June 26 Silver Flash Crash: A Forensic Analysis
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Job growth improved more than expected in September although the gain was held back by contraction in the government sector. Payroll jobs advanced 103,000 in September, following a revised 57,000 rise in August (originally flat) and revised 127,000 increase in July (previously 85,000). Analysts forecast for a 65,000 increase for September. Revisions for July and August were up net 99,000. Private nonfarm payrolls were somewhat stronger than the total, gaining 137,000 in September, following a 42,000 increase in August and 173,000 boost in July. The September number topped the market expectation for a 95,000 increase. A return of striking telecommunications workers added about 45,000 to the payroll total.
In the private sector, goods-producing jobs rebounded modestly while service-providing jobs posted a notable gain. Goods-producing jobs rebounded 18,000 after a 9,000 decrease in August. Manufacturing jobs fell 13,000 after a 4,000 dip the month before. Motor vehicle industry jobs were flat in September. Construction rebounded a sizeable 26,000, following a 7,000 decline in August. Mining grew 5,000, following an 3,000 gain the prior month.
Private service-providing jobs jumped 119,000 in September, following a 51,000 gain the prior month. The August gain was led by professional & business services (up 48,000) and health care (up 44,000). Employment in information was up by 34,000 over the month due to the return of about 45,000 telecommunications workers to payrolls after an August strike.
The public sector shrank as government employment fell 34,000, following a 15,000 rise in August. August would have declined other that due to a return of 22,000 Minnesota government workers from a partial government shutdown.
Wages rebounded 0.2 percent in September after dipping 0.2 percent the prior month. Analysts had projected a 0.2 percent increase. The average workweek for all workers in September ticked up to 34.3 hours from 34.2 hours in August. The median forecast was for 34.3 hours.
From the household survey, the unemployment rate held steady at 9.1 percent. The consensus expected a rise to 9.2 percent.
Today's report indicates that the labor market is not quite as sluggish as earlier believed. Importantly, the services sector may be gaining mild momentum. Looking ahead, today's numbers point to a healthy wages & salaries component in the upcoming personal income report. However, industrial production for September is likely to be soft outside of autos.
Jobless claims are pointing to little September-to-August change in the labor market. Initial claims for the October 1 week total 401,000 vs the Econoday consensus of 410,000. Cutting into this difference is a 4,000 upward revision to the prior week to 395,000. The four-week average is 414,000 which is slightly lower than the month-ago comparison, but this indication is clouded by a nearly 20,000 increase in the direct September-to-August comparison of the Labor Department's mid-month survey week.
Continuing claims likewise show no conclusive change. Data for the September 24 week show a 52,000 decrease to 3.700 million but the four-week average of 3.739 million is virtually unchanged with the month-ago comparison. Yet the unemployment rate for insured workers did tick lower, down to 2.9 percent following seven straight weeks at 3.0 percent.
Despite quarter-end issues, the Labor Department says there are no special factors whatsoever affecting today's report. Demand for the safety of Treasuries is easing in a move that suggests today's data may be improving expectations for tomorrow's monthly employment report.
Dexia May Be Left as ‘Bad Bank’ by Governments
Dexia SA (DEXB) may be left with the lender’s worst assets under plans that would allow the French and Belgian governments to avoid injecting more capital into the bank, two people with knowledge of the talks said.
Under the option most favored by the French, the two governments would guarantee Dexia’s borrowings before splitting up the lender, said the people, who declined to be identified because the talks are private. Belgium may then assume Dexia’s assets in that country, while France’s state-owned La Banque Postale and Caisse des Depots et Consignations would buy Dexia’s French municipal-lending unit, leaving Dexia as the “bad bank,” the people said.
That would avoid an immediate recapitalization of Dexia, which would then sell its legacy assets over time, the people said. If the lender transferred its bad assets to a new company, the bank would need additional capital because a sale would crystallize what are at the moment paper losses for Dexia, one of the people said.
A final decision is yet to be made and the negotiations are still fluid, the people said. The governments pledged yesterday they would take “all necessary measures” to protect clients and will guarantee all Dexia’s loans.
France will announce more details about Dexia’s rescue tomorrow, French Finance Minister Francois Baroin told RTL radio today. Deposits with Dexia are backed by state guarantees which won’t increase French state debt, he said.
Belgian Finance Minister Didier Reynders said guarantees that will be provided will be “inferior” to the ones granted in 2008, when Belgium’s share exceeded 90 billion euros. He also said that Belgium has “no intention” of chalking up losses, adding that it will collect a fee in return for the guarantees. Dexia paid 489 million euros last year for use of guarantees, according to company filings.
Purchase applications fell 0.8 percent in the September 30 week in a soft ending to a solid month. Mortgage rates, the lowest since the 1940s, are a positive for housing demand as they are for refinancing demand. The refinance index, though down 5.2 percent in the latest week, has been rising sharply. The report notes that many refinance borrowers are deleveraging by moving to 15-year terms with the maturity making up 27 percent of the week's refinancing volume for the highest share on record. The average 15-year rate is 3.49 percent, up three basis points in the week.
A planned 50,000 troop reduction in the army and a 30,000 layoff announcement at Bank of America made for a swollen 115,730 total for Challenger's September layoff count, the largest total since the recession days of April 2009. Excluding the army and Bank of America, layoffs would have come in under 40,000 which is on the low end of trend. Still, today's results could be signaling increases ahead for jobless claims.
Challenger also offers data on hiring intentions which total 76,551, much weaker than 123,076 in September last year. Retailers including Halloween City, Party City and Toys "R" Us announced large hiring plans in the month but the retail sector's monthly total of 70,912 doesn't compare well with the 114,000 of last September.
ADP estimates private payrolls rose 91,000 in September, little changed from its revised 89,000 estimate for August. Markets are showing little immediate reaction to the results.