Canada Barely Avoids a Technical Recession: Growth at a Standstill

• Gross Domestic product rose 0.3% (annualized) in the second quarter after contracting 0.8% (annualized) in Q1 (revised down). Export sector subtracted over 2 ppt from total GDP growth in the quarter while the domestic side of the economy retained some strength. Personal consumption grew 2.4% (lower than the average of the last 2 years of 3%) and final domestic demand maintained a pace above 2.0%. Housing sector continued to subtract from GDP. Corporate profits rose 8.3% but capex spending has been cut

Click Here For Full Analysis

Global Slowdown Begins to Hit Asian Exports: Will Trends Worsen in H2 2008?

• Global growth, stronger than expected growth in U.S. and high oil and commodity prices provided some resilience to exports in H1-08 but worsening U.S. economy, spread of crisis to other G-7 countries esp. EU, Japan and some major EMs, correction in commodity prices pose risk to exports in the coming quarters; impact may be exacerbated by rising input, production and shipping costs
• Contraction in electronic exports is hurting industrial production in many economies will spill-over effects on investment and consumption

Click Here For Full Analysis

Triple Hit on Emerging Economies?

• Three external shocks are hitting the Emerging Market Economies: i) Slower global growth; ii) Weaker commodity prices; and iii) Stronger dollar.
• Growth in the nine largest emerging Asian economies in 2008 will be little lower than long-run trend (after 9% in 2007; 8.5% in Q1-08). Growth in China will slow to 9.9% and to 5.5% in ASEAN (Indonesia, Malaysia, Vietnam, Thailand, Philippines, Singapore). Concerns of global slowdown and limited exchange rate flexibility have kept central banks behind the curve, leading to risk of second-round price effects and wage-price spiral; Asia is not immune to global slowdown but impact of commodity inflation on fiscal and production costs is a greater threat

Click Here For Full Analysis

The economic downturn takes a new dimension as disappointing ...
India Daily - Whitehouse Station,NJ,USA
An economic depression is impossible without forst signs of tumbling personal income. That is exactly what happened yesterday. By the close in New York, ...


Hey, Big Number, Make Room for the Rest of Us
New York Times - United States
The gross domestic product was invented in the United States during the Depression to measure just how much and how quickly the economy was shrinking and ...


It Isn’ta Zero-Sum Game
Newsweek - USA
If we define the world's economic leader as the country with the biggest gross domestic product, China is on the way to claiming that prize. ...

Credit Crisis Pushing World Economy Into a Soft Depression
The Market Oracle - London,UK
This week we examine what that means, and what the economic environment will look like over the coming quarters. We also (sadly) re-visit Freddie and Fannie ...
See all stories on this topic

The Market and Presidents
Historical Perspective
Joblessness and Education
Foreign Investment
Productivity Gains in Manufacturing
Mortgage Crisis
Fraud Taints Mortgages
The Rich and Taxes
Immigration, Assimilation

Who Resembles JFK on Taxes, McCain or Obama? - P. Ferrara, Forbes

The Drill-Down on Sarah Palin - Telis Demos, Fortune

Alaska: To Drill, or Not to Drill? - Stephen Hayes, Weekly Standard

Better Way to Power Your Car? It's a Breeze - Lester Brown, Wash. Post

Fannie and Freddie: A Damage Report - David Bogoslaw, BusinessWeek

Commercial Banks are Next Act in Credit Crisis - The Economist

A Growing Economy - Editorial, New York Sun

The Four Horsemen of the Market - Jonathan Burton, MarketWatch

Trichet's Price Phobia Stymies Growth Chances - M. Sesit, Bloomberg

The Growth Future – India and China - Arvind Subramanian, VoxEU

Emerging Markets: Sinking Like a BRIC - Dan Burrows, Smart Money

After Katrina: Economic Health of New Orleans - Liu & Holmes, NYT

• Incomes Drop Sharply in July
• Oil Prod. Stops as Gustav Nears
• Stocks Down on Pers. Income Data
• Euro Stocks Snap Two-Week Drop
• U.K. Economy at 60-Year Low

Can't Sleep Sunday Thoughts

From today, we've got 37 days, if the predictive linguistics are right, to the next point in this timeline when life will go through a major shift - just as the major tipping point in early September of 2001 has had a lasting (and arguably negative) impact on the lives of most of the planet. So, up early this morning working on checklists and how to deal with life thereafter for Peoplenomics.com subscribers.



Along the way though, some serious events that are worth of note as they fit in so closely with the concept of 'urban survival.'



One of these is the report out of the UK today that Lehman Brothers is in urgent talks to try and drum up a capital injection.



In case you missed it, after the close on Friday, Integrity Bank failed down Alpharetta Georgia way. This is a fair-sized bank - about a billion in assets. This is expected to eat through another $250-million to $350-million of the Federal Deposit Insurance Corp.'s dough, which in turn came from where? You guessed it: nice upstanding report-every-dime taxpayers like you and me. It's getting so anyone with an ounce of economic wit, ought to be afraid as hell of Fridays after the close.

