• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
Download
 
Copyright © 2009 TrimTabs Investment Research. All rights reserved.
W
EEKLY
M
ACRO
A
NALYSIS
 
M
ADELINE
S
CHNAPP
 
 D
 IRECTOR OF
 M 
 ACROECONOMIC 
 R
 ESEARCH 
D
AVID
S
ANTSCHI
  MANAGING
 E
 DITOR
 
N
OVEMBER
3,
 
2009
 
V
OLUME
6,
 
N
UMBER
44R
ESEARCH
@T
RIM
T
ABS
.
COM
+1
 
(415)
 
331-440
TrimTabs Estimates U.S. Economy Loses 284,000 Jobs in OctoberThird Quarter GDP Extremely Weak Excluding Impact of Government StimulusWages and Salaries Tumble 4.6% Y-o-Y in October
Spotlight: U.S. Economy Sheds 284,000 Jobs in October; “Steroid–Laced” Third Quarter GDP ResultsUnsustainable; BEA September Personal Income Report Highlights Weakness in Wages and Salaries andConsumption
More than a year after the meltdown on Wall Street, employers are still eliminating hundreds of thousands of  jobs each month. We estimate that the U.S. economy shed 284,000 jobs in October, a slight improvement overthe 358,000 job loss in September. While monthly job losses have slowed this year, they remain historicallyhigh. Job losses of 5.9 million in the past 12 months are the most in a 12-month period dating to 1970. Totalemployment now stands at 130.7 million, the lowest level since February 2004.The Bureau of Economic Analysis (BEA) reported that third quarter GDP grew at a seasonally adjusted annualrate of 3.5%, its best showing since Q3 2007. Yet government stimulus programs masked the economy’sunderlying weakness. Excluding the impact of these programs, GDP growth would have been lackluster.Without meaningful gains in employment, the positive GDP results are nothing more than a flash in the pan.The BEA’s Personal Income report for September confirms the depth of government support for both incomeand spending. At this stage in the business cycle, we would expect the private sector to start providingmeaningful support for income and spending, but our indicators show such support is not materializing.
Bottom Line
Most economists are declaring that the recession is over. While these pronouncements may be technicallycorrect, a meaningful economic recovery is dependent on private sector job growth and healthy credit markets.The key indicators we track show the labor market remains weak. Wages and salaries declined 5.6% y-o-y inSeptember and 4.6% y-o-y in October, weekly initial unemployment claims still top 500,000, and more than 9.8million people are collecting some form of unemployment insurance. Meanwhile, bank reserves exceed $1trillion, and banks are reducing lending to both businesses and consumers. Until the labor market improves andcredit markets function normally without massive government support, the positive GDP growth reported in Q32009 will not be sustainable.
This Week’s SummaryIncome– Wages and Salaries Decline 4.6% Y-o-Y in October.
Adjusted income tax withholdings fell 4.6%y-o-y in October, an improvement from the 5.6% y-o-y decline in September but equal to the 4.6% y-o-ydecline in August. We believe the large decrease in September was due in part to a calendar quirk and in part tothe expiration of the “Cash for Clunkers” program. “Other” taxes dropped 24.8% y-o-y in the past three months
 
Weekly Macro AnalysisNovember 3, 2009Page 2 of 14
 
Copyright © 2009 TrimTabs Investment Research. All rights reserved.
after falling 25.7% y-o-y in Q3 2009. Corporate income taxes fell 33.8% y-o-y in the past three months afterdropping 35.6% y-o-y in Q3 2009.
Employment– U.S. Economy Sheds 284,000 Jobs in October. Weekly Unemployment Claims RemainElevated at 530,000. Whopping 9.8 Million People Collecting Some Form of Unemployment Benefits.
The TrimTabs Online Job Postings Index edged up 0.3 points, or 0.4%, to 69.0 in the past week. The index rose3.3% in October, suggesting job demand, particularly in information technology, is slowly improving. Weeklyunemployment claims fell 1,000, or 0.2%, to 530,000 in the week ended October 23, while continuing claimsdropped 2.5% to 5.8 million. Despite the drop in continuing claims, enrollment in extended unemploymentbenefit programs grew 1.0% to 3.9 million.
Housing
 
