Posts Tagged ‘jobs growth’
Old Man Winter appears to be killing the retail sector and the economic renewal. Extreme cold and nasty weather has engulfed about 70% of the country, reaching as far south as Georgia, North Carolina, and Texas, which don’t traditionally experience winter weather.
All that nasty weather means less driving to the malls and shops, which, judging by the numbers, appears to have been the case over the last two months. And if consumers don’t spend, the retail sector hurts and this translates into softer gross domestic product (GDP) growth.
Retail sales contracted by 0.4% in January, which represented the second straight month of declines following a revised contraction of 0.1% in December, according to the U.S. Department of Commerce. The poor showings were attributed to the weather.
With consumers staying at home, we are hearing whispers that fourth-quarter GDP growth could be revised downward from its initial 3.2%.
And while it’s too early to call for the economy to weaken, continued bad weather could mean just that. Now there are, of course, other reasons for the lackluster retail sector metrics.
There’s still a sense that the jobs market continues to be fragile following the creation of a mere 74,000 jobs in December that was blamed on the weather. Yet January was only marginally better with the creation of 113,000 jobs, which was well below the 185,000 estimate.
The jobs numbers are horrible, and unless they start to improve, I expect consumers to continue to feel hesitant about spending in the retail sector.
As I wrote in a previous commentary, investing in the retail sector will be much more difficult this … Read More
Don’t for a second believe consumer spending in the U.S. economy is improving!
J. C. Penney Company, Inc. (NYSE/JCP) has announced it will be closing 33 stores in the U.S. economy. By doing this, the retailer will save about $65.0 million a year starting in 2014. 2,000 employees will be let go. (Source: J. C. Penney Company, Inc., January 15, 2014.)
Macy’s, Inc. (NYSE/M) is also closing stores.
Best Buy Co., Inc. (NYSE/ BBY) reported that for the nine-week period ended January 4, its comparable sales declined 0.8% from the same period a year ago. The CEO of the company, Hubert Joly, said, “…our holiday revenues were negatively impacted by a number of factors, including: (1) the aggressive promotional activity in the retail industry during the holiday period; (2) supply constraints for key products; (3) significant store traffic declines between “Power Week” and Christmas; and (4) a disappointing mobile phone market.” (Source: “Best Buy Announces Holiday Revenue Results,” Best Buy Co., Inc., January 16, 2014.)
Target Corporation (NYSE/TGT) is another retailer that’s been hurt by dismal consumer spending in the U.S. economy. The company expects a decline of 2.5% in its fourth-quarter comparable sales. Target has also lowered its corporate earnings guidance for the fourth quarter; it now expects to report earnings of between $1.20 and $1.30 per share. Previously, it stated its corporate earnings in the fourth quarter would be between $1.50 and $1.60 a share. The company also plans to close eight stores in the U.S. economy. (Source: Target Corporation, January 10, 2014.)
Each day, it is becoming more evident that consumer spending, which makes up about two-thirds … Read More
In today’s jobs report, we’re told 169,000 jobs were added in the U.S. jobs market in August. (Source: Bureau of Labor Statistics, September 6, 2013.) Aside from the fact we need a minimum of 200,000 jobs a month to see a substantial change in the U.S. jobs market, the details in this morning’s report are particularly weak and concerning.
Actually, let’s start with the previous month’s downward revision in employment. The revised numbers that came out this morning show the U.S. economy added only 104,000 new jobs in July, not the 162,000 we were originally told were created in that month.
Moving to August, this morning’s jobs market report shows the only growth in jobs is in the low-wage-paying sectors. Add up all the new retail, health care, business services, and hospitality jobs, and 71% of all jobs created in August were in the low-paying sectors!
The underemployment rate, which includes those people who have given up looking for work or who have part-time jobs because they can’t get full-time jobs, still sits near 14%! (The politicians will never talk about the underemployment rate—what economists like me consider the real employment rate—because this number shows the jobs market is not improving.)
So what type of growth did we see in August in jobs in the manufacturing, construction, and other sectors that pay a higher salary? Sadly, jobs growth in those sectors was dismal. The manufacturing sector of the U.S. economy only created 19,000 jobs in August—after a decline of 10,000 in July! Sectors like construction, mining and … Read More
The National Association of Realtors (NAR) just reported July existing-home sales increased in the U.S. housing market to an annual rate of 5.39 million homes—up 17.2% from July of 2012. (Source: National Association of Realtors, August 21, 2013.)
And those companies that are closely related to the housing market like The Home Depot, Inc. (NYSE/HD) and Lowe’s Companies Inc. (NYSE/LOW) reported better-than-expected second-quarter earnings. All these companies cited the housing “recovery” as the reason their earnings did better.
So does this mean it’s a good time to buy homebuilder stocks, or to jump into companies related to the housing market? My answer is a resounding, “NO.”