---

I've explained for subscribers, but it bears repeating: The danger in all these bank failures is not just the potential for depositors to lose their shirts and savings. If that were the case, the Feds would likely be upset, but not nearly as worried about 'systemic integrity'.



The real problem that crops up is the whole notion of cascading bank failures.' The way this scenario paints out is very simple. Picture all the banks in the world as being players sitting in a gigantic circle, each bank having a pile of receivables from their bank on the right and owing a bunch of payables to the bank of their left.



These inter-bank obligation instruments, have tow kinds of values. One in a 'notional value' and the other is an 'actual value'. They are derivatives and other piles of paper debt that have previously been taken at face value. But, all that is now changing.



The problem THE WHOLE WORLD has is that if the orderly transfer of dough from the players to the right - to the player in the middle - to the player on the left (in a manner of speaking) seizes up, there will be NO MORE FINANCIAL WORLD as we know it today. Pure and simple.



All it takes is just one bank to renounce its 'turn' and suddenly the whole global economic system can lock up. In other words, there is no way for the floating craps game that is the global derivatives and debt market to act in an adaptive manner because the underlying instruments are so horribly complex. You might have a pile of this kind of pseudo-bond (let's say a collection of mortgages) that was paying 'x' interest, and you decide to swap ownership of thatr for something that will pay you a spread and that in turn is based on some other piece of paper or variable rate on some exchange somewhere.



You should be getting the picture that everything is stitched together in a manner that makes it impossible to move positions about. You can just 'move' the whole world financial system around to accommodate the needs of a few players because underlying the global financial systems is a global pile of 'lawyer-drafted contracts' which would make your head spin. There is no way all that 'paper asset' and 'paper debt' legal work to be rewritten every couple of weeks (and becoming more regular lately, and becoming the norm this fall) fast enough to keep global economic collapse at bay.

---

The world came close to a financial meltdown in 1974. You need to devote a few minutes to read a couple of short Wikipedia entries here: One is about the failure of Herstatt Bank in Germany in 1974 which brought the world to the abyss. The second is about 'settlement risk' which is the source of the lockup problem.



To summarize, how would you feel if I said to you "Oh, I'm guessing 45-75 days until we hit one of these 'settlement risk' problems? That'd be where Bank A fails to pay Bank B, so B, owing money to Bank C doesn't have the dough to pay up, and so the whole failure propagates. Not just to the mahogany foxholes at the next bank - I mean globally, such that banks won't have money to load up ATM's and things like that. Sucks to be a banker lately.



I first learned about this notion back in the mid 1970's when the late Dr. Paul Erdman explained the problem over a two martin8i lunch at the old Trader Vic's in Seattle. The Herstatt Effect, as the German failure because known in banking circles, was one of the underlying research points in his book "The Crash '79". However, any of his other financial novels, "The Billion Dollar Sure Thing", and "The Silver Bears" are all equally entertaining, but more important, they will help you soak up some serious financial understanding that you won't find today even in many grad schools.



The Herstatt Effect is the ugly duckling, or should I say Taleb's Black Swan, that underlies things like the Lehman gone fishing for capital story. If you are just sitting around this weekend doing nothing, I'd suggest that if you've got even a half ounce of awareness going you'd find some way to change things around in your life so when whatever's coming gets here, you'll be ready for it...

http://www.urbansurvival.com/week.htm

Credit Bubble Bulletin
by Doug Noland | Aug 29

Ponzi Finance Dynamics Still at Play

The economy and markets are not as stable as they might first appear.



Read more
The Bear's Lair
by Martin Hutchinson | Aug 25

Here we go again?

Similarities between today and the 1930s look eerily familiar.

Read more

Deficit looms for California's unemployment benefit fund

• LA Times
• 09/01/2008 06:40 AM

Fed's response to crisis hurt its key role: Hoenig

• Reuters
• 09/01/2008 05:52 PM

Deficit looms for California's unemployment benefit fund

• LA Times
• 09/01/2008 08:56 AM

Study: Bankruptcies soar for senior citizens

• USA Today
• 09/01/2008 06:22 AM

Reset loans add to US home woes

• FT
• 09/01/2008 08:20 PM

Oil, Gas Fall as Hurricane Gustav Weakens, Easing Damage Fears

• Bloomberg
• 09/01/2008 10:05 AM

Reset loans add to US home woes

• FT ($)
• 09/01/2008 08:53 PM

Hedge funds face struggle for survival

• Globe&Mail
• 09/01/2008 06:26 AM

Money Market Disruption to ``Continue,'' BIS Says

• Bloomberg
• 09/01/2008 06:17 AM

Pangs of Seller’s Remorse in Miami Market

• NY Times
• 09/01/2008 08:19 PM

Running a hedge fund loses its allure

• IHT
• 09/01/2008 05:55 PM

Slowing Economy Boosts Volatility of U.S.-Focused Firms

• WSJ ($)
• 09/01/2008 09:11 AM

More economic forecasters predict [b]recession over the next 18 months[/b]
Financial Times - 3 hours ago

Contracting M1, Slowing M3 in the Eurozone and Abroad: What Does the Data Tell Us?

