Lil’ Reader

by CC July 31, 2011 10:48 pm • Commentary




July ISM Manufacturing report

June Construction Spending


June Personal Income and Spending

Weekly Johnson Redbook Retail Sales

July Domestic Auto Sales


Weekly MBA Mortgage Applications Survey

July ADP National Private Payroll Forecast

July ISM Non-Manufacturing Report

June Shipments, Inventories and Orders

Weekly EIA Petroleum Status Report


Weekly Initial Jobless Claims


July Monthly Employment Report




Loews, Boston Properties, Vornado, Allstate, Humana, Principal Financial Group


Becton Dickinson, Coach, Entergy, Marathon Oil, Marathon Petroleum, MetroPCS, Pfizer, Archer Daniels Midland, Expeditors International, FirstEnergy, CBS, NYSE Euronext, Duke Energy, Ford, Cephalon


Allergan, Constellation Energy, Clorox, Comcast, Intercontinental Exchange, Northeast Utilities, Walgreen, Mastercard, Time Warner, Prudential, Hartford


Costco, Edison International, Fortune Brands, Southwest Airlines, AIG, CVS, CF Industries,, Kraft


EOG Resources, Procter & Gamble, Viacom, Washington Post, Pepco, PPL


President Barack Obama said tonight that leaders of both parties in the U.S. House and Senate had approved an agreement to raise the nation’s debt ceiling and cut the federal deficit that must now be sold to Congress.

“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said at the White House. “This compromise does make a serious down payment on the deficit-reduction we need. Most importantly it will allow us to avoid default.”

Congressional leaders are sifting through the details of the tentative bipartisan agreement to raise the debt ceiling by $2.1 trillion, sufficient to serve the nation’s needs into 2013. They are preparing to sell to members the deal to cut $917 billion in spending over a decade, raising the debt limit initially by $900 billion, and to charge a special committee with finding another $1.5 trillion in deficit savings by the year’s end. They confront an Aug. 2 deadline for approval…

…While the compromise shaping up will probably assuage immediate concerns about default in financial markets, “this relief will be short,” said Mohamed A. El-Erian, chief executive officer of Pacific Investment Management Co., the world’s largest manager of bond funds…

…The agreement “does nothing to restore household and corporate confidence, so unemployment will be higher than it would have been otherwise,” El-Erian said. “Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise.”


Is a second recession in so short of a time in the offing? It certainly seems that way. The hope for a continued recovery has grown dim lately as many of the economic indexes are moving towards contractionary territory. As we posted recently in EOC Index Shows Economic Weakness there are several concerns pressing the US economy and, in the words of David Rosenberg, chief economist at Gluskin Sheff, “one small shock” could send us into a second recession. With the recent release of the Chicago Fed National Activity Index, our proprietary economic index is just one small step away from crossing the 35 mark which has always been a pre-cursor to recession.


Recovery? What recovery? Economic growth has largely stalled led by a depressed consumer and budget cutting state and local governments. Household spending came to a screeching halt as vehicle sales tanked in the spring. That created a sharp decline in durable goods spending. Businesses continued to invest but the demand for equipment and software grew at the slowest pace in two years. And then there were state and local governments, where budget cutting has become de rigueur. The slicing and dicing reduced economic growth by over 0.4 percent point. That is not chump change and shows that my comment that there is no such thing as a free budget cut was not just a cute phrase. Thankfully, the trade deficit narrowed on solid increases in exports and weak imports. That kept growth above one percent. –Naroff Economic Advisors

Recovery, we hardly knew ya! Economic growth is clearly flagging in the U.S., and the most troubling thing about it is that distress in Washington limits the policy response. As a result, we see a greater potential that the current slow patch could transition into a longer period of deeply disappointing results, and even a possible recession. While odds of such a recession are still modest, today’s results indicate an increasing probability. –Guy LeBas, Janney Montgomery Scott

The U.S. is facing some major headwinds and challenges as it emerges from the worst recession in our lifetimes. Growth of this order is not only not enough to bring down the unemployment rate but would be coincident with an increase in unemployment. Fortunately, we do not expect this rate of growth to be repeated in the second half. However, and as we have been writing about lately, the current debate in Washington is having a negative effect on private sector activity and to the extent this continues, we have to believe that growth during the remainder of the year if not 2012 will be even lower than we originally thought. –Dan Greenhaus, Miller Tabak

This data fits more neatly with the rise in unemployment over the past several years and weakness over the first half of this year better explains the weakening labor force and the lower pace of job growth over the second quarter. While it paints a bleaker picture of the past and demonstrates progress through the post financial crisis has been tepid and uneven, it also suggests that growth in [the third quarter] may set up better than expected as consumer spending bounces off its weakest change since the recession. –Eric Green, TD Securities


This should make clear, I think, that basically every story you’ve read over the past 18 months explaining the “jobless recovery” is kind of bunk. No recovery, no jobs. Personally, I think this was pretty clear even before the revisions, which is why I never put much stock in either leftwing or rightwing versions of the “corporations have found a magical way to increase production of goods and services without employing people” narratives. It’s true that firms have achieved very high profit margins, but the overall story is of an American economy that contains more workers and better technology than we had in 2008 but still isn’t making new stuff.