Suitably Flip

Nessuno Sa la Fatica che Ho Visto

Former Italian prime minister Silvio Berlusconi is sentenced to four years in prison, following tax evasion conviction.

Fiscal Cliff the Least Of Our Problems

Oh good!

Oh, wait.  They might mean that in a bad way.

Commerce Department Set To Drop MOAOS on Friday?

(Mother of All October Surprises, that is.)

At 8:30 tomorrow morning, the Commerce Department will unveil the advance estimate of third quarter GDP growth.  Consensus expectations are for a mild uptick from the previous quarter's moribund 1.3% to something like 1.8%.

But that same department's report this morning on September's durable goods orders, despite an above-estimate headline number, might hint at something less rosy.

GDP Estimates Move Lower Following Durables Report
...
Details within the report were discouraging — and could point to a weaker-than-expected figure in Friday’s much-anticipated report on third-quarter gross domestic product.

Perhaps most concerning: Business investment has fallen over the last three months. Orders for nondefense capital goods excluding aircraft — a proxy for business spending on equipment and software — were flat in September, after rising a bleak 0.2% in August and falling 5.6% in July. Shipments of those goods have fallen in each of the past three months.

J.P. Morgan, Morgan Stanley and Wells Fargo all cut their growth rate forecast in the wake of the durable goods report, with the consensus slipping to 1.7% (and the whisper number now undoubtedly lower).  If we see something below 1.3%, it'd be the third consecutive quarter of deceleration and a decent indication that we've hit stall speed.

If it can cut through coverage of generation-defining issues of the day like free birth control and Gloria Allred, that might make some waves.

I'll go ahead and make the mopey prediction that we actually see a zero handle.

Update:  A bit better than expected (until the revisions, naturally) at 2.0%.

Update:  Speaking of revisions, if you poke around the BEA archives, you'll find that roughly 3 of every 4 quarters' initial estimates (since 2009) wind up lower upon final revision.  On average, 0.5% lower.

Kids Say the Darnedest Things

Note the President isn't saying this unpresidential thing.  He's just passing on what he's hearing among 6-year-olds.  Mkay?

FIRST LOOK – Rolling Stone cover, “Obama and the Road Ahead: The Rolling Stone Interview,” by Douglas Brinkley: “We arrived at the Oval Office for our 45-minute interview … on the morning of October 11^th. … As we left the Oval Office, executive editor Eric Bates told Obama that he had asked his six-year-old if there was anything she wanted him to say to the president. … [S]he said, ‘Tell him: You can do it.’ Obama grinned. … ‘You know, kids have good instincts,’ Obama offered. ‘They look at the other guy and say, “Well, that’s a bulls***ter, I can tell.”’”

Impact of the Final Debate

The conventional wisdom that suggested that all Romney needed to do was hold his own, show he's knowledgeable about foreign affairs, isn't the bloodthirsty warmonger his opponents and the media would like him to be, and has some kind of cohesive vision for a stronger America, appears to be supported by the snap polls.

Despite respondents indicating that (as in the second debate), Obama "won" the event by some modest-to-moderate margin, they were nonetheless more persuaded to vote for Mitt Romney.

Two key nuggets:

CNN poll of debate watchers: Who did debate make you more likely to vote for? Obama 24%, Romney 25%, Neither 50%. #CNNDebate

— Sam Feist (@SamFeistCNN) October 23, 2012

PPP post-debate INDYs only key stat: "More/less likely to vote after debate" - Obama 32 more/48 less. Romney 47 more/35 less.

— NumbersMuncher (@NumbersMuncher) October 23, 2012

Interestingly, Romney was the one highlighting points of agreement, while Obama was ticking off conflicts. Romney was pulling punches, while Obama was baiting and jabbing.  In other words, neither seems to think the incumbent remains the frontrunner.

Poll fiend NumbersMuncher made another interesting observation:

I still find it remarkable that Obama mentioned PA first in the debate and Romney mentioned it later. You tend to do that when its in play.

— NumbersMuncher (@NumbersMuncher) October 23, 2012

Nasdaq Loses 3000

For the first time since August.

Decent earnings seem to be losing the battle with concerns over macro growth.  Friday's first look at third quarter GDP growth should help stir the pot.

