{"id":910,"date":"2012-09-12T14:11:46","date_gmt":"2012-09-12T20:11:46","guid":{"rendered":"http:\/\/www.sunlakesofarizona.com\/blog\/?p=910"},"modified":"2012-09-12T14:11:46","modified_gmt":"2012-09-12T20:11:46","slug":"economic-notes-for-the-week-of-september-10th","status":"publish","type":"post","link":"https:\/\/dev.sunlakesofarizona.com\/blog\/2012\/09\/economic-notes-for-the-week-of-september-10th\/","title":{"rendered":"Economic Notes for the Week of September 10th"},"content":{"rendered":"

The ISM manufacturing index<\/strong> for August was weaker than expected, coming in at a slight decline to 49.6 versus an expected 50.0.\u00a0 New orders, production and employment were all down slightly, while supplier deliveries and inventories helped.\u00a0 Construction spending<\/strong> fell -0.9% in July, despite calls for a slight gain of a half-percent or so.\u00a0 On the other hand, auto sales<\/strong> rose to an annual rate of 14.52 million units for August\u2014up from 14.1 in July\u2014so buying conditions here are improving.<\/p>\n

The non-manufacturing ISM <\/strong>rose strongly from 52.6 in July to 53.7 in August, which was largely unexpected and above a forecast of no change.\u00a0 The employment index rose notably, while the new orders and general business activity pieces were a bit weaker.\u00a0 This is perhaps unsurprising, as our economy has shown more strength and general growth in service sectors than it has in manufacturing (a multi-decade trend).<\/p>\n

The U.S. Commerce Department\u2019s productivity growth<\/strong> figure for the second quarter was revised up from an annualized +1.6% to +2.2%.\u00a0 Nonfarm unit labor costs<\/strong> were revised downward from +1.7% to +1.5% for Q2, while, at the same time, costs for Q1 were revised upward from +5.6% to +6.4% (old news now).\u00a0 Overall, the year-over-year number is just under 1%, despite quarter-to-quarter choppiness, which is on par with other inflation numbers.<\/p>\n

Initial jobless claims<\/strong> came in at 365k, which was a drop of -12k from the prior week and a bit lower than the expected 370k for the Sept. 1 ending week.\u00a0 Continuing claims for the Aug. 25 week registered at 3,322k, which was a bit higher than the expected 3,315k number.<\/p>\n

The ADP report, which has sporadically been useful\/not useful in forecasting Friday\u2019s government jobs number, showed a gain of +201k jobs in August, which was a positive surprise versus the expected +140k.\u00a0 July figures were also revised up by +10k.\u00a0 Gains in employment appeared across all types of firm sizes as well as sectors, which is a positive development.\u00a0 Service jobs rose by +185k, while \u2018goods-producing\u2019 jobs were up +16k, in line with the direction our economy\u2019s going (more service positions than manufacturing).<\/p>\n

The bigger report, the government\u2019s monthly employment situation<\/strong>, resulted in a weaker gain of +96k jobs, which is a bit below the forecast +130k figure.\u00a0 Manufacturing and temporary employment were both down.\u00a0 Hours worked rose by 0.1 hour and hourly earnings for August were flat (year-over-year gain was +1.7%, largely in line with broader CPI inflation).<\/p>\n

The unemployment rate<\/strong> fell from 8.3% to 8.1%, which is a headline positive, as was the broader U-6 measure of \u2018underemployment\u2019 fall from 15.0% to 14.7%, but the details are much weaker\u2014the improvement being driven by a shrinking of the labor force.\u00a0 Some of this is based on demographic models; some of it is just less participation, which points to some of the structural unemployment issues Bernanke alluded to in his Jackson Hole comments.<\/p>\n

Considering the political context and focus the \u2018jobs numbers\u2019 are receiving in the months prior to the November presidential election, it might help to put these measurements into perspective.\u00a0 For one, they\u2019re estimates, and not necessarily precise ones.\u00a0 For instance, the confidence interval of monthly employment figures is +\/- 100,000 jobs, so the room for error is quite large.\u00a0 (What this means:\u00a0 if the estimate for the prior month comes in at 150,000 jobs, there is a 90% statistical chance of the true estimate falling between 50,000 and 250,000 jobs…a fairly wide range.)\u00a0 But, that said, it is the best estimate we have in this short amount of time, which is why traders and politicians both react so strongly to it.\u00a0 Should they?\u00a0 Probably not.\u00a0 However, it could be another factor in Fed officials deciding on further accommodative action.<\/p>\n

In European news, the ECB proposed a new bond-buying plan that would essentially serve as another \u2018backstop\u2019 for individual country interest rates, by promising essentially unlimited funds to support these markets.\u00a0 This has been the real question up until this point….would there be any type of backstop if things turned ugly for the peripheral nations?\u00a0 The new Outright Monetary Transactions (OMT) program would buy government bonds with a maturity of three years and under, but only for those nations currently the European stability mechanism… if that isn\u2019t convoluted enough.\u00a0 So, Spain could qualify if it elects to fall under that system (it hasn\u2019t chosen that path yet).<\/p>\n

This is another step in the right direction, but certainly doesn\u2019t bring uncertainty to an end quite yet.\u00a0 Now it is up to the politicians to agree on whether or not this is feasible (and legal).\u00a0 The German constitutional court rules this week regarding how far that nation can give up sovereign control over to the broader ECB in these stability mechanism activities (as the largest member, their participation is obviously critical).\u00a0 It is a fine line these politicians are walking in terms of preserving the Euro but also not giving up too much of their own sovereignty and money\u2014to an unknown outcome beyond their own borders.<\/p>\n