– Mortgage Applications Index Plummets 25.7% in Past Four Weeks as Housing MarketWeakens. New and Existing Home Sales Jump 8.4% in September in Advance of First-Time HomebuyerTax Credit Expiration.
The Mortgage Purchase Index fell 16.7% and the Mortgage Refinance Index plunged30.3% in the past three weeks. New and existing home sales jumped 8.4% in September, but many of thesesales were borrowed from the future because many buyers were rushing to claim the first-time homebuyer taxcredit before its expiration. More recent data suggests sales in October were much weaker.
Spotlight: U.S. Economy Sheds 284,000 Jobs in October; “Steroid–Laced” Third Quarter GDP ResultsUnsustainable; BEA September Personal Income Report Highlights Weakness in Wages and Salaries andConsumption
TrimTabs October Employment Estimate
We estimate that the U.S. economy lost 284,000 jobs in October, a slight improvement over the 358,000 jobloss in September. Job losses have steadily diminished this year, falling from an average of 724,000 per monthin Q1 2009 to 436,000 per month in Q2 2009 to 357,000 per month in Q3 2009. While this slowdown iswelcome, job losses remain enormous compared to those in previous recessions. Worse still, our indicatorssuggest the economy will continue shedding jobs at a rate of 250,000 to 350,000 per month.The contraction in employment in this recession has been truly historic. In the past 12 months, the economyshed 5.9 million jobs, the most in a 12-month period dating to 1970. Moreover, non-farm employment hasdropped to an estimated 130.7 million, the lowest level since February 2004, even though the population hasincreased 12.5 million since February 2004.Our proprietary model uses income tax withholdings to compute employment. In addition to job losses, twoother factors affected year-over-year growth in withholdings in October:1.
 
 Lehman Brothers bankruptcy.
We assume the collapse of Lehman Brothers in September 2008 severelydisrupted the bonus structure in the financial services industry. We increase year-over-year growth inwithholdings in October by an annualized 2.0% to account for lower bonuses.
 
2.
 
“Making Work Pay” tax credit and COBRA withholding tax reimbursements
. We increase year-over-year growth in withholdings in October by an annualized 4.0% to account for the “Making Work Pay”tax credit, which employers began implementing in March, and the Consolidated Omnibus Budget
 
Weekly Macro AnalysisNovember 3, 2009Page 3 of 14
 
Copyright © 2009 TrimTabs Investment Research. All rights reserved.
Reconciliation Act (COBRA) withholding tax reimbursements that officially began in April but did notimpact withholdings until May.Table A.1 in the Appendix provides details of the employment calculation for October.Source: TrimTabs Investment Research – www.trimtabs.com and Bureau of Labor Statistics – www.bls.gov 
“Steroid-Laced” Third Quarter GDP Results Not Sustainable
The Bureau of Economic Analysis (BEA) released GDP results for Q3 2009 showing the U.S. economyexpanded at a seasonally adjusted annual rate of 3.5% after contracting for four consecutive quarters. Notsurprisingly, the media proclaimed that the recession is over because the economy is no longer shrinking.While GDP growth of 3.5% seems impressive, most of the improvement was due to four mostly unsustainablefactors:1.
 
The U.S. dollar declined significantly against most major currencies, helping to drive up exports up14.7% at an annualized rate.2.
 
Money from the Obama Administration’s $787 billion stimulus program boosted government spending,which was up 2.3% at an annualized rate.3.
 
The “Cash for Clunkers” program triggered a huge jump in sales of motor vehicles and motor vehicleparts. As a result, consumption was up 3.4% at an annualized rate.4.
 
Government largesse boosted fixed residential investment, which was up 23.3% at an annualized rate.Not only is the government offering a tax credit of up to $8,000 to first-time homebuyers, but it is
 
-800-700-600-500-400-300-200-1000100200300
   N   u   m    b   e   r   o    f   J   o    b   s    (   T    h   o   u   s   a   n    d   s    )
Comparison of TrimTabs versus Bureau of Labor Statistics Employment EstimatesJanuary 2007 through October 2009
 
Monthly TrimTabs Employment Estimate,Increase/Decrease (thousands)BLS Employment Increase/Decrease (thousands)
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...