Dan Rather Is Concerned About Electoral Integrity, Still Exists

The Examiner, via Ace:

“Keep in mind: The whole upper tier of Ohio state government is in the hands of the GOP now,” Rather explained in a Facebook post this morning. “In very close voting they have the power to influence what votes are counted and how.”

Rather warned, “Remember Ohio, Bush v. Kerry in 2004 and Florida, Bush v. Gore in 2000.”

Indeed, if the state government can keep the margin of fraud narrower than the margin of victory, they may well prevent a "fake but accurate" tally from prevailing.

25 Years Ago

Was a not optimal day.

Report: Hillary Ordered Additional Libya Security, Didn't Get It

Darrell Issa's day just got busier.

After the Clinton legal team had a chance to review the State Department cable traffic between Benghazi and Washington, the experts came to the conclusion that the cables proved that Hillary had in fact given specific instructions to beef up security in Libya, and that if those orders had been carried out — which they weren’t — they could conceivably have avoided the tragedy.
...
I am told by my sources that she firmly believes that when the State Department cable traffic is made public, either through leaks to the press or during formal House committee hearings, it will exonerate her and shift the blame for the entire mess onto the president.

Of course this is (at least) a step shy of Hillary's team publicly making such an assertion, but if it gets to that point, Obama has zero good options, even if the cables never see the light of day.  He can confirm it, which is death, or deny it, at which point Bubba disappears from the campaign trail, likely leaving a touch of scorched earth behind him, and perhaps Hillary resigns for good measure.

I suppose we can't underestimate the possibility of a squishy middle ground, wherein Obama stonewalls on the specifics, acknowledges mistakes were made, and directs a vaguery of mid-level state department personnel under the bus for failing to carry out Clinton's instructions.  Even if the cables themselves paint a clear picture of White House culpability, they can probably run out the electoral clock with such a strategy, so long as Hillary doesn't unduly bristle.

Unless Issa acts swiftly, that is.

Jobless Thursday: Yes, Virginia, the Economy Does Suck

Since we jobbers have been exposed as utterly disjointed conspiracists to a man, we can have unquestioning faith that today's spike in weekly unemployment claims (from an (obviously upward) revised 342,000 to a whopping 388,000) is legit, neither the result of last week's missing state data, nor of dastardly data massage.

The 46,000 increase (to be revised next week to 48-50k) is the largest since Obama's inaugural month of January 2009.

Change in Weekly Initial Unemployment Claims

388,000 is the highest reading of initial jobless claims since mid-June (392,000).  Upon revision, it may prove to be the highest since late-November 2011 (399,000).

Weekly Initial Unemployment Claims
(Blue = range of likely revision)

Suspected Spontaneous Protester Arrested for Alleged Plot to Spontaneously Protest Federal Reserve

Fixed that headline for you, NBC News.

Suspected Terrorist Arrested for Alleged Plot to Attack Federal Reserve in NYC
The plot was a sting operation monitored by the FBI and NYPD

Gallup: Romney Up 4 (Update: Now 6; Update: Now 7!)

Surge.

Romney
50%
+1

Obama
46%
-1

Daily Kos predicted their own PPP poll (also showing Romney up 50-46) would be by far the worst poll of the week for Obama.  By "the week" they presumably meant "Tuesday morning."

Both among likely and registered voters (where Romney now ties Obama at 47), this is Romney's best post-debate Gallup showing by 2 points, further muddying the bounce-reversal story.

Update:  Note well that Gallup's new-and-improved, Axelrod-approved favorability sampling shows Obama increasing to 49% approval today, despite his cratering re-elect number.

Update:   Romney pulls into a 6-point lead in Wednesday's Galllup tracker (51/45).  Up 2 among registered voters.  But surely Obama will overcome even that deficit in the electoral college, right?

From Charles Cooke:

These statistics are there to be broken, but it is worth pointing out for the record that, in the history of Gallup, no presidential candidate has ever been over 50 percent in mid-October and gone on to lose.

Update:  As of Thursday, Romney's expanded to a 7-point lead (52/45).  Weren't we told Obama won the 2nd debate?

FoxNews.com Live, Today at Noon

I'll be on FoxNews.com Live today from 12:00 - 12:20 with Jonathan Hunt, discussing the state of the race heading into the VP debate.

