U.S. Payrolls Post Biggest Annual Drop Since 1945

U.S. Payrolls Post Biggest Annual Drop Since 1945
By Shobhana Chandra

HIGHLIGHTS

• Labor Department: U.S. lost more jobs in 2008 than any year since 1945 as employers fired another 524,000 people in December. In 2008, the nation lost 2.589 million jobs with the unemployment rate climbing more than economists forecast, to a 15-year high of 7.2 percent in December.
• Negative Feedback Loop: Analysts said the economy may be in danger of a reinforcing cycle of rising unemployment and declining household spending, what policy makers call a negative feedback loop, which is difficult to snap once it’s begun.
• Michael Darda: chief economist at MKM Partners LP stated, “This was the most rapid deterioration in the labor market over a six-month period since 1975,” “Policy makers will go full throttle” until “the labor market starts to turn,” he said.
• Average Work Week: shrank to a record-low 33.3 hours from 33.5 hours, today’s figures showed. Average weekly hours worked by production workers dropped to 39.9 hours from 40.3 hours, while overtime decreased to 3 hours from 3.3 hours. That brought the average weekly earnings down by $2 to $611.39.
• President Elect Obama: is pressing for a stimulus plan including tax cuts and spending on everything from roads and schools to the energy network. Yesterday he called for “dramatic action as soon as possible” to help pull the world’s largest economy out of a slump that’s in its second year. “If nothing is done, this recession could linger for years,” he said in Fairfax, Virginia.

COMMENTS:

Presidential Course of Action: Jobs, Jobs, Jobs, will be the mantra to try and turn momentum of the country around. With no silver bullet fixes in sight, the attempt to shore up the workers and middle class segment of the country will be a good start.

Old Faces New Policy: Not sure how that works, clearly recovery will be a difficult road to navigate and what we all have to admit is that legacy leadership confidently guided us all into this major world wide economic slow down. Whats worse, many of our governmental and business leaders never saw it coming. The financial system is faltering severely and putting together a fresh team of talent that will be capable of recognizing past failures and not defending previous career actions could get sticky.

Opportunity: Yes it is out there but be careful because the birds of 2009 have abandon their old nests of 2008 and will be finding new locations to feather their nests.

Solutions: Start with responsible management. I believe we will begin to see a major rotation of Legacy Leadership in business and government. Meaning, we will experience the injection of fresh faces in positions of leadership with passion, talent, and energy to carry the Country and the World into the new business and governmental paradigms that are being forged.

James Monachino

Year end look forward for 2009

COMMENTARY

Holiday Greetings To All,

2008 is winding down and we will soon be starting 2009. Looks like a another bump in the road for the World Economy. However, there is opportunity for some of us, if we realize it won't be business as usual, rather, it will be a new deck and a new deal.

Projected Highlights to come for 2009

• Deflation: Phase Two hits with high unemployment (Looking for 10% plus by year end) and accelerated bankruptcies across the board while the CRB Cash Index continues to grind lower with a few keep-em-honest mini rallies through out 2009.

• Run Away Inflation: Sorry, Fed and World Central Banks will not be able to pull that one off to get everyone off the debt hook. Look at the velocity of money in circulation (or guess at it). All the de-leveraging taking place at the Consumer, Business, Money Center Banks, and Governmental levels are crushing the International Stimulus Package efforts, at least near term.

• Dollar begins to Strengthen: by 2Q as other countries an economies continue to wind down and catch up with the US slow down. Another words, dollar strengthens by default not necessarily by improving fundamentals.

• Gold: stays under 2008 highs (Previous highs were slightly over $1,000) and look for large cracks in prices developing in the numismatic coin market.

• Residential Real Estate: continues to slide down, no near term bottom in sight for 2009.
  
• Commercial Real Estate: Joins the party in a big way as businesses and leases fail leaving huge empty spaces. At first it will look like teeth are missing from a beautiful smile. Construction on some buildings will stop mid way as the excess capacity is drained from the system. Bids for the Commercial Bond paper will become scarce at any price.
  

• National Health Care: Comes to America not by choice but out of desperation. Look for a single payer National Health Care Program begin to emerge in 2009. Crushing business and individual costs along with rising uninsured numbers that are now above 40 mm plus will force the issue.

• Worker Collective Bargaining: will re-emerge again as workers desperately try to hang on to their jobs and not get run over by business interests. This will be a long and painful process for everyone.