• Problem: A fall over the last few months in M1 and M2 in the US, UK and EMU is a troubling development: We now have credit contraction. Deleveraging is deflationary
• The ECB’s favored money supply measure is the broad monetary aggregate M3 which grew 9.3% in July (medium-term reference growth rate is 4.5%). On the other hand, M1 is now contracting in real terms--> While M1 has been a good leading indicator for real GDP growth since 1998, the slowdown in M1 has resulted from a portfolio shift out of overnight deposits into term deposits with a slightly longer maturity (AllianceBernstein)

Click Here For Full Analysis

Are U.S. GDP Components Indicating Recession?

U.S. Profit and Corporate Earnings Recession: The Worst Since 2001

U.S. Economy in a Midst of a Double-Dip Recession, or Even Worse?

Fed Official Says Institutions Must Be Allowed to Fail
By BLOOMBERG NEWS
The president of the Federal Reserve Bank of Kansas City,
Thomas M. Hoenig, said that for economies to work best,
institutions must be allowed to fail.

Full Story:
http://www.nytimes.com/2008/09/02/business...amp;tntemail1=y

Counting Writedowns Replaces Winning Deals as Wall Street's Newest Ritual In the good old days on Wall Street, in 2007, analyst James Hyde didn't write a report about a bank without first checking to see how it ranked among managers of stock sales.

GM, Chrysler Likely Led U.S. Auto Sales Drop as Discounts Didn't End Slide General Motors Corp. and Chrysler LLC probably led a drop in U.S. auto sales last month as new buyer incentives failed to stem an industry slide that began in December.

Lehman Brothers in Talks to Sell Stake to Korea Development Bank, Min Says Korea Development Bank is in talks to buy a stake in Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm, as Asian investors shore up Wall Street firms beaten down by the global credit squeeze.

Gustav's Insured Losses May Hit $10 Billion, Fourth-Most for a U.S. Storm Hurricane Gustav may trigger insurance claims as high as $10 billion after lashing Louisiana, according to firms that specialize in catastrophe estimates, making it potentially the fourth-highest total for a U.S. storm.

U.S. Manufacturing Probably Stagnated as Weaker Spending Swamped Exports Manufacturing in the U.S. stagnated in August for a second month as weakening domestic demand countered rising exports, economists said before a report today.

Here Are Five Things Democrats Won't Tell You: Caroline Baum
Commentary by Caroline Baum



Sept. 2 (Bloomberg) -- The Democrats have concluded their quadrennial love fest in Denver, inspired by their new standard bearer, united against a common enemy (President George W. Bush) and confident of victory in November.

And why not? The animosity toward Bush is so great it would take a major gaffe to keep Barack Obama out of the White House.

That doesn't mean the Democrats won't rise to the challenge.

Presidential campaigns are full of lofty rhetoric and pie- in-the-sky promises. The nominee aspires to restore America's image in the world, fix the economy, feed the hungry, care for the sick, and do it all while balancing the budget.

Governing is rife with realities: natural disasters, recessions, inconvenient wars all compete for a share of the federal budget.

Why burden the voters with the facts? There's plenty of time for that later.

For those who like to think ahead, here are five things the Democrats won't tell you. (I'll get to the GOP's non-truths after their convention.)

1. Government can't ``fix'' the economy.

A recent Obama TV ad juxtaposes John McCain's comments (from January) that the economy isn't headed into recession with those of ordinary Americans telling us how bad things are. It ends with, ``How Can John McCain Fix the Economy When He Doesn't Think It's Broken?''

The implication is that Obama knows and can fix it.

The economy may be broken, 3.3 percent second-quarter growth notwithstanding. Employment is falling, average incomes aren't keeping up with inflation and credit channels are clogged.

That doesn't mean the government can fix it. The first stimulus package of tax rebates came and went with little impact. Yes, consumers spent more this summer than they would have without the rebates, but someone else will spend less later.

No matter how the government dresses them up, these are ``transfer payments.'' They transfer purchasing power from the government (i.e., the taxpayer) to folks who may or may not pay taxes. There is no stimulus there. It's a transfer of money from one pocket to the other.

Obama wants to provide $50 billion of ``stimulus'' -- just to ``jumpstart'' the economy. That's $50 billion that won't be available for the private sector.

Democrats should attend an Alanon meeting and familiarize themselves with the three C's: I didn't cause it, I can't control it, I can't cure it.