If you miss it live, you can catch a replay at the link until noon on Friday.  I'll update with any notable highlights.

Update:  Here's a clip.

A Deeply Cynical and Heroically Bold Prediction

We'll see a Strategic Petroleum Reserve release before November 6.

Gasoline Prices Set to Rise Through Election Day

Retail gasoline prices, already at the highest levels on average since July 2008, are likely to continue to climb this month as refinery and pipeline problems overshadow weakness in U.S. consumer demand.

On Wednesday night, a fire broke out at Exxon's Baytown, Texas refinery, a 584,000 barrel per day facility that is the largest operating refinery in the U.S.

Exxon said there may be "some impacts to production" from the fire, but the plant will resume normal operations. A partial shutdown of the Colonial Pipeline, the nation's largest oil product pipeline, also contributed to supplies fears, as it impacted the portion of the line carrying gasoline from Atlanta to Nashville.

"It will only take another refinery issue and a bit more of geopolitical noise to have the first U.S. election at a US average gasoline price of $4 a gallon," says energy analyst Olivier Jakob of Petromatrix.

Probably not for another 1-2 weeks though, assuming they've learned the lesson from last year's non-emergency release.

On June 23 [2011], the day the U.S. unveiled plans to release 30 million barrels from the Strategic Petroleum Reserve, crude plummeted $4.39 a barrel, or 4.60% -- the biggest one-day selloff since mid-May. The tumble left crude, which had already been losing serious ground, at its lowest level since February 18.

That wasnt a change in sentiment, said Schork. This was a state-sponsored margin squeeze.

Indeed, crude took just five days to bounce back from that selloff and continued to head northward. On Tuesday, crude jumped another $2.28, or 2.4%, to $97.43 -- leaving it $2.02 above the SPR release level.

Likewise, the national average price of gasoline tumbled from $3.6258 a gallon on June 22  the day before the SPR release  to as low as $3.5412 on June 30, according to the Oil Price Information Service. However, gas prices quickly bounced back, increasing 11 of the 12 days so far in July and climbing to $3.6361 a gallon on Tuesday.
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This is purely a politically-motivated move and the market is seeing right through it, said Schork. This is why prices have bounced back so ferociously in such a short amount time.

Crude prices were roaring back inside of a week.  Prices at the pump had returned to pre-release levels (even higher) within three weeks.  So tapping the SPR in the modern oil market - particularly when the market perceives electoral impetus - does little more than paper over the problem for a few weeks.

On the plus side, it papers over the problem for a few weeks!

Let's watch that reserve get raided, ooh, say between October 11-18.

Jobs

Here comes the number of the month.  In the wake of Wednesday's upside-surprising ADP report that convinced no one to raise their expectations for today's payroll data, we're left with a consensus of 120,000 jobs added in September, with unemployment ticking back up to 8.2%.

A deviation similar to last month's ADP-actual gap would imply something closer to 60,000 jobs, but I'd be surprised if we're meaningfully under 100,000.  8.2% sounds about right, but as always, it'll be at the mercy of the cratering participation rate.  If it continues to tank, we could see the rate hold at 8.1% or even "improve" further.  If it normalizes somewhat, we could have a multiple tick jump.

Data at 8:30 am...

Update:  Wow.  114,000 new jobs (slightly below expectations, and comfortably below the pace needed to keep up with population growth).  Unemployment down to 7.8%.

This may partially explain the declining rate:

The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000.

The revision largely dwells in a change of heart about whether government jobs were lost (as previously reported) or gained (tada!) over the last two months.

Rick Santelli's prediction that the Labor Department would, come hell or high water, manage to get the headline rate under 8% by election day has been validated.

Update:  Ed notes that for every job created in September, exactly 3 people abandoned the workforce entirely.

However, the number of unemployed dropped 456,000 last month, while only 114,000 jobs got added.  That either means that 342,000 people left the US, or they left the work force in one way or another.

Update:  Yeah, this doesn't smell right.  The household survey (the part used to calculate the unemployment rate, not official payroll growth, which comes from the establishment survey) shows a whopping 873,000 jobs added in September (seasonally adjusted).

