic pricing — they intelligently recognize that a content item’s value is highest when first released, and then subsequently fades. That’s why DVD prices come down over time, to capture those marginal buyers. The consumers who will not pay $49.99 for Seinfeld Season 1 & 2, might pay $29.99.

The labels have mostly avoided this strategy — but perhaps that’s changing. I had just finished reading a post about Amazon’s conference call, and on it Amazon’s management discussed their Long Tail strategy. I went over to the site, and thru some random clicking and scrolling, noticed this little tidbit:   a long list of interesting CDs for sale on Amazon for between $6 and $10:

Blowout Music Bargains

As Low as $9.99

As Low as $8.99

As Low as $7.99

As Low as $5.99

I ran thru the entire $9.99 list, and was surprised to see quite a few names worth buying (I have yet to go thru the other lists). I am waiting to hear back from Amazon as to whether this is a new pricing policy, a discount from labels, a loss leader, or a mere inventory clear out.

Here’s my short list of favorite moderate priced CDs off of the Amazon sale:

  • : On And On

    On And On This is a fabulous album; Recall I first mentioned Jack Johnson in December

  • : Stripped

    Stripped — an under appreciated stone album

  • : Tattoo You

    Tattoo You the same — kicked  off the modern Stones, and it rocks

Read More

Category: Finance, Music

Your world with Neil Cavuto: (8/03/05)

Category: Media

The Return of the 30 Year Bond

Category: Economy, Fixed Income/Interest Rates, Politics

GDP Revised Downwards

Category: Economy

Juiced Data

We have been watching, with no small degree of skepticism, a stream of improving Macro-economic data. Color us unconvinced. Many of the key releases have been fraught with misleading headlines obscuring much weaker data beneath, and last month was no different. From Inflation to Federal Deficit to Unemployment Rates to Industrial Output to recent GDP…Read More

Category: Economy, Investing, Politics, Psychology