2. Healthcare is not a right.

Senator Edward Kennedy of Massachusetts, undergoing treatment for brain cancer, left his hospital bed to speak to the delegates gathered in Denver. He told the audience he had ``new hope'' the U.S. could guarantee every American ``decent, quality, affordable health care as a fundamental right and not a privilege.''

Universal health care may be a noble goal, but it is not a right. Rights are ``inalienable,'' which means they can neither be granted nor taken away by government.

A right imposes no duty on anyone else, according to an essay by Charles W. Baird in ``Cliches of Politics,'' a wonderful collection of essays upending old socialist saws, published by the Foundation for Economic Education. (It was originally published as ``Cliches of Socialism.'')

We can all exercise our rights simultaneously. ``Any time a right claimed by anyone imposes a duty on another to undertake positive action,'' it's not a right, according to Baird.

The Democrats are famous for inventing new rights: a right to an education, a right to a job, a right to a minimum wage.

Applying our definition, do any of these qualify as rights? Right, I mean correct.

If Congress wants to enact universal health care, fine. But don't confuse a privilege with a right.

3. Government doesn't create jobs.

One of the ways Obama aims to fix the economy is by creating ``New Jobs Through Infrastructure Investment,'' according to his Web site. Many of those jobs will be ``green.''

The government has three ways of financing investment in jobs or anything else: It can tax, borrow or print money.

One lesson of the Great Depression was that every job created by the New Deal, financed by higher taxes, meant less money for consumers to spend on goods and services, which retarded private-sector job growth.

Government borrowing saps funds available for lending to businesses. Less-efficient government jobs are created in place of private ones.

And as for printing money to pump up spending in the short run, presumably even politicians understand the limits of this strategy.

4. You know all those promises? We can't pay for them.

In his Aug. 28 acceptance speech, Obama promised ``to cut taxes for 95 percent of all working families.'' That's not as easy as it sounds.

``It's almost impossible to deliver tax relief to the working class because they hardly pay anything,'' says Pete Sepp, vice president for communications at Washington's National Taxpayers Union.

``The effective federal income tax rate for the bottom two quintiles is negative,'' Sepp says, pointing to a Congressional Budget Office study.

The bottom 50 percent of tax filers (adjusted gross income under $32,000) earned 15 percent of the income and paid less than 3 percent of the income taxes in 2006, according to the Internal Revenue Service.

At the other extreme, the top 1 percent of filers (AGI over $389,000) accounted for 21 percent of the income earned and almost 40 percent of the taxes paid.

If the rich are getting richer, ``it's not because the tax system hasn't tried to redistribute income,'' he says.

Obama plans to pay for new spending, including what Sepp says are ``refundable tax credits that exceed the tax liability,'' by raising taxes on the wealthy, closing corporate loopholes and tax havens, and going ``through the federal budget line by line'' to eliminate wasteful and inefficient programs.

He'll need a sharp pencil. Mandatory spending on programs such as Social Security and Medicare are consuming an ever-larger share of the budget and the economy, leaving less for congressional appropriations.

5. We really are sorry Obama beat Hillary.

(Caroline Baum, author of ``Just What I Said,'' is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.

A Nightmare on Wall Street
Why the credit crunch has lasted so long

The Build Up to the Third World War
Middle East Online - London,UK
Last century’s great depression ended with the build up to the Second World War, and the unacknowledged economic depression of today will give way to the ...
See all stories on this topic

Well, at least if they stopped breaking it, recovery might be possible.


Tell that to Denmark. Or Sweden, Norway, Germany, etc etc. They are doing very well, thank you, with "Social Democracy", a system we used to have before the Ray-Gun attack.


Used to during hard times.

Like now.

How about a few million new Green Collar jobs in non- fossil fuel based power generation? How about a few hundred thousand jobs fixing up bridges before they fall into the river? How about fixing the levee system so we can just shrug when the next hurricane hits?

Speak for yourself. BTW who the hell is Caroline Baum?

ECONOMY -- WORKERS WORSE OFF ON PAY, EMPLOYMENT: A Rutgers University labor scorecard reported that workers are "in worse shape than they've been in years," with 10 percent of Americans "unemployed, discouraged from seeking work or underemployed." Median weekly earnings have not grown in real terms over the last eight years, and the federal minimum wage is now "worth 40 cents less per hour, in inflation-adjusted dollars, than it was a decade ago." Despite these discouraging figures, President Bush declared in his radio address this week that "there have been some signs that our economy is beginning to improve." In fact, Bush will leave the next president with a record deficit of over $480 billion, the worst housing crisis since the Great Depression, and the lowest rate of job creation in the last 40 years. "Professor Douglas Kruse, a labor economist who created the scorecard, said a sharp decline in the number of Americans able to find full-time jobs, along with growing consumer debt and health care costs, were causes for concern."

