ECONOMIC WATCHDOG, Jan 4
January 4, 2007
Thursday has been another busy day for economic data with no less than seven reports released. As is often the case, the data has provided a mixed view of the economy and stocks have had a confused reaction as a result. Of course, all of today’s data will be trumped Friday when the report on the employment situation is released.
Two reports dealing with jobs came out this morning in the form of the Monster Employment Index and the Challenger Job Cut Report. However, even these two reports were not consistent. Remember that on Wednesday, the ADP Employment Report showed a surprising drop of 40,000 private sector jobs. This raised concerns about how strong nonfarm payrolls were in December.
The Monster report, which measures job demand on the Internet on the various job posting sites, fell in December by 8 points to 167. However, the Challenger job cut data showed that just 54,643 job cut announcements were made in December. This is down from 76,773 in November and 107,822 in December 2005. However, this data was offset by the fact job hiring intentions came in at just 6,693, well below last December’s figure of 42,972. So it seems that though corporate America isn’t necessarily cutting a lot of jobs, they aren’t in the hiring mood either. Jobless claims for the week ending Dec. 30 rose by 10,000 to a level of 329K, although the four-week moving average fell slightly to 317,500.
The pending home sales data, which is a leading indictor for housing activity, fell by 0.5 percent in November. On a year on year basis, pending home sales are off 11.4 percent. On Wednesday, the MBA Mortgage Applications data showed a rise despite a move higher in mortgage rates. Overall, the feeling of most analysts is that the housing sector has bottomed and should see gradual improvement in 2007.
Factory orders rose 0.9 percent in the month of November following a 4.5 percent decline in October. This report shows a lot of month to month volatility mostly due to civilian aircraft orders. When transportation orders are excluded, durable goods orders fell 0.5 percent. As is usually the case, this report doesn’t have a lot of impact because it is a bit dated due to more recent regional manufacturing data. Nonetheless, taking the sum of all these reports points to a still soft manufacturing sector.
The services sector of the economy continues to show expansion, although the ISM Non-Mfg. Survey fell more than expected in December. This index came in at 57.1 after a reading of 58.9 in November. Any reading above 50 is considered expansionary. The employment component showed strength, rising 1.7 points to 53.3. However, prices paid also rose to 59.1 from 55.6.
Retailers have been in the spotlight Thursday as a bulk of the sector announced same-store sales results for December. Overall, Thomson Financial reported that 54 percent of retailers missed sales expectations. The ICSC reported that warm weather and gift card sales also hurt sales in December with the 58 largest retailers averaging same-store sales growth of 3.1 percent. This was stronger than estimates reported on Wednesday, but still not a robust figure. However, redemptions of gift cards should provide strength in sales in January.
Oil prices continued to slide Thursday, falling $2.73 a barrel to $55.69. Just two weeks ago, crude was trading above $63 a barrel. Thursday’s release of weekly inventory levels showed a 1.3 million barrel drop following a 5 million barrel drop in the prior week. However, this week’s data was above expectations and traders just kept selling the commodity.
Now we look to Friday, which will see the release of the always-important employment data. Estimates are calling for nonfarm payrolls growth of 100,000, but this might prove to be too optimistic given the recent weakness in other jobs data. Average hourly earnings will also be watched closely with expectations for growth of 0.3 percent.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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