High-yield/macroeconomics (fka YIELD)

[Preciouslife1]

Economy Is Worse Than The Numbers Say, Analyst Says
January 3rd, 2008-10:30pm

http://news.ino.com/headlines/?newsid=10320081247

(RTTNews) - The ADP estimate for the change in private payrolls in December was +40k. Allowing for a trend-like 20k rise in government payrolls, the ADP data suggests about a 60k rise in total payrolls in Friday's employment report, says UBS analyst Kevin Cummins in the firm's daily U.S. economic comment. Initial jobless claims fell to 336k in the week of December 29 from 357k the previous week. The data can be especially volatile around year-end, but the trend has been upward.
At 344k, the four-week average is up from 341k in the last week of November, 328k in the last week of October, 313k in the last week of September, and an average of 317k in H107.
The trend in continuing claims has also picked up.
They rose to 2761k in the week of December 22 from 2715k in the prior week—pushing the insured unemployed rate up to 2.1% from 2.0%.

Factory orders rose 1.5% in November, thanks to a 3.0% surge in nondurable goods—mainly reflecting a price-related 15.0% surge in the petroleum products component of (nominal) nondurable goods orders. In contrast, durable goods orders remained weak, with continued weakness in core capital goods orders in November after -3.0% in October.

The ABA reported an increase in consumer delinquency rates in Q3. Overall delinquencies were up to 2.44% from 2.27% based on the number of delinquent accounts, and to 1.68% from 1.38% based on the value of the delinquent loans. We estimate light vehicle sales rose slightly to a 16.3M annual rate in December from 16.2M in November. For the year as a whole, sales fell to an estimated 16.1M units from 16.5M in 2006 and 16.9M in 2005. Details in the ABA report showed delinquencies of home equity loans and auto loans increased in Q3, while credit card delinquencies were mixed. The share of credit card accounts with delinquencies fell to 4.18% from 4.39%, but the dollar value of credit card delinquencies increased to 4.00% from 3.73% in Q2.

Gains in total payrolls have averaged 103k during the last three months, below the currently reported 126k per month pace in Q2 this year and 161k per month in the year ended March 2007. Moreover, we suspect the recent pace has been overstated somewhat. The BLS has already indicated that payrolls growth in the year ended March 2007 will be revised down by almost 300k, or 24k per month. That revision will be finalized and reflected in the data on February 1, 2008. However, the December employment report will include the annual re-estimation of the seasonal adjustment factors for the household survey; the payroll data (including hours and earnings) will not be affected. The re-estimation typically results in minor, and offsetting, revisions, extending back five years.

The headline non-manufacturing ISM business activity index is based on a single question about current activity, unlike the headline manufacturing ISM index, which is a composite index based on details of the survey. We calculate a composite non-manufacturing index using the manufacturing ISM weights: that index fell to 51.8 in November (the lowest level since April 2003), from 53.5 in October. Through October, the index had been relatively stable, with little change from the Q3 average of 53.4 or the first-half average of 54.4.
ISM officials are considering publishing a composite non-manufacturing ISM index beginning early next year.
They have indicated they will announce a decision by the end of January.

Our estimated overall all-economy ISM index, which combines the manufacturing and non-manufacturing surveys, fell to 51.6 in November from 53.0 in October and an average of 53.3 in Q3. Even before the decline in November, the level was low enough to signal a much weaker trend in growth than implied by Q3 GDP.

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