• Tariffs: or defacto job protecting legislation (This could also take place through the creation of special business sector incentives) will begin to emerge with consequence regarding international trade. Look for trading partners to be doing similar actions.

• Civil Unrest: in the cities will flare up. The downturn will occur as an over leveraged citizenry becomes ugly as built in safety nets are unable to hold the numbers. Possible use of regular Army may be seen to assist crowd control efforts by using the cover of a military exercise or tagging it a monitoring and assist event for Homeland Security purposes.
  

• Legacy Leadership: will begin to disappear in both business and government. It will be done quietly but in the next couple of years all new faces will be up front.

• Nationalization of the Federal Reserve: I know, hard to believe. But it happen before in the 1940's and I believe it will happen again (Structural change which will divest the private interests and reconnect to the Public Sector under the Department of Treasury.) Their is precedent, and the while Ben and Greenie (Greenspan) should get an A for effort they clearly failed us in application - F. (This is my wild card call looking to happen in the next couple years as the economies slow recovery start to choke on huge public debt.)

• Govt Bankruptcies (light): at the Local, State, Federal and International levels. Look for the emergence of payment default holiday's to become more common as a useful tool to try and keep decaying infrastructure going.

• Business Bankruptcies: Consolidation will continue to occur as many business both large and small will slip under the water and disappear. High unemployment, falling real wages, and eroding family net worth (from declining Property and Retirement Programs) will continue to conspire to disrupt consumer purchasing power.

• Equity Markets World Wide: continue to grind down with a few brief rallies through out the year. Be careful in 2009 you don't get suck into a decaying market prematurely.

FYI - Some stocks took over 20 years to reach old 1929 prices while many never made it at all.

• Strategy: The old two step might be needed - - regarding the preservation of your principle which should be your main focus during a major world wide deflationary period. I am completing that strategy as we speak and will share the results with any who may be interested.

That's all from your Main Street Sidewalk economist for 2008. Your comments are welcome. I hope I am way off on this one versus what my cyclical charts seem to be indicating.

Happy, Healthy, and Safe Holiday Season,

James Monachino

Banks Show No Signs of Easing in Step With Fed’s Cuts

Banks Show No Signs of Easing in Step With Fed’s Cuts
Dec. 17 (Bloomberg) --By Liz Capo McCormick and Gavin Finch


HIGHLIGHTS

• Federal Reserve and Treasury: Credit Markets show no signs of ending the 18-month freeze, as evidenced by the unprecedented gap between what banks and the U.S. government pay to borrow money.
• TED SPREAD: Libor, that banks charge each other for three-month loans and Treasury bill rates is six times wider than before markets began to seize up in June 2007. Even though the so-called TED spread narrowed to 1.55 percentage points from 4.64 percentage points in October.
• Consumer Credit: fell $6.4 billion in August and $3.5 billion in October, making 2008 the first year with at least two declines since 1992, according to Fed data. August’s decline was the biggest in at least 65 years.
• Bond Sales: by companies rated below investment-grade fell 57 percent to $63.3 billion this year from 2007, according to data compiled by Bloomberg. The extra yield investors demand to own the debt instead of Treasuries rose to a record 21.4 percentage points yesterday from 1.32 percent 18 months ago.
• Personal Bankruptcies: rose 34 percent in the third quarter from the same period of 2007, according to the American Bankruptcy Institute in Alexandria, Virginia. Moody’s Investors Service predicted in November that corporate defaults in the U.S. will surge threefold to 11.4 percent in the next 12 months.
• 85 % of Domestic Banks: tightened lending standards on commercial and industrial loans to large and mid- size firms, the highest since the survey began in its current format in 1991, the Fed said in its latest quarterly Senior Loan Officer Survey conducted between Oct. 2 and Oct. 16.
• Finally: “There isn’t a community banker in America who doesn’t want to make good loans,” said James Mckillop, chief executive officer of the Independent Bankers’ Bank of Lake Mary, Florida, which provides loans to 350 community banks in Florida and Georgia. “But finding loans that they feel are going to be good is becoming more and more difficult.”

COMMENTS:

Federal Reserve cuts rates and the nightmare continues. It will be a number of years before we complete all the outstanding commitments that were made during more prosperous circumstances.

