Intersecting Minds: Education, Business and Technology at the North Carolina State Jenkins Graduate School of Management

Friday Quick Links

February 5, 2010
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Today’s focus remains on jobs:

– The unemployment situation in this country is slightly worse or slightly better depending on how you look at it. First, the jobless rate fell to 9.7%, which is good news.

– But the bad news is that the economy shed another 20,000 jobs in January, deepening the number of unemployed in this country. By some estimates, almost 18% of the country’s workforce is out of a job or can’t find full-time employment. That is a scary number.

– While the numbers indicate that the US economy is poised to start adding jobs again, this graph from Calculated Risk shows just how far we have to go to climb out of the hole (click link for larger version):

– Meanwhile, the US Senate has reached an “impasse” on financial regulation. Reforming the financial system will be a key ingredient to sustaining a long-term economic recovery for the United States.

All in all a rough week, and more signs pointing to the fact that any type of economic recovery will take an extended amount of time to unfold.


Thursday Quick Links

February 4, 2010
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Today is all about jobs, jobs, and the complete lack of jobs:

– The Bureau of Labor Statistics revised the number of jobs lost during the recession up by 824,000 bringing the total job losses to nearly 8 million people. Mike Shedlock has a nice analysis of the BLS’ Birth-Death model and why this happened over at his website, Global Economic Analysis.

Jobless claims also rose to 480,000 in January, another sign that the employment situation is not improving. Employment will be the biggest drag on any type of economic recovery America hopes to experience. If employers don’t start hiring soon, expect this miraculous bull run in equities to end soon enough.

Royal Dutch Shell announced it will cut 1,000 more jobs on slightly disappointing 4th quarter numbers.

Greece’s debt troubles are continuing to worsen, according to the Wall Street Journal.

Wednesday Quick Links

February 3, 2010
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The US economy shed approximately 20,000 jobs in January, just beating forecasts for the month. Following the 5.7% growth in GDP last quarter, many economists expect employers to start adding jobs over the next few months.

– In a separate, but related item, Bloomberg reports that the economy most likely added service jobs over the same time period. This is an important development because services are now the vast majority of the US economy.

– From bad to worse for Toyota. The automaker suffered another blow with more thanĀ 100 complaints about the brake pedal in its Hybrid Prius model. Needless to say, the company’s sterling quality reputation will take another hit.

– The situation in Greece becomes more interesting by the day. The EU has approved a plan from the debt-ridden country to get its fiscal situation under control, but the plan demands heavy cuts from public sector employees. As a result, government workers are preparing to strike next week.

– Both Time Warner and Pfizer announced strong fourth quarter numbers, with each company posting higher profits than the same quarter last year.

Thursday Morning Quick Hits

January 28, 2010
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Following the President’s State of the Union last night, a look around the business economic community

Ford Motors posted an annual profit for the first time since 2005. While the numbers were boosted by special items, this is a huge step forward for the American automaker after it took a beating during the second half of the last decade.

Durable goods orders in the United States rose 0.9% last month, another positive indicator that the American economy is showing signs of life. Unfortunately, this news was buffeted by a greater than expected number of jobless claims, a sign that labor market improvement is coming along more slowly than hoped for.

– I mentioned yesterday that Toyota was forced to recall over a million vehicles from the US market. Now that recall has extended to Europe and China as well in another blow to the automaker.

– And oh yeah, the President gave some State of the Union speech last night. The Wall Street Journal has a nice recap.

Tuesday Morning Quick Hits

January 26, 2010
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A mixed bag of news today:

S&P warned that Japan’s debt rating could be cut. This comes after the agency downgraded Greece’s debt earlier this year. Concern is growing that several advanced economies, including the United States, are in a bad situation with the amount of debt they are facing.

– On the bright side, Ford announced that it is adding 1,200 jobs to a plant in Illinois to gear up for production of its 2011 Explorer model.

– Also on the good news side, consumer confidence in the US is rising over hopes that the job market is improving. As the Bloomberg article notes, increased consumer confidence generally leads to increased consumer spending, a major driver of the economy.

– And on the downside, Verizon plans to cut 10,000 jobs after missing analyst’s fourth quarter sales expectations.

– Continuing with the jobs theme, Senate Democrats are considering a second jobs-focused stimulus bill valued at $80B. Of course there is controversy on whether or not the bill will actually create any jobs.

GDP Growth = Healthy Economy? Uhm No

October 29, 2009
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Earlier today, CNN Money released a new gallery report asking: “Are Things Really Getting Better?” Meanwhile, on their front page, the headline reads: “Economy Finally Back in Gear.”

So does the government’s recent announcement that GDP grew 3.5% last quarter, the economy’s first growth in a year, mean that we’re out of the recession? Um, not exactly. Lets put some additional analysis behind the “Getting Better” article. CNN broke economic indicators down into 7 segments. We’ll tackle them one by one:

1. GDP Growth: As I just mentioned, the economy grew by 3.5%, a strong figure when it stands on its own. But many observers believe this represents artificial growth fueled by government spending (i.e. stimulus dollars and the Cash for Clunkers). Now that many of these dollars have been spent, where does the economy go from here? In other words, are these number sustainable?

