Five Things You Need to Know: Payroll Data; Slowing Service; Five Themes for 2008 Feedback; But Isn't Weather Free?; Five Things Open for Discussion On the Exchange
What you need to know (and what it means)!
Kevin Depew's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Payroll Data
Wow, is it really as bad as all that? The unemployment rate rose to 5% in December, the Bureau of Labor Statistics reported this morning.
- Payrolls rose by a mere 18,000, the Labor Department said.
- That marks the worst year for job creation since 2003.
- Economists surveyed by Bloomberg News had forecast a gain of 70,000.
- The last time the jobless rate rose more in a single month was April 1995, according to Bloomberg.
- The hardest hit sectors based on the preliminary data were no surprise: Construction, Manufacturing and Retail shed a total of 104,000 jobs.
- For all of 2007 the unemployment rate averaged 4.6%.
2. Slowing Service
Closely related to today's Number One, U.S. service industries expanded in December at the slowest pace in nine months, according to the Institute for Supply Management.
- The Institute for Supply Management's index of non-manufacturing businesses activity fell to 53.9 from 54.1 the prior month.
- Why is this an important measure?
- Non- manufacturing businesses make up nearly 90% of the economy.
- With the U.S. no longer a manufacturing-dependent economy, service industries are critical to economic growth.
- Of course, anything above 50 indicates growth, so bulls can point to this with some comfort.
- But the section of the report detailing "what respondents are saying" provides some interesting anecdotal evidence of business expectations across a number of industries.
- "There continues to be concern regarding energy, commodity, credit, transportation, etc. These issues are consistent topics of conversation," according to Retail Trade respondents.
3. Five Themes for 2008 Feedback
Over on the Minyanville Exchange we received an interesting note regarding yesterday's Five Themes You Need to Know for 2008. (For more on the Exchange see today's Number Five.)
Take the 10-15 minutes it takes to read this article by Jude Wanniski (author of "The Way the World Works").
He was talking about deflation back in 2001. Many of the Minyan authors have this right. Jude was right in 2001 about deflation but Greenspan kept rates artificially low to push out the reckoning.
- Minyan James
James, thanks for the link. I disagree with Winniski slightly about this: "Deflation-a significant undersupply of money relative to demand-is first signaled by a fall in sensitive commodity prices, which can change rapidly in highly liquid "spot" markets."
That, certainly, is one kind of deflation, but it is not where we are currently. In fact, it is today, ironically, the very surge in commodities prices (things which Mr. and Mrs. Jones do not buy directly - crude oil barrels, bushels of wheat, etc.) that is sowing the seeds for a deflation, rather than a contraction, as Winniski characterizes the differences.
In this deflation, consumer demand will cut back ahead of a fall in commodities prices. Unlike previous contractions, or deflations, the U.S. plays a smaller relative role in setting commodities prices via demand than it once did. This is a good thing. But it is because of this that those watching commodities prices for signs of a pending hyper-, in- or de-flation may be misreading what is happening. Instead, watch bond prices and interest rates.
Something is clearly not "correct" based on bond prices and interest rates. The signals being generated through commodities prices are out of sync with declining interest rates and spiking gold prices. This is probably a warning that a contraction in the U.S. is already present even though backward looking economic data has yet to confirm it. At least, that's my two cents on the subject. Thanks again for pointing us to the article. Great read and good historical information.
4. But Isn't Weather Free?
The Weather Channel's owner, closely held Landmark Communications Inc., said yesterday it was exploring the potential sale of the independent network, according to the Wall Street Journal.
- Several major media companies were reportedly considering bids, according to the Journal.
- Potential bidders were said to include Time Warner (TWX), General Electric's (GE) NBC Universal, News Corp. (NWS), CBS (CBS) and Discovery Communications, which owns the Discovery Channel.
- Landmark, which also owns several small daily newspapers and two television stations, said it is open to selling its businesses in pieces, the Journal reported.
- The company doesn't break out financial information, but Vice Chairman Richard Barry said it had total revenue of $2 billion last year, according to the newspaper.
- The Weather Channel and its Web site, Weather.com, are the most valuable parts of the business, with a combined valuation of as much as $5 billion, according to some analysts, which bodes very well for my soon-to-be-launched 24 hour "Small Talk Channel."
5. Five Things Open for Discussion On the Exchange
We love the daily feedback we get from Five Things readers who consistently raise good points, objections, agreements and direct us to things we may have missed or which might make terrific fodder for future topics. Now, with the Minyanville Exchange, this can be opened up to a larger audience. Take a few minutes to visit the Exchange and register. We look forward to continuing the conversation.
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