Q2 GDP Growth Accelerates!
Yeah, that's about the only positive spin you can slap on this pile.
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.
The previous reading of 1st quarter GDP growth was 1.9%, so it just took a whopping downgrade from "anemic" to "effectively stagnant."
Economists had predicted 2nd quarter growth would slow to 1.7%, so 1.3% is a material miss. But thanks to the previous quarter's horrendous revision, we're actually showing acceleration. Isn't that dandy?
Stocks sold off more than 1% at the open before recovering (a little).
The government press release contained revisions to data dating back to 2003, which show that the fleeting blip of recovery-style growth (5.0%) we thought we'd experienced late in 2009 never happened. Post-recession growth never got higher than 3.9% (only slightly higher than the sustainable full-employment growth rate) before beggining a steady dive back to the center line.
The 2nd quarter pick-up is - if not quite encouraging - at least an interruption in a newly unveiled trend that would've otherwise shown us plunging back into outright recession.
Still, with first half growth averaging just 0.85% (compared with the now seemingly buoyant 1.8% we woke up expecting), we should all probably just go back to bed.
Hey, look. Initial unemployment claims fell below 400,000. For the first time in 16 weeks. Ever so slightly. So slightly in fact, that there's no way they won't be revised above 400,000 next week.
So inescapable is such a revision that "Jobless Claims Above 400,000 For 16th Consecutive Week" would be a wholly responsible headline.
Coming in at a preliminary reading of 398,000, the only question is whether they'll be revised to 401,000 or 402,000.
Even so, the market was expecting a much milder decline from last week's 422,000 (upwardly revised today by 4,000, naturally) to 415,000. So if any fleeting optimism can be wrung from this volatile and consistently understated weekly reading, let's go ahead and embrace it (and the warm, fuzzy fractional move higher in stocks) for the next 24 hours, until we're forced to lay eyes on the first look at 2nd quarter GDP growth.
Now That's a Selloff
Ever-increasing odds of utter economic annihilation from which there can be no escape, plus an unexpectedly contractionary durable goods report, weren't enough to send the Dow lower by much more than 100 points for most of the day.
But at 2:00, the Fed released the Beige Book, a monthly page-turner that showed 8 of 12 districts experiencing decelerating growth in July. I'm not sure to how many sentient beings this would've come as a surprise at this point, but it seemed to have been enough to convince markets to gnash their teeth a little more anxiously.
With the blue chips now off more than 180 points (and the S&P 500 suffering a nearly 2% decline), stocks can now... boast only a 2-3% gain over the last month.
Yes, as the Extinction Level Event of non-debt-ceiling-raising has grown increasingly likely in recent weeks, stocks have continued to drift higher.
I'll repeat that I don't expect August 2 (or August 10 for that matter) to be nearly as apocalyptic as it's made out to be, but today's market sentiment on equity values does nonetheless now more closely reflect my own.
Heck, another 10 or so healthy froth purges like today, and prices might even begin to seem appealing.
Durable Goods Turn Negative Again, Wreck and Ruin Assured, Repent Sins (and Someone Please Alert the Stock Market)
A month ago, we saw orders for durable goods shake off the previous month's dreadful 3.6% decline (the worst in more than two years) with a 2.1% increase. Today, economists expected to see a falloff in that growth rate, to something like 0.5%.
New orders for manufactured durable goods in June decreased $4.0 billion or 2.1 percent to $192.0 billion, the U.S. Census Bureau announced today.
Last month's rise was also tweaked downward to 1.9%.
New orders for nondefense capital goods excluding aircraft fell 0.4% last month. The orders are a barometer of capital spending by businesses and represent an important gauge of how manufacturing is doing.
Even so, futures are pointing to only a mild selloff at the market open (at levels similar to those seen before the announcement). Predominantly rosy corporate earnings have been rolling in, but between the morbid economic data and what we're assured are at least even odds of catastrophic global meltdown looming just days away, we're left with one (or both) of two possibilities: stocks are remarkably overvalued and this is the shorting opportunity of a lifetime, and/or the smart money sees no appreciable threat of such imminent Armageddon.
Few people could believe there's not a very real chance of reaching August 2 without a debt limit deal, so I tend to suspect the market simply isn't buying into the promised calamity.
I also tend to think stocks are remarkably overvalued, but for reasons wholly unrelated to the debt ceiling impasse (except insofar as the policies that are yielding such miserable economic performance are the same ones that have pushed public debt up against this ceiling, and - not coincidentally - swept into office a bunch of policymakers who are disinclined to write another blank check without significant reform).
