Thursday, September 1, 2011

Morning Update/ Market Thread 9/1 - Sailing into the Mystic Edition…

Good Morning,

Equity futures are flat to down slightly this morning with the dollar rising a considerable amount, bonds are up a little, oil is hanging out at the still hurt locker level of $88.80 a barrel, gold’s hanging out at $1,825, silver is flat, and food commodities are also close to even.

The market is entering pretty stiff resistance in and just above the current area. On the SPX Daily chart below you can see that we are now at the 50% retrace level, approaching a rapidly descending upper Bollinger Band, just beneath an also down slopping 50DMA, and also just beneath a major long-term upslope line:

Weekly Jobless Claims once again remain stubbornly above 400k, coming in at 409,000, this is down from 417k last week, of course revised higher to 421k. In short, nothing to see but an ongoing depression here – just remember the old saying about it being a recession to those who have jobs, but to those who don’t it definitely feels like a depression:
Initial jobless claims are trending sideways pointing to no significant improvement in the labor market. Initial claims did fall 12,000 in the August 27 week to 409,000, but the improvement is offset in part by a 4,000 upward revision to the prior week to 421,000 which is the highest level since mid July. Showing no improvement from a month ago is the four-week average which at 410,250 is up for the second week in a row and compares against 408,250 at month end July.

Continuing claims fell a slight 18,000 in data for the August 20 week to 3.735 million with the four-week average, down 3,000 to 3.726 million, trending flat for the last two months. The unemployment rate for insured workers is unchanged for the third week at 3.0 percent.

The Labor Department said there were no special factors in the latest report and specifically said there was no impact from the strike at telecom provider Verizon. For tomorrow's employment report, this report is unlikely to narrow expectations which range widely from a small contraction to a moderate gain.

Second quarter Productivity was revised downward to -.7%, while at the same time Labor Costs rose 3.3%, the worst of both. Of course I believe that actual productivity is far, far lower than reported, that’s because inflation is underreported, thus making productivity that’s measured in dollars artificially high. Also GDP counts the production of debt, financial engineering, as being “productive,” so it’s all complete mystic nonsense, and really that’s the giant disconnect from reality that has become the “economy.” At anyrate, most people can’t deal with the reality, and so they speak in the Mystic without realizing it. Oh, speaking of which, here’s Econoday actually not pumping for a change:
As expected, second quarter productivity was revised down while unit labor costs were revised up slightly. Nonfarm productivity fell an annualized 0.7 percent, compared to the original estimate of a 0.3 percent dip and a 0.6 percent decrease in the first quarter. The consensus forecast called for a 0.5 percent decrease for the second quarter revision. Unit labor costs rose a revised 3.3 percent in the second quarter, compared to the initial 2.2 percent and first quarter's 6.2 percent. The drop in productivity reflected a revised more sluggish rise in output of 1.3 percent, compared to the initial estimate 1.8 percent and a first quarter rise of 0.9 percent annualized. Hours worked were unrevised up 2.0 percent.

Compensation grew an annualized 2.7 percent in the second quarter (originally 1.9 percent), following a 5.6 percent jump in the first quarter.

Year-on-year, productivity was up 0.7 percent in the second quarter-down from 1.2 percent in the first quarter. Year-ago unit labor costs came in at up 1.9 percent in the second quarter, compared to a rise 1.4 percent in the prior period.

Today's revisions are a reminder that the economy is soft (sluggish output) and that businesses likely see labor as expensive, reducing the incentive to hire.

The Manufacturing ISM and Construction Spending for August are released at 10:00 Eastern. I expect these to be not pretty, we’ll see, please join us in the Daily Thread as we head into the Mystic for a discussion on their release.