Employment numbers topped this week's economic news. Another 651,000 jobs (US, non-farm) were lost in February pushing the unemployment rate up to 8.1%, the worst since the Volcker recession of the early 1980's. A more broad gauge of unemployment which includes part-time workers seeking full-time employment puts the unemployment level at 14.8%. That's more than 1 of every 7 employable persons. Ouch.
In the meantime productivity is actually up. Anyone with a macroeconomics course under their belt should not be surprised by this. Employers slash the workforce and make remaining employees to produce more per employee. Eventually, these workers will demand additional compensation for their increased productivity, incomes go up, the AD curve shifts out, firms increase hiring, and we return to equilibrium. Sounds simple, right, but how long until it all unfolds?
Equities
Just how many new "worst weeks of 2009" will we have? Bank worries, unemployment numbers, continued housing troubles….take your pick, stocks just keep going down. Sparing the repetitive commentary, here is the weekly, year-to-date, and "from peak" performance of the major US indexes:
S&P500: week = -7.03%; YTD = -24.34%; from peak = -56.34%
Dow: week = -6.17%; YTD = -24.49%; from peak = -53.21%
Nasdaq: week = -6.10%; YTD = -17.96%; from peak** = -54.75%
**For the Nasdaq the "from peak" return is from October 2007; not from the high of the dot com bubble. The Nasdaq is currently down 74% from the bubble peak reached March 10, 2000.
Bonds
At least we have returned to normalcy in the Treasury market. Treasuries posted solid gains this week thanks to the turmoil in the equity markets. The yields on the 10 and 30 year fell to 2.83% and 3.50% from 3.04% and 3.72%, respectively.
The TED spread reflected investors' preference for safe Uncle Sam debt over that of corporations. The spread climbed to 110 basis points from 102 the prior week. For historical reference, the TED spread typically ranges from 20 to 50 basis points under normal conditions. It peaked over 450bps last October. Click the link below for TED spread chart, then click the 5 year button, it gives a pretty good indication of just what a mess we are in.
http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND
What to look for next week:
Capitulation…hopefully.
Thursday morning - Retail Sales - Consensus is for a drop of 0.5%. Did you know retail sales were actually up last month? It seems this positive nugget got buried by the other apocalyptic headlines.
Friday morning - Consumer Sentiment - Consensus is for a slight drop to 55 from 56 in January.
Friday morning - International Trade Gap - The net imbalance is expected to shrink from $40B in January to $38B for February.
In the meantime productivity is actually up. Anyone with a macroeconomics course under their belt should not be surprised by this. Employers slash the workforce and make remaining employees to produce more per employee. Eventually, these workers will demand additional compensation for their increased productivity, incomes go up, the AD curve shifts out, firms increase hiring, and we return to equilibrium. Sounds simple, right, but how long until it all unfolds?
Equities
Just how many new "worst weeks of 2009" will we have? Bank worries, unemployment numbers, continued housing troubles….take your pick, stocks just keep going down. Sparing the repetitive commentary, here is the weekly, year-to-date, and "from peak" performance of the major US indexes:
S&P500: week = -7.03%; YTD = -24.34%; from peak = -56.34%
Dow: week = -6.17%; YTD = -24.49%; from peak = -53.21%
Nasdaq: week = -6.10%; YTD = -17.96%; from peak** = -54.75%
**For the Nasdaq the "from peak" return is from October 2007; not from the high of the dot com bubble. The Nasdaq is currently down 74% from the bubble peak reached March 10, 2000.
Bonds
At least we have returned to normalcy in the Treasury market. Treasuries posted solid gains this week thanks to the turmoil in the equity markets. The yields on the 10 and 30 year fell to 2.83% and 3.50% from 3.04% and 3.72%, respectively.
The TED spread reflected investors' preference for safe Uncle Sam debt over that of corporations. The spread climbed to 110 basis points from 102 the prior week. For historical reference, the TED spread typically ranges from 20 to 50 basis points under normal conditions. It peaked over 450bps last October. Click the link below for TED spread chart, then click the 5 year button, it gives a pretty good indication of just what a mess we are in.
http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND
What to look for next week:
Capitulation…hopefully.
Thursday morning - Retail Sales - Consensus is for a drop of 0.5%. Did you know retail sales were actually up last month? It seems this positive nugget got buried by the other apocalyptic headlines.
Friday morning - Consumer Sentiment - Consensus is for a slight drop to 55 from 56 in January.
Friday morning - International Trade Gap - The net imbalance is expected to shrink from $40B in January to $38B for February.
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