So yes, stocks feeling due for a significant correction does have something to do with the debt ceiling, but only in the sense that the massive debt itself (and the misadventures to which its proceeds were directed) has got us wallowing in a sea of malaise that doesn't appear adequately discounted in current equity prices.
Surely the "hey cool, monsters" argument here trumps the ethical concerns, no?
Action is needed now to prevent nightmarish "Planet Of The Apes" science ever turning from fiction to fact, according to a group of eminent experts.
Their report calls for a new rules to supervise sensitive research that involves humanising animals.
One area of concern is "Category Three" experiments which may raise "very strong ethical concerns" and should be banned.
An example given is the creation of primates with distinctly human characteristics, such as speech.
Exactly the same scenario is portrayed in the new movie Rise Of The Planet Of The Apes, in which scientists searching for an Alzheimer's cure create a new breed of ape with human-like intelligence.
The report also acknowledges the "Frankenstein fear" that humanising animals might lead to the creation of "monsters".
Currently research involving great apes, such as chimpanzees, is outlawed in the UK. But it continues in many other countries including the US, and British scientists are permitted to experiment on monkeys.
"The fear is that if you start putting very large numbers of human brain cells into the brains of primates suddenly you might transform the primate into something that has some of the capacities that we regard as distinctively human.. speech, or other ways of being able to manipulate or relate to us," he told a news briefing in London.
Sounds fantastic. Should I ever have the means, I'll hereby commit to sponsoring a Dr. Moreau-style island haven for all scientists interested in pursuing monster research unfettered.
(HT: Hot Air Headlines)
FoxNews.com Live 9-10
I'll be on FoxNews.com Live this morning from 9-10.
Topics TBA, but I'm guessing debt ceiling.
If you miss it live, the show will be available at the link until 5 pm (dial the tape back to 00:00:00).
Update: Here's a clip.
Jobless Thursday (With Philly Kicker)
For the 15th conescutive week, initial jobless claims were above 400,000.
In the week ending July 16, the advance figure for seasonally adjusted initial claims was 418,000, an increase of 10,000 from the previous week's revised figure of 408,000. The 4-week moving average was 421,250, a decrease of 2,750 from the previous week's revised average of 424,000.
Economists expected a milder increase to 410,000.
Last week's figure was (as is the fashion) revised higher.
At 10:00, we'll brace for another important datapoint, the Philadelphia Fed's monthly Business Outlook Survey. This guy correctly and boldly predicted it would dip negative last month (pooh-poohing the consensus that saw it rising from 3.9 to 7.0), but I didn't expect it to tumble as low as it did - to a hideous -7.7, the lowest level outside a formal recession since the immediate aftermath of 9/11.
Ever-hopeful economists see the Philly Fed bouncing back to zilch.zilch this morning, a level suggesting not outright contraction, but merely precise stagnation. Huzzah!
I'm going to go ahead and predict that... won't happen. The last three months have given us the swiftest decline in the history of the Philly Fed survey. I'm not entirely convinced the plunging dagger below appears to have found a bottom just yet.
Update: Color me pleasantly stupefied. The index popped back up to 3.2, ahead (yes, ahead) of expectations, and making me look quite dumn.
Before you pop the cork, though, as illustrated above, this is not exactly a level to cheer about. Excusing 2010's Recovery Summer and the last couple months' malaisey sequel, the business outlook hasn't been this crummy since the end of the recession. What's more, it's still fully 40 points below its March 2011 peak.
And yet, it's an improvement.
Why Not Zero Days a Week?
Honestly, would there be any disruptions we couldn't reasonably accommodate if the Pony Express were permanently put out to pasture?
Mail call: Just three days a week?
The mailman comes through rain and sleet and snow, but perhaps only on Mondays, Wednesdays and Fridays in the future.
Postmaster General Patrick Donahoe told USA Today’s editorial board that budget concerns and falling volume may lead the government-sanctioned monopoly to reduce its service to three days a week “at some point,” perhaps in the next 15 years.
The seminal argument for disbanding the USPS (which lost more than $8 billion last year) is coming up on its 15th anniversary. Why hasn't this happened already?
FoxNews.com Live 9-10
I'll be on FoxNews.com Live tomorrow (Monday) morning from 9-10.
Topics TBA by early morning.
If you miss it live, the show will be available at the link until 5 pm (dial the tape back to 00:00:00).
Update: Here's a clip, in which we bicker over bickering over the debt limit.
HSIF; Update: HS!
Buckle your seatbelts, econophiles. One of two things is about to happen. Either the monthly employment report confirms what ADP suggested yesterday, showing payroll growth climbing out of the gutter in June, giving comfort to everyone who brushed off the last couple months' swift and broad deterioration in economic conditions as a mere fleeting "soft patch," and ushering in a day of unanimously cheerleading media reports assuring us of such...
