Five Things You Need to Know: Dawn of the Slow Movement
As the velocity of life slows, so too will the velocity of money... by definition.
Kevin Depew's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Inside the Payroll Data
Non-Farm Payroll data released by the Labor Department this morning showed the U.S. lost jobs for the first time in more than four years.
Payrolls fell by 17,000 in January, the first drop since August 2003, after an 82,000 gain in December that was larger than initially reported, the Labor Department reported. Internally, the numbers showed wages rose 0.2%, less than the 0.3% forecast, while the average work week showed its first decline since the summer.
Also worrisome, at least from our seat, is the fact that service industry jobs, including banks, insurance companies, restaurants and retailers, added 34,000 jobs last month following December's addition of a whopping 143,000 jobs. Why is that worrisome? Those are among the industries currently facing the most pressure from housing and consumption. It is unlikely those job additions will continue.
Meanwhile, the Manpower Inc. (MAN) conference call this morning revealed an interesting labor market perspective. MAN, the global staffing firm, is well diversified internationally, but the U.S. segment was quite weak, contributing to lowered guidance for the first quarter.
Although MAN does not see the U.S. economy slowing further in the first quarter of 2008 compared to Q4 2007, the company indicated there was also no sign of an upturn either, or a "U-shaped" recovery. As well, the company noted cautiousness on the part of U.S. clients.
Interestingly, MAN CEO Jeffrey Joerres contrasted the current labor market situation with what was seen in 2000 and 2001. "We view what is happening in the U.S. economy as different from what happened in 2001," he said. "In 2000 and 2001 there was a more traditional effect on the labor market. What I mean by that is there was a slowing of demand for goods and services by our clients and therefore we were very much part of being a leading indicator as labor and staff was being whittled out of business."
The current environment is much more based on a slowing housing market and some challenges with the financial industry, so the effect isn't as immediate, Joerres added. "That doesn't mean there won't be as it works through the system, but it doesn't have the immediacy it did in 2000 and 2001."
2. Fly in the Subprime Rescue Ointment: Lenders Shunning Borrowers
An interesting article on Bloomberg this morning highlights the fly in the Fed's aggressive rate cuts and the government's subprime rescue ointment. Apparently state housing agencies are giving the vast majority of applicants seeking housing aid the cold shoulder, so much so that states have had no need to raise additional funds.
More than 50% of subprime borrowers are being rejected by state programs because their homes have lost too much value or they've accumulated excessive debt, according to Geoffrey Cooper, emerging markets director at a unit of MGIC Investment Co., Bloomberg reported.
Bloomberg says at least 10 states have introduced subprime refinancing programs to help stem foreclosures. But housing officials in Ohio, Massachusetts, New York, Connecticut, and Maryland say they underestimated the extent of the crisis as well as the number of applicants.
Take Ohio, for example. Ohio Governor Ted Strickland pushed for a rescue program in April, anticipating selling more than $100 million in taxable bonds to help the state ward of a subprime foreclosure crisis. Gov. Strickland told Ohio residents to apply to refinance their subprime loans with 30-year fixed-rate mortgages. But the state failed to anticipate how many applicants were ineligible because they'd missed a mortgage payment in the last year, Dawn Larzelere, the legislative affairs director at the Ohio Housing Finance Agency told Bloomberg. "I don't think our lending standards are too high,'' Larzelere said. "I think people have gotten in too far over their head.''
3. Residential Real Estate Infecting Commercial Real Estate
Deterioration of the commercial real-estate market will lead to rising losses and bank failures in the near future. Sound like typical bear rumblings? Maybe. Except in this case the "bear" making the rumblings is John Dugan, the comptroller of the currency.
"We're entering a stage of the commercial real-estate credit cycle where problems have started to surface and losses have started to increase,'' Mr Dugan said in a speech in Florida, according to the Financial Times. Specifically, Dugan said what began as a residential real estate problem has spread to commercial real estate.
Wait, just who is this so-called comptroller of the currency anyway? No worries. The Office of the Comptroller of the Currency (OCC) is merely responsible for ensuring the safety and soundness of the national banking system.
4. Gambling Expansion Takes One Step Forward
Five months after outlawing cash-paying video games in bars and taverns, Gov. Ted Strickland has plans to boost the state's ailing budget... by essentially allowing cash-paying video games in bars.
According to the Cleveland Plain Dealer, in the game, called Club Keno, bar patrons would choose numbers on a card, place a bet and the card would be inserted into a machine. Every six to 10 minutes, numbers would be drawn and displayed on a video monitor. Winners would be paid at the bar.
Ohio Lottery Chairman Michael Dolan said Club Keno, which is offered in several other states, can raise significant revenue and he suggested it to Strickland's office a few weeks ago, the newspaper said. And here we thought we were going to have to wait a full year for states to rush to expand gaming (See Five Things No. 5).
5. As a New Secular Bear Market Takes Root, Slow Movement Spreads
The so-called "Slow Movement," which has largely been relegated to the kitchen for the past 20 years, is finally beginning to spread into other areas of life courtesy of a broad shift in social mood. An article in the Home & Garden section of the New York Times yesterday, "The Slow Life Picks Up Speed," looked at the spread of the the basic tenets of the Slow Food movement into other areas, notably Slow Design.
The Slow Food movement emphasizes slowness in the creation and consumption of products. As the Times points out, it's widely portrayed as a "corrective" to the frenetic pace of 21st-century life. ""Good, clean and fair" is the Slow Food credo, and it has - rather slowly - begun to make its way out of the kitchen and into the rest of the house," the article notes.
Carl Honoré, a Canadian journalist, published a book on the rise of the Slow Movement in 2005, "In Praise of Slow: Challenging the Cult of Speed." In it he chronicled the sudden rise (how ironic) of all manner of slow movements, from tantric sex to Slow Food to the Society for the Deceleration of Time, the article noted.
"Sometimes it's more of a click in attitude than anything else," Mr. Honoré told the Times. Indeed, an attitude whose time has finally come. Remember, it's the velocity of money that is most important to our economy. As the velocity of life slows, so too will the velocity of money... by definition.
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