March 4, 2011
The market rallied yesterday after initial jobless claims came in at 368K, the lowest level in almost three years, vs. expectations of 395K and in anticipation of a stronger Non-Farm Payrolls report today. The NFP was only slightly above consensus this morning at 192K vs. expectations of 185K, but the overall employment rate dropped to 8.9% vs. expectations of 9.1%. Hourly earnings and the average workweek were below expectations, which doesn’t confirm the reduction in the unemployment rate. Some of the bump in February is being attributed to weather issues impacting January. Either way, private payrolls are improving as seen both in the numbers and anecdotally through company conference calls. State and local government employment fell by 30K, and that should be the trend going forward given the budget issues. Chain store sales for February were solid, posting a 4.2% increase in spite of difficult weather conditions across much of the country.
It appears that the ECB is on the verge of increasing interest rates as soon as April. ECB President Trichet said the ECB is worried about rising inflation, joining China, Brazil, India and many other emerging countries in battling rising food and energy prices.
A report published by the Washington Post estimates that the total pension shortfall faced by state and local government pension funds is $1.5 trillion. The report finds that the way the government accounts for future pension obligations significantly understates the liability.
Chairman Bernanke was on the defensive again yesterday, denying that the recent liquidity injected into the US economy is responsible for soaring food prices around the world. The United Nations said its Food Price Index is at a 21-year high. I guess the question would be after it goes to the equity markets, where is the stimulus going because rates have risen about 100bps since QE2 was introduced, the opposite of what he had predicted? I’m not sure the Chairman, nor anyone, is sure what the impact of QE2 is or will be.
President’s Obama and Calderon agreed to allow Mexican trucking companies to enter the US. The agreement came after Mexico had imposed retaliatory tariffs on US exports to Mexico in response to a US ban on Mexican trucks in the US, which was found to be in violation of NAFTA. A US DOT program found that Mexican trucks were safer than their US counterparts.
Charlie Sheen set another record yesterday by having the highest first day total of Twitter followers with an initial following of 1.5 million. Why Tweet? Because celebrities and athletes get paid by advertisers to promote their products via Tweets, and the endorsers can earn anywhere from $1k to $10K per tweet.
In spite of oil trading over $100 per barrel, the CEO of Devon Energy was out this morning saying $70-$80 is supported by the fundamentals, the rest is due to hype and speculation.
I picked up this chart from TBP, but it was created by Societe Generale and is one we used in the ‘90’s in a presentation to support the notion of sub-5% interest rates. It is the really long term chart of US interest rates, going back 200 years.
Have a great weekend