UK Economic Outlook: Worst Slump in 60 Years?

• OECD forecasts a recession in the UK starting already on the 3Q08 (-0.3% +/-1.2%) and going through the fourth quarter of this year. Average growth for 2008 revised from 1.8% to 1.2%
• Darling: "Britain Faces Worst Slump in 60 Years."

Click Here For Full Analysis

A Global Military Spending Surge

• Conflict in Georgia, deployment of missile defense shield may contribute to further acceleration in defense spending globally - especially in Eastern Europe.
• SIPRI: global military spending rose to $1.33T in 2007, a real-terms increase of 6% over 2006 and of 45% since 1998. The U.S. accounts for 45% of the global total with the UK China, France and Japan each accounting for 4-5%.
• The subregion with the highest increase in military expenditure from 1998–2007 was Eastern Europe, at 162%. Russia, with a 13% increase in 2007, accounted for 86% of this regional increase. Armenia, Azerbaijan and Georgia also sharply raised their military spending due to the region's three "frozen conflicts"

Click Here For Full Analysis

Last week the FDIC released the Quarterly Banking Profile for the second quarter. FDIC chairman Sheila Bair sums the results up as ‘pretty dismal.’ In particular, Q2 earnings were 87% below the Q2 2007 level (i.e. $5 billion vs $36.8 billion) trimmed by sharply higher loan loss provisions (total $50 billion). Unfortunately, noncurrent loans have been growing even faster than the boost in reserves for the ninth consecutive quarter: the industry’s ‘coverage ratio’ fell accordingly to 88.5 cents of reserves for every $1.00 in noncurrent loans, a 15-year low. Banks have little choice but to build up loss reserves substantially in coming quarters, which occurs at the cost of earnings.

Whereas expected losses are booked against earnings in the form of loan loss provisions, unexpected losses result in capital writedowns. Already, global bank capital writedowns exceed $500 billion (out of the $1 trillion estimate for the entire financial system), the very number the IMF set as a ceiling for global bank losses in April. Far from being over, S&P acknowledges that “we’re at best maybe halfway through this cycle,” and therefore we may be navigating towards Nouriel Roubini’s $2 trillion global loss estimate. Interesting new research by the Federal Reserve Board shows that foreigners hold 39% of ABS backed by U.S. assets, meaning that 39% of associated mark-to-market losses will occur abroad. In numerical terms, and assuming a 20% markdown, this translates into roughly $475bn.

The 19 primary dealers on both sides of the Atlantic were at the forefront of the crisis so far and account for over 50% of writedowns. With equities and commodities following fixed income markets down there’s nowhere for investment banks to hide. Analysts are slashing the Q3 earnings outlook across the board and a recent survey among institutional investors reveals that another big financial firm is expected to collapse within the next 6 months.

Regional and smaller banks are vying with large banks and primary dealers for fresh capital ($350bn raised so far globally), but the window of opportunity is closing fast. The number of ‘dead men walking’ - in John Mauldin’s words – is rising quickly as is the number of banks on the FDIC list that are considered as troubled (i.e. 117 in Q2 up from 90 in Q1). Ironically, the FDIC might be itself on track to turn into one of the biggest casualties of this financial crisis. See “Can the FDIC Handle the Coming Banking Bust‌?”

A rather unexpected additional source of stress for banks are the GSEs. The FT last week reported that U.S. banks and insurance companies are the primary holders of Fannie&Freddie’s $36bn preferred shares. The latter were downgraded heavily in view of an imminent government intervention. The costs to the taxpayer of any government intervention are adding up accordingly from the initial $25bn CBO estimate to over $100bn among prime credit losses, preferred share and subordinated debt writedowns.

Turning to the non-bank sector it is clear that even the shadow banking system is in deleveraging mode. Hedge funds are closing in record numbers amid a dismal average performance especially in the past two months. Furthermore, cost efficiency considerations fuel a move towards ever higher asset concentration among the top 100 players. See “Shake-Out in the Hedge Fund Industry: Who Are the Haves And the Have-Nots?‌”

Where Is this U.S. Recession Already?
http://www.rgemonitor.com/us-monitor/25344...is_us_recession


Are U.S. GDP Components Indicating Recession?

U.S. Profit and Corporate Earnings Recession: The Worst Since 2001

U.S. Economy in a Midst of a Double-Dip Recession, or Even Worse?

U.S. Q2 GDP Growth Revised Up to 3.3% : A Temporary Recovery Before the Economy Falls Back into Slump?


U.S. Profit and Corporate Earnings Recession: The Worst Since 2001


U.S. Consumers on a Tightrope as Headwinds Only Get Worse

• Recession is always around the next corner (quarter), by João Marcus Marinho Nunes
  2008-09-02 08:30:20

Fed governor sees US contagion, not 'decoupling'


Weak economy set to hit credit card companies hard


U.S. Manufacturing Shrank in August, ISM Index Shows


Fed's response to crisis hurt its key role


Reset loans add to US home woes


Is inflation the right battle?