How whopping?  It's the best month of the millennium to date.

Monthly change (thousands) in seasonally adjusted employed, per household survey

In fact, it's the best month since 1983 (excluding Januarys, which usually show crazy numbers, due to annual revisions, which is why they're removed from the chart).

That's just not remotely plausible.  In the last 29 years, we've had 22 quarters of growth exceeding 5%.  And never did the household job creation rate hit the ostensible peak we just experienced, with growth hovering in the 1-2% range.

We've either got a massively massaged seasonal adjustment in place, a drastic change in household survey methodology, or the number is real, the economy is booming, and ADP undercounted by 700,000.

Update:  If it's a change in methodology, it may be in how they count (or adjust for) the number of part-time jobs.

The number of people with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million, the most since February 2009.

That skyrocketing of 600,000 is not too far from the discrepancy between the household (+873k) and establishment (+114k) surveys.

Labor Secretary Hilda Solis was on CNBC a few minutes ago defending the household survey and its attempts to capture various flavors of self-employed that the establishment survey misses.

Maybe DOL is taking a cue from Obama's welfare work requirement tinkering, and redefining self-employment to include things like motivational reading and making your bed.

Update:  That about sums it up.

So BLS isn't "cooking the books" they just changed the recipe. suitablyflip.com/suitably_flip/…

— DrewM (@DrewMTips) October 5, 2012

Update:  Here's another chart for you to ponder.  This is the monthly disrepancy between the job growth as reported in the household and establishment surveys (positive numbers indicate household > establishment).

This month's gap of 759,000 just isn't something you tend to see, outside of the months surrounding massive terror attacks and financial meltdowns.

In fact, while it's a volatile series, it's been less so in recent years, without a monthly divergence nearly as large as this one since the official end of the recession in 2009.

Monthly discrepancy in payroll growth (thousands) between household and establishment employment surveys

Romney Rally

From Business Insider:

Stocks are taking off. Now up a bit less than 1%.

Romney rally? It could be, since there's no equivalent rally happening in the European sovereign bond market, so it would imply that the rally is based on something stateside.

Here's the S&P 500 futures market action during the debate and immediate post-game.

ADPick'em

T-minus 15 minutes until ADP's increasingly unreliable prelude to Friday's jobs report.

Economists expect it to show 133,000 jobs created in September, but how to parse that expectation?  ADP showed 201,000 for August and the government followed up with a piddling 96,000 (103,000 private payrolls, which is more apples:apples) two days later.  Has the ADP consensus begun to take its error term into account?

Apparently not, as the estimate for Friday's official private payroll growth is a very similar 130,000.

In fairness, as noted in this space repeatedly, ADP's predictive powers only tend to whiff huge about half the time (and in such cases, almost inavriably they whiff high).  The rest of the time, they're usually fairly close.

I'm going to speculate they come in well under consensus, perhaps the result of timing differences between theirs and the government survey (meaning the two-month average discrepancy might moderate a fair bit).

Let's say [thumb in the air...] 85,000.

Of course, the other way the average discrepancy could decline is for ADP to come in roughly in line and for the official job creation number to spike closer to 200,000, but... hmm.  As activist as the Labor Department has become lately, that seems like a stretch.

Update:  Other direction.  162,000.  August and July were revised down by 12,000 and 17,000, respectively, so that must be where we're going to get our partial discrepancy normalization from.  Judging by CNBC's monthly gap analysis, that 50/50 track record has actually gotten worse recently, with ADP overshooting more like 75% of the time this year.  So don't get too excited about an upside surprise on Friday.

Update:  Via Hot Air, Gallup throws some cold water on September.

U.S. nongovernment workers reported worse job creation conditions in September than they have in any month since February. Gallup’s Job Creation Index score of +21 among nongovernment workers is down from +23 in August and a high of +25 in April. At the same time, the job creation climate within state and local government became even more positive, helping to sustain U.S. job creation nationally. …

Nongovernment workers, which include private- and nonprofit-sector workers, continue to report the most job creation overall, but September’s score marks a retreat from the higher numbers of the previous six months and a movement toward the level seen at the start of the year. Because nongovernment workers make up more than 80% of the monthly sample of employed workers, the decline in that sector helped push the overall national average slightly lower in September.