Weekending Financial Scorecard
Here’s the most important financial data that you need to know to be fairly well informed, or at least sound that way at the Holiday cocktail party. Each Friday evening I post the data of 8 financial market’s, and 10 economic indicator’s weekending scorecard. As of 11/30/12
What the heck happened this week? FINANCIALS: Only slight changes in most areas, nothing to get excited about, but it’s still a great time to refinance home mortgages. Another Recession Coming? Could be, hopes were lifted though today with little better GDP avg., but consumer Holiday spending is way down vs last year, unemployment remains high, manufacturing output down, and high Federal deficit and debt.
- Mortgage Rates DECREASE: 30-year last/this week: 3.45%/3.41%, 15-year 2.85%/2.84%
- Dow Jones Industrial Average INCREASE from 13,009 to 13,025 (avg. of 30 companies, highest all time 14,164 10/9/07)
- S&P 500 INCREASE from 1409 to 1416 (all time 1565 10/9/2007)
- US Treasury’s DECREASE: 2-Year Note from .283% to .250%, 10-Year from 1.694% to 1.616%
- Crude Oil Futures INCREASE from $88.26 to $88.93
- Gold prices DECREASE from $1,751 to $1,716 (High $1,895 9/6/11) per ounce
- Euro INCREASE from 1.2972 to 1.2990 (2011 high 1.48 5/11, all time 1.59 7/2008)
- US Dollar Index DECREASE from $80.22 to $80.15
Jobs: RECESSION WATCH SCORECARD*
2 NEGATIVE vs 1 POSITIVE
- Unemployment – Negative, INCREASED in October to 7.9% from 7.8% in September: September’s was the lowest rate since January 2009, and was good improvement over August’s 8.1%, so this shows things are really remaining about the same. However, keep in mind this ‘Official Unemployment’ rate only tracks those who are without jobs and have actively sought work within the past 4 weeks. Since this statistic does not track all people who are not working, some websites report that the ‘Real Unemployment’ rate is about 15% when all able-bodied people of working age are considered. For a historical perspective: The unemployment rate during the Great Recession peaked at 10.10% in October 2010. In 2012 it has varied in the range of 8.10% – 8.30%, so we are not seeing a lot of change this year. It could be worse when you consider that during the Great Depression it peaked at about 25% in 1933.
- Monthly change in non-farm payrolls – Positive, INCREASED: 171,000 new jobs were added in October, compared to 114,000 new jobs in September.
- Initial Jobless Claims for Unemployment Insurance – Negative DECREASED to 410,000: The last two weeks above 400,000 are directly related to Hurricane Sandy, the 4 week rolling average is up to 396,250 from 386,750. Looking back 12 weeks, the average was 371,750; 6 weeks ago it was 366,500, so we seeing more of a trend of an increase in this year. This number is much better than it was in 2009 when it peaked at over 650,000. In 2010 we saw a decrease from nearly 500,000 early in the year to the low 400,000′s. In 2011 the claims were in the low to mid 400,000′s, but since October of 2011 they have been below 400,000, until these past few weeks. The lowest we have seen this rate in 10 years is 282,000 in January of 2006, and the earlier part of the last decade we saw the average similar to what we are seeing now. During the Great Depression from 1929 – 1941 there was not the same level of unemployment insurance that we have today, although unions may have had some. It wasn’t until the Social Security act encouraged it in 1935. Today we have the Federal Unemployment Tax Act (FUTA) tax to fund state agencies.
Financials: RECESSION WATCH SCORECARD**
4 NEGATIVE vs 3 POSITIVE
- Gross Domestic Product (GDP) - Positive, GDP increased at an annual rate of 2.7%, for the third quarter, however this would only add up to 2.1% for 2012. We really need to see GDP in the 4% – 6% range to have a fueled economic recovery.
- Manufacturing output - Negative, this is a good indication of how industry is doing; it was modestly increasing this past winter, leading to some guarded optimism, but for almost the last 6 months it has decreased to Spring 2009 levels.
- US Consumer Spending - Negative is currently at 71 compared to peaks this year of 96 in March, 84 in October, and 98 a year ago. Economists watch consumers’ spending trends to try to track their confidence in the economy. The more confidence consumers have, the more willing they are to spend money.
- US Household Debt Service - Positive, as a percentage of people’s disposable income is at 10.69% (June) and has been steadily decreasing from its 10 year high of about 14% in the 3rd quarter of 2008.
- The Federal Deficit - Negative for 2013 is projected by the Congressional Budget Office to be $1.1 trillion for 2013; this will make 5 years in a row it has exceeded $1 trillion, and this doesn’t include all the money our Federal government borrows.
- The US National debt - Negative exceeds $16.3 trillion.
- Consumer Price Index - Positive CPI for October annualized monthly growth rate was 1.75%. The long term-term average annualized rate of 3.63%. The CPI is the most common indicator of inflation. November 2012 CPI data are scheduled to be released on December 14.
*Unemployment statistics are an important indicator of how our economy is doing; more people employed points to stronger business growth and to fewer people receiving government entitlements. However, this is a little difficult to track, since the government doesn’t really publish a combined statistic that truly indicates what is happening. Most people who study this issue follow these three indicators: percentage of people unemployed, monthly change in non-farm payrolls, and jobless claims for unemployment insurance. The most discussed statistic is the unemployment rate; reading the explanation above illustrates how this number falls short.
**GDP tracks the size of our economy by calculating the total dollar value of all goods and services produced over a specific time period in comparison with the previous quarter. For 2012 GDP slumped to 2% in the first quarter, and 1.3% for the second, so the announcement of 2.7% for the third quarter is good news. Is this a great indication? Well any increase is good, however this would only add up to 2.1% for 2012. Looking back at the most recent recessions, from a presidential term perspective, provides some challenging information. Economic recovery under Ronald Reagan, GDP averaged 4.4% from 1995 – 2000, assuming you take out his first two years in office, where there was negative GDP, as it took some time for his policies to take affect. Bill Clinton took office in weak economic times, but not nearly as bad as Reagan. Under Clinton, GDP averaged a decent rate of 3.1% from 1994 – 2000. This assumes you don’t take into consideration his 1st year in office, when there was negative GDP. Under President Barack Obama it has averaged 2.1% if you don’t include his first year with negative GDP. How does this compare to those other Administration’s first few years in office? In Reagan’s first 3 good years GDP averaged 5.3%, and for Clinton it averaged 3.4% for his first 3 good years in office. In conclusion: The economy is growing at a much slower rate that it needs to in order for it to lift unemployment, prevent more middle-class people from sliding into poverty, and to help those stuck there. Fiscal Cliff, Federal Debt, unemployment, and global economic crisis will continue to weigh down progress.
**Technically a recession occurs when business cycles retract, evidenced by down consecutive quarters of GDP, or a 12 month 1.5% or more rise in unemployment.