Market Notes <\/em><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n
\n

Period ending 9\/7\/2012<\/strong><\/td>\n

\n

1 Week (%)<\/strong><\/p>\n<\/td>\n

\n

YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n

DJIA<\/td>\n\n

1.68<\/p>\n<\/td>\n

\n

11.02<\/p>\n<\/td>\n<\/tr>\n

S&P 500<\/td>\n\n

2.28<\/p>\n<\/td>\n

\n

16.09<\/p>\n<\/td>\n<\/tr>\n

Russell 2000<\/td>\n\n

3.74<\/p>\n<\/td>\n

\n

14.73<\/p>\n<\/td>\n<\/tr>\n

MSCI-EAFE<\/td>\n\n

2.90<\/p>\n<\/td>\n

\n

10.02<\/p>\n<\/td>\n<\/tr>\n

MSCI-EM<\/td>\n\n

2.27<\/p>\n<\/td>\n

\n

5.72<\/p>\n<\/td>\n<\/tr>\n

BarCap U.S. Aggregate<\/td>\n\n

-0.27<\/p>\n<\/td>\n

\n

3.58<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n\n\n
U.S. Treasury Yields<\/strong><\/td>\n\n

3 Mo.<\/strong><\/p>\n<\/td>\n

\n

2 Yr.<\/strong><\/p>\n<\/td>\n

\n

5 Yr.<\/strong><\/p>\n<\/td>\n

\n

10 Yr.<\/strong><\/p>\n<\/td>\n

\n

30 Yr.<\/strong><\/p>\n<\/td>\n<\/tr>\n

12\/31\/2011<\/td>\n\n

0.02<\/p>\n<\/td>\n

\n

0.25<\/p>\n<\/td>\n

\n

0.83<\/p>\n<\/td>\n

\n

1.89<\/p>\n<\/td>\n

\n

2.89<\/p>\n<\/td>\n<\/tr>\n

8\/31\/2012<\/td>\n\n

0.09<\/p>\n<\/td>\n

\n

0.22<\/p>\n<\/td>\n

\n

0.59<\/p>\n<\/td>\n

\n

1.57<\/p>\n<\/td>\n

\n

2.68<\/p>\n<\/td>\n<\/tr>\n

9\/7\/2012<\/td>\n\n

0.11<\/p>\n<\/td>\n

\n

0.25<\/p>\n<\/td>\n

\n

0.64<\/p>\n<\/td>\n

\n

1.67<\/p>\n<\/td>\n

\n

2.81<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

We experienced a shortened Labor Day holiday week, which has traditionally brought us out of a typically low-volume summer and into a seasonally more \u2018adventurous\u2019 time of year.\u00a0 The first week of the new \u2018season\u2019 was a strong one.\u00a0 \u2018Risk\u2019 in all forms was strongly up, led by foreign stocks and small-caps, while large-caps were also positive.\u00a0 In the S&P, the week was led by cyclical materials and financials, while utilities and consumer staples lagged\u2014being more defensive.<\/p>\n

Bonds were down on higher interest rates.\u00a0 However, credit, including high yield, as well as foreign bonds were strongly higher\u2014nearly performing as well as equities.<\/p>\n

European REITs performed best, in line with other European stocks, while U.S. office\/industrial and Asian REITs weren\u2019t far behind.\u00a0 U.S. retail and residential real estate was up positively, but lagged other areas.<\/p>\n

In commodities, metals were up big\u2014both industrial and precious\u2014by over 5%.\u00a0 Copper and silver in particular were the largest gainers on the week, led by hopes for more monetary easing in the U.S. and approval of a large infrastructure program in China.\u00a0 Energy was also up, but less so, while agricultural contracts fell.<\/p>\n

Hopefully, you received our invitation for this week\u2019s Monthly Advisor Meeting, to be held Thursday, September 13, at 9:00 AM Pacific\/12:00 PM Eastern, during which we\u2019ll discuss the current market environment and performance of our asset allocation portfolios\u2014in addition to an always-interesting Q&A session.<\/p>\n

Have a good week.<\/p>\n

Karl Schroeder<\/p>\n

Investment Advisor Representative<\/p>\n

Schroeder Financial Services, Inc.<\/p>\n

480-895-0611<\/p>\n

Sources:\u00a0 FocusPoint Solutions, Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, Goldman Sachs, JPMorgan Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Thomson Reuters, Schroder\u2019s, Standard & Poor\u2019s, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.\u00a0 Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return\/excluding dividends.\u00a0 Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.<\/p>\n

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.\u00a0 All information and opinions expressed are subject to change without notice.\u00a0 Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.\u00a0 Schroeder Financial Services, Inc. is a registered investment advisor.<\/p>\n","protected":false},"excerpt":{"rendered":"

The ISM manufacturing index for August was weaker than expected, coming in at a slight decline to 49.6 versus an expected 50.0.\u00a0 New orders, production and employment were all down slightly, while supplier deliveries and inventories helped.\u00a0 Construction spending fell -0.9% in July, despite calls for a slight gain of a half-percent or so.\u00a0 OnRead more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-910","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/910","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/comments?post=910"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/910\/revisions"}],"predecessor-version":[{"id":911,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/910\/revisions\/911"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=910"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=910"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=910"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}