The numbers for the employment situation in February were released today and the unemployment rate was flat at 9.7% with no change.  The equity market investors rejoiced at the Department of Labor’s report as the numbers were better than expected.  However, it wasn’t that peachy.

36,000 jobs were lost (the consensus was predicting 50,000 jobs lost), meaning about 36,000 people also had to exit the labor force to keep the unemployment rate from changing.  The jobs lost were mainly from construction, which lost 64,000 jobs last month.  The construction industry’s unemployment rate rose from 21.4% this same time last year to 27.1% this year according to the Associated General Contractors of America (AGCA).  Stephen Sandherr, AGCA’s CEO, commented, ”The industry has gone from being a symptom of our economic problems to a victim of them. Until we see meaningful increases in demand for new infrastructure and private sector construction projects, our economy will continue to suffer.”

The number of lost jobs surprised the market as investors anticipated February snow storms to hurt employment numbers.  Due to the hype about February snow storms the Labor Department made a special note stating workers are counted as employed even if they only worked one hour for the pay period.  Not surprisingly, the average workweek fell from 33.3 hours in January to 33.1 hours in February - the snow storms likely placed their effect on this statistic.

On a side note, total U.S. consumer credit rose $4.96 billion in January, its first rise in a year and the largest for any month since mid-2008.  Are consumers finances improving?

The National Association of Realtors released the Pending Home Sales Index today.  The index measures housing contract activity and is based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes, which is usually one to two months out for most contracts.

The index declined 7.6% from December to 90.4 in January.  Since last January, however, the index is up 12.3%.  The National Association of Realtors blamed the low sales on cold and poor weather conditions which detracted buyers from house shopping.  The cold weather doesn’t quite explain the lower numbers though as the numbers are seasonally adjusted.

An index of 100 is equal to the average level of contract activity during 2001, the first year the index was created. 2001 was also the first of four consecutive record years for existing-home sales. With 2001 as the base year an index of 100 coincides with a historically high level of home sales activity.  It may not be reasonable for the people to expect a level of 100 for this index in the future - at least until the base year reflects a normal market.

Services sectors show best growth in two years: ISM data

Rollercoastering through unemployment, the US is soon to fill with jobs that have to be created for today’s youth (or as a youth, I hope).  After IBM’s non-manufacturing index rose 2.5 points to 53.0 points, there truly is a significant improvement in employment as the US service sectors grow at the fastest pace in more than two years this past February.

The Institute for Supply Management survey resulted the ISM non-manufacturing index rose to 53 in February from 50.5 in January, marking the best reading since December 2007.  ISM surveyed nearly 400 firms from 60 US sectors; including agriculture, mining, construction, transportation, communications, wholesale trade, and resale trade.

So, is the economy truly climbing the rollercoaster?  Leveling out?  Jennifer Lee, senior economist for BMO Capital Markets, says, “The US economy is recovering…it fits and starts.”  In other words, the economy stalls and then picks up.

A 7.6 million annual rate for domestic made car sales was reported in February.  In January the number was 7.9 million, in December 8.4 million.  It’s not unusual for car sales to decrease in the later winter months as consumers retreat from the car lots in poor weather.  GM’s sales actually increased by 12%.  GM attributed the rise to doubling their sales to fleet operators and demand for newer crossovers, like their Chevy Equinox.  Surprisingly, Toyota also posted an increase in sales moving from 69,691 domestic units in January to 100,027 in February.  Apparently, the American consumer isn’t especially phased by Toyota’s mishap.  For once, in Oz, things make more sense…

Consumers Spend More & Save Less

The Bureau for Economic Analysis released the numbers for January pertaining personal income, disposable personal income (DPI), and personal consumption expenditure (PCE).  Personal income increased .1% in current dollars  since December, while disposable personal income decreased .4% in current dollars (.6% in 2005 real dollars).  The discrepancy arose from the increase in federal nonwithheld income taxes.  Personal current taxes rose by $59 billion and disposable income only rose by $11 billion - resulting in a decline of disposable income of $48 billion or .4%.  The tax increase is an annual adjustment, which gave us the large month over month change.

Personal consumption expenditure increased .5% in current dollars (.3% in 2005 real dollars).  For expenditure to increase when disposable income increases means consumers dipped into their savings to fund their purchases.  Personal savings declined $101 billions dollars from December and the savings rate declined from 4.2% of income to 3.3% - but still remained positive (meaning credit didn’t play a huge part in the expenditures).

Is the consumer more confident to be spending more when they’re receiving less?  Maybe, maybe not.  The 5% increase in consumer expenditure was made up of 99% nondurable goods and services.  In other words, the consumer wasn’t out buying the giant flat screen TV or new Cadillac.

Manufacturing Employment Increases - For Good?

The Institute for Supply Management released the manufacturing report for last month and manufacturing employment numbers rose once again.  The manufacturing employment index rose from 53.3 to 56.1 in February.  Any number above 50 indicates growth, the larger the number above 50, the faster the growth.  Is the employment growth due to temporary workers or actual permanent workers?  My hunch is for the former.  Looking at the customer inventories index, the index which measures the respondents (manufacturing firms surveyed) belief on the optimal size of their customer’s inventories, manufactures believe their customer’s inventories have room to grow.  The index did rise from 32 to 37, but is still well below 50.  The demand created by the room to grow can be met with temporary manufacturing workers, but is unlikely to be sustained by permanent workers.  As inventory demand returns to normal there will no longer be the need to play “catch up” and the extra labor will not be needed.  A complete breakdown of the report is given below or can be found at the ISM’s website.

Kohn Steps Down

Donald Kohn the Vice Chairman of the Federal Reserve made it known today he is stepping down in June after 40 years of service.  His departure will leave three spots open on the board of seven giving President Obama ample opportunity to select appointees who follow his philosophies.  I wonder if that makes Kohn happy?