Date: Dec 07, 09
To: Everyone
From: Gregory S. MacKay, Senior Vice President & Chief Economist
Date: 12/04/09
This week – it’s all about jobs and productivity. With many writers calling for level unemployment numbers, a mild surprise brought us all a little holiday cheer. November unemployment dropped a bit to 10.0%, as non-farm payrolls only fell by 11,000 jobs. In the same report, job losses for September and October were revised to indicate that 159,000 fewer jobs were lost in those two months than previously recorded. Job losses in November were concentrated in construction (-27,000) and manufacturing (-41,000), as service industry jobs gained 58,000, led by professional and business services and education and health services. So the service sector job gains were not about holiday retail sales. In fact, retail jobs fell by 15,000 in November. It seems to be one more indication that the recovery will avoid any threat of a double dip.
Other data in the jobs release support the “no double-dip” theory. Hours worked in manufacturing remain over 40 per week, and average weekly earnings rose .7% to $622.17 in November, and are up about 3.4% annualized since bottoming in June. Both increasing hours and increasing income will help avoid a drop in consumerism that could spark another reversal.
But the increases in both hours and wages were not so obvious in the third quarter of 2009. A newly released revision to productivity data indicates substantial annualized growth of 8.1% in that quarter, following a similar gain of 6.9% in the second quarter of 2009. There was a 2.9% increases in output and a 4.8% decline in hours worked during the third quarter of 2009. While real hourly compensation rose only 1.8%, the output increase was a substantial improvement to the second quarter’s negative output of 1.1%. Simply put, we’ve got the best of the best out there now, and the productivity is so good, unit labor costs are actually decreasing. This is one more indicator of an economy righting itself.
We always suggest that unemployment claims numbers tend to be a little unreliable at this time of year. However, we must mention the extension of the slow downward trend on a monthly basis in both initial claims and continuing claims. Just seems to be more of the base for happier days ahead.
Business indices were a little mixed this week. The gauge of mid-west manufacturing, The Chicago Business Barometer, showed a slight increase in business activity, as production grew more slowly, while new orders grew quickly and backlogs slowed their decline. At the same time, the Institute for Supply Management (ISM) Report on Business indicated national trends in manufacturing to be growing, but at a slightly slower pace. Service industries, as measured by the ISM, saw a slight downturn in November.
Stock prices rose modestly for the week as good early holiday sales made stock buyers happier. At the close, for the week and year:
Dow Industrials |
10389 |
+.8% |
+18.4% |
NASDAQ |
2194 |
+2.6% |
+39.1% |
S&P 500 |
1106 |
+1.7% |
+22.5% |
Treasury bond yields had a hefty 20 BP movement upward as future financings weighed on the markets. Municipals continued a yield decline, as demand still far exceeds supply.
|
U.S. Treasuries |
Municipal Bonds |
12/04/09 |
11/27/09 |
12/04/09 |
11/27/09 |
2 year |
.84% |
.68% |
.59% |
.66% |
5 year |
2.25% |
2.04% |
1.51% |
1.63% |
10 year |
3.48% |
3.22% |
3.09% |
3.15% |
It’s prime time holiday shopping season. Don’t forget to shop at your local merchants when you can. Those dollars help both your local merchant and the entire community.