In fact, the housing market is flashing four warning signs that the so-called “recovery” is losing steam.
First-time home buyers are not entering the housing market. Last month, first-time home buyers accounted for only 29% of all existing-home sales in the housing market, down 15% from July 2012. In a normal market, you’d want t first-time home buyers to account for 40% of all sales.
Mortgage rates are rising quickly. The rate on the standard 30-year fixed mortgage hit 4.6% this morning—up sharply from about 3.5% at the beginning of 2013
For months (in these pages), I’ve been saying interest rates would start to creep up. Even the NAR acknowledges the problem with higher interest rates. Its chief economist, Lawrence Yun, said this week, “Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines…the initial rise in interest rates provided strong incentive for closing deals. However, further rate increases … Read More
Last week, Moody’s Investors Service changed its outlook on the U.S. national debt from negative to stable. (Source: Reuters, July 18, 2013.)
Despite the credit reporting agency’s “upgrade” on U.S. national debt, my opinion remains the same: the U.S. national debt has taken on a life of its own, growing like a bad cancer with no cure in sight.
In June of this year, the U.S. government registered a surplus of $117 billion after a budget deficit of $139 billion in May. On the surface that sounds great. But look a little closer, and we see that interest paid on the U.S. national debt for the month of June was $93.03 billion.
In the fiscal year so far (October 2012 to June 2013), the U.S. government has paid $345.26 billion as interest. For the full fiscal year (ending October 31, 2013), interest rate expense on the U.S. national debt is expected to reach $420.61 billion. (Source: Department of the Treasury, Financial Management Service, July 11, 2013.)
That’s almost half a trillion per year on interest payments only! And we must remember the Federal Reserve is keeping interest rates artificially low. If interest rates doubled (which is not a long-shot concept, considering that even if rates did double from here, they would still be below the 30-year average), the government interest rate payments could read $1.0 trillion a year!
Looking at the U.S. national debt as a percentage of our gross domestic product (GDP), it stood at 105.07% at the end of the first quarter of this year. (Source: Federal Reserve … Read More
Wherever we turn to in the media today, we hear or read the U.S. economy is witnessing a period of economic growth. The media and politicians cite an improving luxury car market, rising real estate prices, and jobs growth.
On the contrary, and as I have been writing in these pages for months (if not years), economic growth in the U.S. economy can only occur when consumers are optimistic and feel better about spending; the opposite of that is happening right now.
According to the U.S. Department of Commerce, sales at restaurants and bars in the U.S. economy plummeted the most in June since February of 2008. Sales at restaurants and bars also witnessed a decline in May. (Source: Wall Street Journal, July 15, 2013.)
In times of economic growth, consumers go out and spend money. As purchases at restaurants and bars are discretionary, this tells me consumers in the U.S. either don’t really want to spend or don’t have much to spend.
U.S. companies are also painting a picture of slowing consumer spending. Consider General Electric Company (NYSE/GE), one of the pioneer companies in the U.S. economy. General Electric (GE) reported second-quarter earnings that beat estimates, but the company’s revenues declined two percent from the same period a year ago. (Source: General Electric Company web site, July 19, 2013.) In times of economic growth, you want to see earnings increasing with revenues.
Why aren’t the consumers in the U.S. economy spending?
Wages of employees in the U.S. economy in real terms, adjusted for inflation, are declining. In June, real average weekly earnings for all employees in the U.S. … Read More
While an economic slowdown is looming over the global economy, no one seems to care, as stock markets continue to reach new record-highs—giving investors false hopes of economic growth. But how long can this mirage actually last?
The economic slowdown in the global economy I’m talking about is a worldwide pullback in growth. Take India as the first example. According to India’s Central Statistics Office, the Indian economy is growing at five percent—its slowest pace in a decade! The director general of the Confederation of Indian Industry was quoted late last week as saying, “With no visible pick-up in any key levers of the economy, the situation remains grim.” (Source: Mallet, V., “India records slowest growth in a decade,” Financial Times, May 31, 2013.)
China, the second-biggest economic hub in the global economy, is facing headwinds, as its economy is growing at its slowest pace since 2009. Japan has undergone the largest per-capita quantitative easing program in history (its debt-to-gross domestic product [GDP] is running above 200%), and that country is back in a recession.
The unemployment rate in the eurozone was reported last week at 12.2% for April. It was 12.1% in March. The unemployment rate in Spain stood at 26.8 % and in Portugal, it stood at 17.8%. (Source: Eurostat web site, May 31, 2013.)
And industrial metal prices, which are supposed to be a leading indicator, are all heading downward.
Take a look at the chart below of the Dow Jones-UBS Industrial Metals Index. This index provides an overall picture of the performance of industrial metals.
Chart courtesy of www.StockCharts.com
Since the beginning of the … Read More
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