Where Does the GOP
Wall Street Journal - USA
... the Great Depression, they produced after World War II (as modified by Eisenhower) a rapid rebuilding of Europe and Japan and economic growth at home. ...
See all stories on this topic Obama charges Republicans ignore economic issues
Monsters and Critics.com - USA
... did mention economic issues, saying that the Democrats make it sound like the country is 'in the middle of a great depression' while living in the 'most ...
See all stories on this topic GLOBAL ECONOMY-Europe gloomy, US vulnerable
guardian.co.uk - UK
However, with US companies' planned layoffs up 29 percent in January to August from the same period a year ago, economic damage has already been done. ...
See all stories on this topic Obama Embraces Media Hype about Economic 'Turmoil'
Business Media Institute - Alexandria,VA,USA
... more than 70 comparisons to the Great Depression in the first six months of 2008. His claims of “economic disaster” also went unchallenged on August 19. ...
See all stories on this topic

Dow Sinks More Than 300 Points After Retail, Unemployment Data- APWall Street tumbled Thursday, sending the Dow Jones industrials down more than 300 points on more disappointing economic news: sluggish back-to-school sales and a jump in unemployment claims.

• Jobless Claims Take Unexpected Jump- AP
• Wal-Mart Beats Expectations, but Many Retailers Sluggish- AP
• Oil Down After U.S. Gasoline Supplies Report- AP
• CFTC Probing False Oil Inventory Reports: Report- Reuters
• Services Grow on Increasing Orders, Less Inflation- AP
• Productivity Up Strongly While Labor Costs Dip- AP
• European, British Central Banks Hold Rates Steady- AP
• Boeing Pact Extended Despite Strike Vote- AP
• U.S. House Price Decline Could Be Worse than Great Depression, Says Economist Shiller- Tech Ticker

Auto sales down sharply in August
Fed, ECB Must Switch Off Life Support
U.S. Must Buy Assets to Prevent `Tsunami,' Gross Says
Fed governor sees US contagion, not 'decoupling'
Weak economy set to hit credit card companies hard
Lehman lifeline plan in doubt as Korean banks cool
Retailers slash prices, but run risk of hurting profit margins

Credit strains linger, Pimco pleads for help

• Reuters
• 09/04/2008 08:08 PM

JPMorgan, Facing Federal Probe, Exits Municipal Swaps

• Bloomberg
• 09/04/2008 07:57 AM

ADP Says U.S. Companies Cut 33,000 Jobs in August

• Bloomberg
• 09/04/2008 07:53 AM

Jobless Claims in U.S. Rise More Than Forecast as Employers Face Slowdown

• Bloomberg
• 09/04/2008 07:48 AM

Wal-Mart's August Sales Rise on Grocery Discounts; Limited Brands Declines

• Bloomberg
• 09/04/2008 07:16 AM

Dallas Fed president foresees 'anemic' growth into 2009

• USA Today
• 09/04/2008 05:46 AM

Investments Are Faltering in Chrysler and GMAC

• NY Times
• 09/04/2008 05:44 AM

Toll Brothers Reports Fourth Straight Loss as U.S. Housing Slump Persists

• Bloomberg
• 09/04/2008 05:37 AM

<h1 class="heading">Dow plunges after warning of 'financial tsunami'</h1> Tom Bawden in New York div#related-article-links p a, div#related-article-links p a:visited { color:#06c; } Weary investors in the United States received a further pummelling yesterday as data showed new unemployment claims at a near-five-year high last week, a leading fund manager gave warning that America faced a “financial tsunami” and key retailers released disappointing sales figures.

The mounting nervousness about America’s economy dragged down shares. The Dow Jones industrial average fell 344.60 points, or 3 per cent, to 11,188.20, and the S&P 500 closed down by 38.20 points, or 3.3 per cent, at 1,236.80 points.

The Labour Department reported that the number of Americans claiming unemployment benefits for the first time rose by 15,000 to 444,000 in the week to August 30. The disappointing figures came after companies cut staff in the face of a weakening global economy and contrasted with a consensus forecast that new jobless claims would fall to 420,000.

The data, combined with a call by the manager of the world’s biggest bond fund for the Government to inject more money into the banking system, spooked US investors already jittery about the outlook for the global economy. Bill Gross, co-chief investment officer of Pimco, said that the US was confronted by “systematic debt liquidation”. He added: “Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami.”

<h3 class="section-heading">Related Links</h3>

• Dow soars as banks pump $280bn into markets

• Markets take fright on deepening credit fears

Mr Gross said: “If we are to prevent a continuing asset and debt liquidation of near-historic proportions, we will require policies that open up the balance sheet of the US Treasury.”

