Little Ho Ho Ho in the Data (Michael Pento) but the market doesn't care.....yet

The Dow is roughly 21% from its all time,

ever high, set in October 2007

Unemployment rate in October 2007...4.7%

(less than 1/2 of the current, fictitious rate)

Wednesday, December 1, 2010
By: Michael Pento

American consumers are trampling each other to capture the holiday spirit—which sadly has now become Black Friday and Cyber Monday. However, the economic data is flashing a warning sign that may, hopefully, deter shoppers from their recidivistic habits.

The number of mortgage applications in the U.S. fell last week by the most this year as lending rates inched higher. The average rate on a 30-year fixed mortgage increased to 4.56% from 4.50% the prior week. Borrowing costs have been rising since reaching 4.21% during the week ended Oct. 8th, which was the lowest in records going back to 1990.The Mortgage Bankers Association’s index dropped 16.5% in the week ended Nov. 26. The gauge of refinancing fell 21.6%, which was the biggest drop in all of 2010.

Meanwhile, the Challenger, Grey and Christmas report released today showed the pace of downsizing surged to the highest level in 8 months. Planned layoffs jumped 28% from their 37,986 level posted in October, to reach 48, 711 in November.

The ISM Manufacturing Report fell slightly in November to 56.6 from 56.9 in October. The ISM’s U.S. new orders index fell to 56.6 from 58.9, while the production index dropped to 55, the lowest level since June 2009, from 62.7. The employment gauge was little changed at 57.5 from 57.7, and the index of export orders dropped to 57 from 60.5.

Finally, the ADP report for November showed that of the 93,000 private sector jobs created this month, only 14k was in the goods producing sector of the economy. The direction of the ADP number is good but still very much shy of the number of new jobs needed to bring down the unemployment rate.

The economy is barely subsisting despite of, or perhaps more correctly, because of government intervention. When will we learn?

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Weak Job Growth of the Wrong Kind (Michael Pento)

Wednesday, November 3, 2010
By: Michael Pento

The employment picture in the U.S. continues to get much worse. The headline number from the ADP report for October showed the economy added just 43k private sector jobs. However, the details of the report showed that the economy lost 34k jobs in the goods producing sector. Therefore, not only are we not creating enough jobs to keep up with the increase in the workforce but we are also still losing jobs in the sector of the economy that is best at creating real wealth.

Service-sector jobs rose by 77,000 last month, while factory jobs fell 12,000. This means job growth is coming from new hires that help sell foreign made goods to U.S. consumers. It also means that we are borrowing more money and will not have the productive output generated to be able to pay it back.

In another report released today on the labor condition of the U.S., employers announced job cuts totaling 37,986 during the month, 2.2% above those planned in September, according to global outplacement firm Challenger, Gray and Christmas, Inc.

The truth is that job growth is anemic and what little private sector hiring that actually occurred came from the service sector of the economy. Therefore, the conclusion can only be that the outlook for the economy is bleak.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Layoff Announcements increase in October: “The problem is that consumer spending will not increase until more people have jobs."

So, right now, it is difficult to imagine

what exactly will provide the spark for

increased hiring and an accelerated recovery.

CHICAGO, November 3, 2010 – Downsizing activity remained flat in October, as employers announced job cuts totaling 37,986 during the month. That was 2.2 percent more than the 37,151 planned layoffs in September, according to the latest job-cuts report released Wednesday by global outplacement firm Challenger, Gray and Christmas, Inc.

October marks the sixth month in the last seven in which fewer than 40,000 job cuts were announced. It was the tenth consecutive month this year that saw fewer job cuts than the same period a year ago. Last month’s total was 32 percent lower than October 2009, when 55,679 job cuts were announced. Overall, the pace of job cutting is down 62 percent from a year ago, with employers announcing 449,258 job cuts year to date, compared to 1,192,587 over the same period in 2009.

“Job cuts are the lowest they have been in a decade, due in part to a slowly improving economy; if not the fact that many employers have basically cut their workforces to the bare minimum. Unfortunately, the lack of spending by consumers and businesses is stunting demand for new workers. The modest gains in business activity are currently being met by increasing hours of existing workers,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“The problem is that consumer spending will not increase until more people have jobs. But businesses won’t begin expanding production or hiring until there is more demand for their products and services. Increased government spending, while economically justified, has become politically unfeasible. So, right now, it is difficult to imagine what exactly will provide the spark for increased hiring and an accelerated recovery. Something has to provide that spark, though, or the economy will be stuck in mud for the foreseeable future,” noted Challenger. Full Report

Small business start-ups lowest rate in over 20 years

By Emmeline Zhao (Wall Street Journal)

The activity of new entrepreneurs plunged in the first half of 2010, falling to the lowest rate in more than two decades as more workers found employment or were driven away from start-ups by a feeble economy.

Start-up activity fell to an average 3.7% in the first two quarters of this year, down from 7.6% in the first half of 2009 and 9.6% in the second half, according to a survey of about 3,000 job seekers by global outplacement and executive coaching firm Challenger, Gray and Christmas, Inc. Many of those surveyed are former managers and executives.

“It is difficult to pinpoint the exact reason behind the decline in start-up activity among former managers and executives,” Challenger Chief Executive John Challenger said in a statement Monday. “On one hand, it could be that the job market has improved to the point that many do not feel compelled to take the risk of going it alone. Then there is the fragility of the recovery and the uncertainty that comes with it. Many small business owners are increasingly pessimistic about business conditions and still find it difficult to get a loan.”

The 3.4% first-quarter start-up rate and the 3.9% in the second quarter mark the lowest first-half since Challenger started recording data in 1986. The highest half-year start-up rate was 21.5% in the first six months of 1989.

While the economy recovers but remains fragile, entrepreneurism drops as fewer job-seekers look to start their own businesses and secure employment. Those already self-employed are less confident about their outlooks — a small business optimism index fell to 92.2 in June from 89 in May, according to the National Federation of Independent Business.

The annual average rate of job seekers starting a business fell with the onset of the recession — from 8.1% in 2007 to 5.1% in 2008. The number of self-employed workers peaked at more than a seasonally adjusted 9.7 million in June 2007, just before the recession, but fell to almost 8.9 million in June 2010, according to the Bureau of Labor Statistics. The rate of new entrepreneurship dropped steadily through the first six months of 2010 from 9 million.

The Challenger survey shows an increase in new entrepreneurs in the third and fourth quarters of 2009 — 11.8% and 7.3%, respectively. The total number of self-employed workers jumped almost 3% to more than 9.1 million in December 2009 from just under 8.9 million that June.

Meanwhile, as fewer people looked to self-employment in the first half of 2010, the number of payroll workers increased by a seasonally adjusted 1.3 million between December 2009 and June 2010 in nonagricultural industries.