James Monachino

U.S. Economy: Employers Eliminate 533,000 Jobs, Most Since 1974

U.S. Economy: Employers Eliminate 533,000 Jobs, Most Since 1974 By Bob Willis and Rich Miller Dec. 5 (Bloomberg) --

HIGHLIGHTS

• Companies Slashed Payrolls: last month at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II.
• Employers cut 533,000 Jobs: Unemployment rate rose to 6.7 percent, the highest level since 1993 with losses so far this year totally 1.91 million jobs.
• Nariman Behravesh: Chief Economist at IHS Global Insight, “It’s unbelievable,” he went on to say, “We’re well on our way to the worst recession of the postwar period.”
• Revisions for September and October: increased job losses by 199,000. The October figure was revised to 320,000 from the previous estimate of 240,000. November was the 11th consecutive drop in payrolls.
• Mark Zandi: Chief Economist at Moody's Economy.com,“Almost all businesses are in survival mode,” “Policy makers from the Federal Reserve to Congress and the new administration are going to have to be very aggressive.”

COMMENTS

Testing the Markets: Is it time to put your toe in the water? Great bargains everywhere. What's a Fat Cat to do? I see a toe lightly feathering a vat of acid. If you don't need ten toes dip in.

Global Disorder will find a New Paradigm:

* New Tax Structures - look for it coming to a country or continent near you.
* New Oversight - rules that will impact the way you do business.
* New Regulations- that will hopefully dampen the rip and tear capitalism that helped create our current global market decay.

* World Wide Tariffs - Look for the revival of tariffs or defacto tariffs that will begin to appear around the globe as job creation becomes number one.
* Oil Revenues Decline - look for world wide terrorist traffic to slow significantly. These campaigns our expensive and don't run on credit.

* Federal Reserve - Sorry Ben, looks like an A for effort and an F for application. The world economies are melting and the Fed's lack of critical oversight is in the middle of it.
* Nationalize the Federal Reserve: Time to make a change in personnel and structure. Reconnect our monetary system to the taxpayers not private international banking interests.

* Bailout Money: focus on rebuilding the real economy (middle class worker). This is hard pain staking work but will start to change the current downward momentum.
* National Health Care: Massive unemployment, crushing corporate health & retirement burdens, and rising premiums that are forcing the rolls to swell well beyond the 40mm number of uninsured USA citizens that swamp our emergency rooms and hospital balance sheets. This will force the creation of a national single payer health care program.

* Leadership: In a capitalistic environment you are not rewarded for failure. Look for legacy leadership to be cycled out in both Business and National Politics. It will be subtle but wide reaching by the end of Obama's four years term.

Conclusion
Folks, we are all on the merry go round and some of us can't get off while others are being thrown off into brick walls. The good news is we have the ability to rebuild a more effective economic and political order. Maybe not by choice but desperation. Fasten your seat belts, refocus your thinking to a forward mode, opportunity an action awaits the astute and patient individuals.


James Monachino

Consumer Prices in U.S. Decline 1%, Most on Record

Consumer Prices in U.S. Decline 1%, Most on Record (Update2)
By Bob Willis - - Nov. 19 (Bloomberg)

HIGHLIGHTS

The Cost of Living: in the U.S. fell by the most on record as fuel costs plummeted and retailers used discounts for cars and clothing to entice consumers hobbled by job losses and sinking home values.

• Consumer Prices Plunged: Down 1 percent last month, more than forecast and the most since records began in 1947, after being unchanged the prior month, the Labor Department said in Washington. Excluding food and energy, so-called core prices unexpectedly fell for the first time since 1982.
  
• David Resler, Chief economist at Nomura Securities International Inc: ``We are moving into an environment where prices are falling across the board,'' he said, in an interview with Bloomberg Television. ``That is going to continue. Deflation is spreading across the economy.''
• Housing Starts: fell 4.5 percent in October to an annual rate of 791,000, the lowest level since the Commerce Department began keeping the data in 1959.
• Price Rollbacks: Eduardo Castro-Wright,`Wal-Mart's U.S. stores chief, stated,`You'll see a lot of rollbacks,'' at a Morgan Stanley conference in New York. Rollbacks refer to price reductions the retailer scatters throughout grocery, pharmacy and other departments to spur sales.

COMMENTS

Deflation: is showing up in the numbers for the first time in decades. It is spreading and the remedies will be different than an inflationary recession. The growing number of bankruptcies seem to indicate to survivors change is in the air.