Hugh Johnson, head of Johnson Illington Advisors, the US fund manager, said: “The stock market declines are more than just the jobless figures. Although they are not good, it is more that they tap into growing concerns that the global economy is weaker than expected and that the problems facing financial institutions are not going away.”

Furthermore, Gap and Abercrombie & Fitch, the clothing retailers, and Target, the discount retailer, all reported a decline in same-store sales for August. Gap said that its sales fell by 8 per cent in August.

Saks, the luxury department store chain, and Limited Brands, the owner of the Victoria’s Secret lingerie chain, also reported weaker sales.

A separate Labour Department report provided a glimmer of hope, announcing that productivity – the amount of output for every hour of work – rose to an annualised rate of 4.3 per cent in the second quarter, one percentage point above consensus forecasts. Analysts said that the higher productivity was encouraging because it helps to keep a lid on inflation.

Auto sales down sharply in August
Fed, ECB Must Switch Off Life Support
U.S. Must Buy Assets to Prevent `Tsunami,' Gross Says

U.S. Labor Market in Recession Territory With Rising Lay-Offs and Jobless ClaimsSep 4, 2008

August ADP Report: Private employment fell -33,000 (July: +1k);Continued job losses in goods producing (-78k), manufacturing (-56k), construction (-25k), finance (-2k), and in large and medium-sized companies; job gains in services (+45k)
ADP has been overstating job creation in 2008 (+41k ytd) compared to BLS numbers (-463 ytd); Pvt emp under BLS data has also shown job losses in every month since Dec-07; ADP pvt emp has exceeded BLS pvt emp by an avg of 81,000 since Dec-07; also ADP covers only a small subset of pvt firms
Sep 4: Initial jobless claims rose to 444k in the week ending Aug 30; 4-week moving avg fell to 438k (but highest since 2001); Continued claims increased to 3.435 mn (highest since Nov-03); jobless rate was unchanged at 2.6% (near 5-yr high)
Congress bill to extend jobless claims by 13 weeks is not swelling the claims numbers since they are calculated separately; however increasing effort by states to reach out to more unemployed workers is helping eligible workers previously not claiming benefits to file for claims thereby raising both initial and continued claims; also those filing for claims but later turning out to be ineligible tend to raise initial claims though not continuous claims; summer season lay-offs (auto, construction, teachers) may have added to initial claims - but these effects will continue to fade in coming weeks
Continued upward trend in initial claims reflects sharp slump in hiring/rehiring but also increase in the pace of lay-offs in recent weeks as firms realize economic weakness is bound to escalate in H2-08 and they face rising production costs, tighter credit and as continued financial headwinds for households with strain consumer spending
BLS Payrolls: July employment down -51k (-463k ytd; June job losses revised down to -51k); unemployment rate rose to 5.7% (highest since Mar 2004 due to increase in re-entrants to labor force, esp. for 16-24 age-group, teens on recent hike in minimum wage); Household survey: employment down -72k
Most indicators are at levels observed in the past only when the economy was in recession; Avg workweek, aggregate weekly hours declined to record lows esp. in pvt sector; part-time emp. up by over 1 mn y/y and at a 13-yr high as a share of total employment as typically in a recession firms reduce work hours and freeze hiring first (due to uncertainty over depth of slowdown and costs involved in hiring/firing/retraining workers) and only then begin to lay-off workers (which in recent weeks has started to gain pace)
Challenger: Aug job cut announcements rose 12% y/y/ led by auto and retail sectors but fell -14% m/m
Conference Board Index shows share of people finding jobs 'hard to get' rose to 32% in Aug (highest since Oct-03), jobs were 'plentiful' fell to 13.1%, expecting 'fewer jobs in 6 months' declined to 30.6%; ISM manufacturing and non-manufacturing emp. index also contracted in Aug
Long-term unemp. rate (marginally attached, discouraged, part-time for economic reasons workers) rose to 10.3%; temporary emp. down -29k;, full-time workers declining; overtime work falling
Job loss in services (-5k) (first time since March), unchanged in finance; Continued job losses in private sectors (-76k), manufacturing (-35k), goods-producing (-46k), construction (-22k), residential construction (-14k), retail (-17k), business & professional services (-24k); job gains in govt (+25k), health & education (+39k); self-emp. (significant in real estate, construction) down 1.34% from June-07 peak; ; diffusion index at 5-yr low indicates job losses are spreading
Low risk of wage-price spiral: avg hourly earnings rose 0.3% (+3.4% y/y, lowest in 2 yrs), avg weekly earnings unchanged (+2.8% y/y); Q2 Emp Cost Index rose 0.6% (weakest since Q1-06), compensation growth slowed to 3.1% y/y due to slowing wages and benefits; withholding taxes declining on q/q and y/y basis
Via WSJ: Labor market will worsen in Q3 as job losses will increase financial pressure on consumers and affect their spending; strained fiscal finances will impact jobs in govt, health, education sectors
Merrill Lynch (not online): After cutting workweek to record lows, firms will next cope with slowing demand by cutting workforce (after resisting so far); jump in jobless claims show that job losses in coming months may rise to 150-200k range
BLS tends to overstate job creation in weakening sectors like construction, services, leisure, hospitality, finance even as rising firm losses/bankruptcies is leading to lay-offs; large birth/death adjustments (adding 155k new jobs in June) miss turning points in business cycle; data is also subject to large revision
Fed: Limited wage pressures as labor demand is softening
Unemp rate forecast - Fed: 5.5-5.7% (2008), 5.3-5.8% (2009); Merrill: 7% by mid-2009; Goldman: 6.25-6.5% in H2-08; Morgan Stanley: 5.6-5.7% in early-2009; Dean Baker: 5.3-5.6% in 2008, 6-6.5% in 2009 (depending on severity of recession); UBS (not online): Unemployment may rise as baby boomers fail to find work post-recession
• Conference Board Employment Trends Index down -0.9% m/m in July; Help-Wanted Advertising Index at a record low and Online advertised vacancies down 7.9% y/y; NIFB Small Business Survey of no. of firms w/ hiring plans/job openings at 5-yr low; Monster Index: July online job availability down 14% y/y (30-month low); Manpower Index: firms planning to increase hiring in Q3 fell to the lowest since Q4-03
• June job opening rate was unchanged at 2.6% but hiring rate at 5-yr low of 3.1%; separation rate was stable at 3.1% y/y
• Phelps: housing correction will lead to further job losses in construction, banking and as firms cut costs by reducing investment, employment, wages esp. when productivity has been slowing in recent years: this suggests unemployment rate is still below the medium-term natural level
• Goldman Sachs (not online): Labor market deteriorating in Sunbelt (housing), Rustbelt (auto), South-East (textile); South-West a bright spot (exports, energy but slowing global growth, oil/commodity correction pose risk ); Wall Street lay-offs will worsen ahead esp. in securities firms; may have less impact on wages, unemp rate as marginally attached workers, immigrants leave labor force; high unemployment among teens amid weak hiring (esp. since they are new entrants), forcing them to go back to school thus reducing unemp rate; housing-related job losses may exceed 1 mn (already 750k) adding 40k to total job losses per month in next 2 yrs, this may be exacerbated by job losses in real estate, commercial sector
• JPMorgan (not online): Financial sector lay-offs not reached significant levels yet since sub-sectors affected by credit crisis are only a small share of total financial sector jobs; but given continued bank losses, lay-offs are bound to rise ahead; these jobs a/c for a large share in national income (bonuses) and corporate profits

