TrimTabs Weekly Macro AnalysisJune 30, 2009Page 2 of 15Copyright © 2009 TrimTabs Investment Research. All rights reserved.
This Week’s Summary
Employment– U.S. Economy Loses 472,000 Jobs in June. Unemployment Rate Likely to Hit 9.7% to
9.8% in June and 10.0% in July.
We estimate the U.S. economy shed 472,000 jobs in June after losing arevised 380,000 jobs in May. June’s job loss will likely push the unemployment rate to 9.7% to 9.8% in Junefrom 9.4% in May. The TrimTabs Online Job Postings Index rose 3.2% in June after holding steady in May.Weekly unemployment claims jumped 15,000 in this past week to 627,000, keeping the four-week movingaverage above 600,000 for the twentieth consecutive week. Continuing unemployment claims increased 29,000to 6.74 million in the latest reporting week, just below the record high of 6.84 million reached two weeks ago.
Income– Income Tax Withholdings Plunge Adjusted 5.8% Y-o-Y in June.
Income tax withholdings fell5.8% y-o-y in June after dropping 4.8% y-o-y in May, indicating wage declines and job losses have accelerated.“Other” taxes plunged 33.5% y-o-y in the past four weeks after falling 33.6% y-o-y in May. Corporate incometaxes have fallen 35.6% y-o-y in the past four weeks after dropping 12.3% y-o-y in May.
Housing– New and Existing Home Sales Jump 4.6% in Past Two Months, While Average Home PricesReach Highest Level since January.
New and existing home sales jumped 108,000, or 2.2%, in May.Meanwhile, the inventory of unsold homes fell 148,000, or 3.5%. Mortgage rates fell 21 basis points to 5.38%in the latest reporting week, fueling an increase in both mortgage purchases and refinance applications.California foreclosure activity fell 19.8% in the past week, most likely in response to the new Californiaforeclosure law that went into effect June 15.
Spotlight: Real Savings Rate 0.9%, Not BEA’s 6.9%; Year-over-Year Growth in Wages and Salaries-4.8% in May, Not -1.1% as BEA Reports
BEA Overestimates Personal Income in May, Inflating Personal Savings Rate
The latest Personal Income report from the Bureau of Economic Analysis (BEA) presents an inaccurate pictureof the financial health of American consumers. According to the BEA, personal savings as a percentage of personal disposable income was a whopping 6.9% in May, the highest since December 1993. For comparison,the savings rate for all of 2008 averaged 1.8%. Our analysis based on real-time income tax deposits indicatesthe real savings rate is a paltry 0.9%. Consumers are in much worse shape than government statistics suggestand have little money left over to repair their tattered balance sheets.Two temporary factors inflated the savings rate in May:1.
Individuals receiving Social Security and other qualifying government retirement programs received aone-time payment of $250, totaling about $160 billion annualized.2.
Incomes were elevated due to the “Making Work Pay” tax credit, which amounts to $60 billionannualized.After adjusting for these two factors, the BEA’s savings rate estimate drops to 4.8%.Moreover, the BEA is overstating income from wages and salaries and income from non-wage sources, whichinflates the savings rate. Income tax deposits to the U.S. Treasury, which are reported in the Daily Treasury