The first week of the New Year was met with some encouraging economic news. Today’s unemployment report for December came in better than expected at 8.5%, down from 8.7% in November. The report underscored the view that the US job market strengthened in the second half of 2011 and added 200,000 jobs in December. Today’s unemployment report was the lowest in nearly three years and was considerably better than the pre-report consensus.
Unfortunately, the Bureau of Labor Statistics revised the number of new jobs created in November to only 100,000, down from 120,000 reported earlier. Today’s report noted that there are 13.1 million unemployed persons in the US as of the end of December. The number of long-term unemployed (those jobless for 27 weeks or more) was 5.6 million or 42.5% of all unemployed.
The number of persons employed part time for economic reasons declined by 371,000 to 8.1 million in December. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. Another 2.5 million people were not counted as unemployed in December because they had not looked for work in the last four weeks. This understates the official unemployment rate.
Thursday’s report on initial claims for state unemployment benefits also came in better than expected at 372,000, down from 387,000 the prior week. The ADP employment report on Thursday indicated that 325,000 new private sector jobs were created in December, up from 204,000 in November. As a result, today’s drop in the unemployment rate did not come as much of a surprise. Stocks actually moved lower on the news.
There is mounting evidence that the economy rebounded solidly in the 4Q. The Consumer Confidence Index jumped from 55.2 in November to 64.5 last month. That was well above the pre-report consensus. Holiday spending was also better than expected according to several sources. On the negative side, the Commerce Department revised 3Q GDP downward to 1.8% (annual rate) from 2.0% as previously reported.
Even though growth in the 3Q was disappointing, I am hearing some surprisingly positive estimates for the 4Q. Some forecasters now believe that the economy grew at a rate of 3.5-4% in the 4Q. Once again, we are hearing talk of “green shoots” in the economy, especially in the manufacturing sector. I will be very surprised if GDP was 3.5-4% last quarter.
The economists at Morgan Stanley Smith Barney (MSSB) are similarly not so optimistic on the economy for 2012. Like me, they believe that the European debt crisis is far from over. Furthermore, they predict that the US economy will slip back into recession this year. You can read the latest research report from MSSB via a link in the story below:
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20111122/FREE/111129935
Did Obama Violate the Constitution?
Earlier this week, President Obama announced four “recess appointments” including the Director of the giant to be Consumer Financial Protection Bureau (Dodd-Frank) and three similar appointments to the National Labor Relations Board. Recess appointments are allowed only if the Senate is not in session (ie – in recess).
The problem is, the Senate IS in session. Thus, this was a bold power grab that has Republicans, and even some Democrats, howling as they should. The Obama administration apparently believes that if it is challenged in the courts over these appointments, it won’t be until after the November elections.
Whether you are a Republican, Democrat, conservative or liberal, you need to know the seriousness of what has just happened! Be sure to read the following editorial from the Washington Examiner which sums it up very well:
Many politicos refer to this unprecedented action by Obama as a giant “power grab.” I would argue, on the other hand, that the president resorted to these “non-recess” appointments because he doesn’t have the political capital to get them any other way. It remains to be seen if he will pay a price for this “boldness” come November.
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On a personal note, the family and I are headed for Park Cities, Utah for a few days of snow skiing/boarding – that is if there’s enough snow. The western ski areas are having one of their worst snowfall deficits in years. I’ve been skiing for over 40 years, and I don’t remember it ever being this bad. We’ll be back late Wednesday night.
Have a great weekend everyone!