It turns out to be one of those 50% of months when ADP wildly over-predicts official job creation, the data sorely disappoints folks who'd allowed yesterday's hint to convince them all the other data was wrong, markets reverse yesterday's rally and then some, and we're treated to a unanimous tsk'ing from the media over both parties' (but really the GOP's) dastardly culpability in snuffing out the President's promising young recovery by bickering over the debt ceiling.
Should be a fun day. Tune in at 8:30 am.
Update: Yep, it's one of those 50%.
Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down.
This is what you'd call a huge miss. Even without the heartbreak factor of the promising ADP number, this is way below the 80,000 expected (expectations were raised as high as 125,000-175,000 following ADP) and a deceleration even from May's atrocious 54,000 revised 25,000.
Private sector payrolls, expected to rise by 110,000, grew by just 57,000.
Obama boosters will note that it's yet another consecutive month of job creation, but with that expansion clocking in at just 15% of the rate needed to keep pace with population growth (and racing toward zero), that's increasingly cold comfort.
Stock futures promptly gave up early gains and pointed toward a triple-digit loss out of the gate for the Dow.
We can expect further ratcheting down of Q2 GDP growth estimates to follow.
Update: Ed at Hot Air calls to mind a terribly apt nursery rhyme, summing up ADP's reliability.
There was a little girl who had a little curl
Right in the middle of her forehead;
When she was good, she was very, very good,
And when she was bad she was horrid.
Doubly Jobless Thursday
In addition to the weekly unemployment claims data, this morning brings us ADP's monthly private payroll report. Double your pleasure mailaise!
I've been known to pooh-pooh the latter's predictive value toward the government's subsequent monthly employment report (due out tomorrow), but last month, the shockingly low payroll growth reported by ADP proved prescient.
ADP hits at 8:15. The market is looking for a moderate rebound from +38,000 payrolls in May to +60,000 in June.
Initial unemployment claims arrive shortly thereafter at 8:30. Economists prophesy a slight easing from 428,000 to 425,000.
In descending order of confidence, I boldly predict:
- Last week's 428,000 will be revised upward to 432,000.
- Initial claims for this week will deviate from the consensus by more than 10,000. Let's say... on the high side (bad).
- ADP will surprise to the upside (good), spawning a media narrative (for at least the next 24 hours, until ADP is contradicted by the official numbers) that the jobs data is "mixed."
Update: Prediction 3 is manifest.
Employment in the U.S. nonfarm private business sector rose 157,000 from May to June on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated advance in employment from April to May was revised down, but only slightly, to 36,000 from the initially reported 38,000.
A healthy reminder: notwithstanding last month's directionally correct whopper of a surprise from ADP, their predictive record remains highly spotty. Roughly half the time, it proves reasonably accurate. The other half, it tends to grossly overestimate job growth. Almost never does it meaningfully underestimate. The scale of the upside surprise here leads me to suspect this is one of those months when ADP significantly overshoots.
Update: Prediction 1 is perfect. Prediction 2 is bunk.
In the week ending July 2, the advance figure for seasonally adjusted initial claims was 418,000, a decrease of 14,000 from the previous week's revised figure of 432,000.
Look for a fractional stock rally today, but brace for it to be dashed by a heartbreak selloff tomorrow when if the labor report doesn't also eclipse forecasts.
Factory Orders Disappoint (Those Who're Watching ((a Little))
You gotta love long weekends - they leave a mere four days of economic data to bum us out during the week.
Alas, today is Tuesday.
New orders for manufactured goods in May, up two of the last three months, increased $3.5 billion or 0.8 percent to $445.3 billion, the U.S. Census Bureau reported today. This followed a 0.9 percent April decrease. Excluding transportation, new orders increased 0.2 percent.
That compares to an expected increase of 1.0%. Not a huge variance, you say. And the factory orders report isn't closely watched anyway, you continue.
Ah, but those two objections cancel each other out. The reason today's report isn't hotly anticipated is that it rarely deviates much from expectations. That's because it consists of already-disclosed durable goods data and the usually easily forecastable nondurable goods data. So there's never much of a surprise.
And since the durable goods number was actually revised upward in this report (from +1.9% to +2.1%), it has to be the nondurables that came in below expectations.
New orders for manufactured nondurable goods decreased $0.4 billion or 0.2 percent to $249.0 billion.
If durables hadn't been revised, it would've taken an increase in nondurables of more than 0.2% to get to the consensus headline forecast, so this is more than a niggling miss (in both sign and magnitude) on what's supposed to be a readily predictable datapoint.