Market Commentary

Last week’s economic reports spurred optimism that the economic recovery is strengthening.
November 30, 2009

Last week’s economic reports spurred optimism that the economic recovery is strengthening.  For example, first time unemployment filings fell to the lowest level since September 2008.  While I do believe seasonal adjustments impacted the data, the statistics is suggesting the jobs market is recovering at a pace quicker than most expect.  Will this recovery be reflected in Friday’s employment data?

An ongoing theme of these remarks is that companies panicked last year, fired to many workers to ensure survivability.  Approximately 6.2 million jobs have been lost since September 2008 with the vast majority—5.3 million—shed between October 2008 and July 2009.  I am not aware of another time in history when such massive job losses occurred in such quick order

To place this data point into its proper perspective and referencing the economic consulting firm of Reid Thunberg during the two previous “killer recessions” of 1973 and 1981 which both lasted 16 months a total of 1.4 million and 2.8 million jobs were lost respectively.

I think it is worth noting since the recession began in December 2007 about 7.4 million jobs have been lost.

Incidentally consensus is expecting a 120,000 decline in nonfarm payrolls and 10.2% unemployment rate.  If the data meets consensus the economy lost the fewest amount of jobs since January 2008.

Housing, the epicenter of today’s crisis, also offered optimism.  New Home Sales jumped by 6% in October and were at the highest levels since September 2008.  In my view the most significant aspect of this data point are the number of new homes available for sale…239,000 which is the lowest absolute number since May 1971.  At current sales pace the important inventory to sales ratio fell to 6.7 months, the lowest ratio in three years.  A healthy home market is 3-5 months.

Some might state the expiring housing tax credit was the primary catalyst for this decline, the data suggests otherwise so in my view the data is even healthier than the headline number indicates.

Finally personal spending and income also improved more than expected.  Disposable income or money left over after taxes rose by 0.4%, the greatest gain since May.

As inferred above this yet another data filled week.  The ISM Manufacturing Index, pending home sales, various private employment surveys, the Beige Book, factory orders and the BLS Labor Report are all released. 

Obviously all data points could impact trading.

Last night the foreign markets were mixed.  London was down 0.69%, Paris down 0.80% and Frankfurt down 0.83%.  Japan was up 2.91% and Hang Sang up 3.25%.

The Dow should open nominally lower as a pledge by the UAE to back Dubai’s banks to ease the regions bank crisis. Wow!  How times quickly change.  Twenty four months ago Dubai and its sovereign wealth fund would assist in providing liquidity to the global financial system.  Today the city state is in default of over $60 billion. The 10-year is off 8/32 to yield 3.23%.