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AnalysisADPSep 04, 2008U.S. ADP Employment Report: Private Payrolls Down 33,000 in August
AnalysisNomura Economic ResearchDavid H. ReslerSep 04, 2008U.S. Jobless Claims Jumped to 444,000
NewsBloombergBob WillsSep 03, 2008U.S. Job Cuts Rise 12% in August From Year Ago, Challenger Says
AnalysisJPMorgan Chase BankRobert E. MellmanAug 08, 2008US labor market: still waters run weak
AnalysisBNP ParibasBrian FabbriAug 08, 2008US: Unemployment Claims Are in Recession Territory
AnalysisHaver AnalyticsTom MoellerAug 12, 2008JOLTS: Job Openings Stable in June, Hires Up
BlogsRGE Analysts' EconoMonitorArpitha BykereAug 01, 2008U.S. July Payrolls Indicate the Worst of Labor Market is Yet to Come
BlogsRGE U.S. EconomonitorMark ThomaAug 04, 2008Unemployment and Hours of Work over the Business Cycle
AnalysisBureau of Labor StatisticsAug 01, 2008U.S. Employment Situation July 2008: Payrolls Down -51,000; Unemployment rate rose to 5.7%
AnalysisBNP ParibasRichard IleyAug 04, 2008US Labour Day Chart Pack
AnalysisWachoviaMark VitnerAug 01, 2008Employment Data Were Not Quite As Bad As Feared
BlogsWall Street JournalPhil IzzoAug 01, 2008Economists React: U.S. Still 'Bleeding Jobs'
AnalysisTD EconomicsBeata CaranciJul 29, 2008A Regional Look at U.S. Labor Markets
OpinionsFinancial TimesEdmund PhelpsJul 20, 2008In search of a more dynamic economyAnalysisCenter for Economic and Policy ResearchDean Baker and John SchmittJanuary 2008What We're In For: Projected Economic Impact of the Next Recession

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U.S. Labor Market Shows Economy in Recession: August Payrolls Down 84,000; Unemployment Rate Spikes to 6.1%

• The Coming US Consumption Bust: 12 Reasons Why the US Consumer is in Serious Trouble and Faltering, by Nouriel Roubini
  2008-09-03 15:45:35