To Big to Fail: Is a fine line to walk and difficult to reward with taxpayers money. Where do you draw the line. From Banks, Insurance companies, Auto Makers, maybe we should ask , Who shouldn't we bail out? The list might be shorter.

Bargains: There will be plenty, but wait if you can. The pricing cycle is still in the first year of a multi year downturn. Preservation of capital and access to credit will continue to be critical during this World Wide Down turn. Your focus should be more on survival at the moment not opportunity. New rules and regulations yet to be developed will make it difficult for you to choose intelligently. Patients will be rewarded.

Jim

U.S. Unemployment Rate Climbs to 14-Year High of 6.5% (Update2)

U.S. Unemployment Rate Climbs to 14-Year High of 6.5% (Update2)

By Bob Willis and Rich Miller

HIGHLIGHTS

Nov. 7 (Bloomberg) --

The U.S. unemployment rate rose to the highest level since 1994.

• 
  
• 
  
• Jobless Rate Rose: to 6.5 percent in October from 6.1 percent the previous month, the Labor Department reported today in Washington.
  
• Employers Fired: 240,000 workers after a loss of 284,000 in September, the biggest two-month slide since 2001.
• 25-Year High: The total number of unemployed Americans jumped to 10.08 million last month, the highest level in a quarter-century, today’s report showed.
  
• Nariman Behravesh, chief economist at IHS Global Insight: “We’re heading for a deep recession -- banish the word mild from your vocabulary -- it’s big, it’s bad and it’s broad-based,” said in Lexington, Massachusetts.
  
• Goldman’s Forecast: Goldman Sachs Group Inc. analysts downgraded their projections for the economy after today’s report, foreseeing the biggest contraction since 1982 in the fourth quarter. Goldman also projects that the unemployment rate will soar to 8.5 percent by the end of next year.
  
• Faltering Economy: and imploding financial markets helped push Obama ahead of Republican rival John McCain, a senator from Arizona, particularly in hard-fought states like Ohio and Florida where unemployment rates have jumped.

COMMENTS

Presidency: "It's the economy, stupid." prove again to be the winning theme for the the Democratic party. Time will tell how effective the new team will be. But there are no magic bullets to this Global Financial Bubble that has been building over the past 20 plus years. It will take a number of years to repair and rebuild the economy.

Bottom Up: Getting money and jobs into the hands of the middle and working class will be the challenge. Solutions that foster growth and opportunity at the grassroots level will help turn this economy around.

Paradigm Shift: Free market behavior will now be shifting to control and regulate. Let us hope that wise policies will be constructed and the pendulum will not swing to far over to the extreme of the other side.


Near Term: More of the same; higher unemployment along with lower stock market & International Commodity Prices. Why? because buying power and access to credit at the consumer level is continuing to drain out of the US and Global populations resulting in increasing bankruptcies. Cash will continue to be King. As has been said before in this blog, we are in a deflationary downturn. Meaning remedies to problems faced in the past will require a different strategy in order to archive success by both Government and Business.

James Monachino

Greenspan Concedes to `Flaw' in His Market Ideology

Greenspan Concedes to `Flaw' in His Market Ideology (Update2)

By Scott Lanman and Steve Matthews Oct. 23 (Bloomberg) --

Highlights:

Former Federal Reserve Chairman Alan Greenspan: said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed. He stated I was ``partially'' wrong in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected. Forecasting is an inexact science.

Greenspan opposed increasing financial supervision: as Fed chairman from August 1987 to January 2006. Policy makers are now struggling to contain a financial crisis marked by record foreclosures, falling asset prices and losses tied to U.S. subprime mortgages.

``What went wrong": former chairman wondered, with global economic policies that had worked so effectively for nearly four decades?''Greenspan reiterated his ``shocked disbelief'' that financial companies failed to execute sufficient ``surveillance'' on their trading counterparties to prevent surging losses.

Greenspan Revised Recommendations: Firms that bundle loans into securities for sale should be required to keep part of those securities and other rules should address fraud and settlement of trades.


Commentary

Falling Giant: Alan Greenspan, was once considered the most powerful and well respected man in finance has now lived long enough to see it turn around. We cheered him on when he helped us and now sneer because he failed us.


New Deal Regulation: It appears we are on the verge of a paradigm shift in free market regulations and oversight. Stay tune for a litany of new laws and oversight after the new administration comes into power in 2009.



Jim