2. Job Growth: For the 21st straight month, the economy is expected to layoff jobs, to the tune of 175,000 more losses this month. Here is where things get interesting. Job growth is seen as a lagging indicator for an economic recovery. Many economists will tell you we should see a return to job growth in early 2010. But where will this job growth come from? Which sectors of the economy are set to deliver enough expansion to bring the unemployment rate from near double digits to calmer numbers?

3. Housing: This is probably the ugliest chart CNN has posted out of all of them. Home values are still declining, but at a slower rate. Unfortunately, there’s still a glut of supply out there. Many people are buying homes simply because the government is holding interest rates at all-time lows. It’s never been more affordable to buy a house. But once again, how long can this last? What happens when the government begins raising rates to combat fears of inflation? Will the improvement hold?

And that paragraph doesn’t take into account the expected Commercial Real Estate market bust. That bubble still needs to pop, and its effects on the economy or unforeseen.

4. Inflation: This is an area of concern further down the road due to the still present risk of deflation (if the economy hits the skids again) and the risks of hyperinflation, if the government doesn’t reign in low interest rates quickly enough.

5. Manufacturing: CNN describes growth in theĀ  manufacturing sector as “tepid.” The reason its tepid will be made obvious in my next point.

6. Consumer Spending: This is the traditional boon of the American economy, accounting for 70% of our total GDP. Unfortunately, Americans just aren’t spending the way they used to. The recession has seriously spooked people, and our country has been long overdue for a deleveraging process. Simply put, people are saving more and spending less. That’s why manufacturing growth is down. People just aren’t consuming as much as they used to, and as a result businesses are making fewer items for sale. This also ties back into the job growth picture. If companies aren’t manufacturing, jobs aren’t being created, money isn’t being spent, and the economy continues its downward spiral.

7. Ironic that CNN’s last point of analysis would be a stock market that’s “roaring back.” Smart analysts out there understand that the surprisingly strong bull run over the last six months has been driven by two primary forces. First, we’ve seen a correction off the absurd lows of Q1 2009. Second, we’ve seen investors speculating that global government stimulus would be enough to drive us out of the economic doldrums. Meanwhile, several multinational companies that compose the DJIA and S&P 500 indexes have been reporting strong earnings reports over the last 2 months, serving to fuel the run up even more.

However, I would argue that the stock market at its current point is overvalued. See Tyler Durden’s analysis of market correlations over at Zero Hedge for why fundamental market indicators point to retreat off the bull run we’ve witnessed through the spring, summer and into fall.

In short, our economy is still in grave peril. Real manufacturing growth is tepid at best. Job losses are still the norm. Worst of all, the financial institutions are back to operating the way they were two years ago. Their balance sheets are still saddled with toxic assets. And the national debt continues to explode. Many economists are now saying that this could be a “jobless” recover (which isn’t really much of a recovery), with the most pessimistic saying we could be looking at a decade or more of fluctuation between recession and rebound (think of Japan’s lost decade).

Buckle up folks. This is going to be a hell of a ride.

Friday Morning Quick Hits

March 6, 2009
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This morning’s news is all about jobs and how quickly they’re disappearing. Unemployment in the United States hit a 25-year high at 8.1% as the economy shed another 650,000+ jobs in February. In New York, 3,700 people showed to a job fair featuring 92 employers.

The economic environment has hit the tech sector hard. Apple’s shares have taken a hit this morning when analysts cut the estimated number of computers and iPhone the company would sell this quarter. Additionally, the company faces a large threat from unauthorized software distributors.

Wells Fargo will cut its dividend 85% in an effort to save costs.

Retailer Ann Taylor delivered more bad news this morning, posting a wider than expected loss.

Thursday Morning Quick Hits

March 5, 2009
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What goes up… After rallying 150 points yesterday, the Dow has sunk back down over 200 points after China quashed rumors of additional stimulus money.

Bank stocks in particular have been hammered this morning. Citigroup’s stock price fell below $1 in trading this morning.

The American economy continues to shed jobs at a gruesome rate. Jobless claims topped 600,000 for the fifth straight week.

And the housing market continues to nose dive. Delinquencies hit a new record at 7.88% of all loans, and real estate market values kept up their decline.

All in all, another peachy keen morning for the global economy.

Tuesday Morning Quick Hits

March 3, 2009
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A hint of positive news to start the morning. Stimulus money has begun to hit the streets, literally. The first infrastructure project has begun in Maryland, and for $2.1M it will create approximately 60 jobs.

Ford posted a 48% decline in monthly sales, and analysts aren’t optimistic for either GM or Chrysler either, according to Bloomberg.

Even Warren Buffett hasn’t remained immune to the recession, as Berkshire Hathaway announced job cuts as well.

CNN has a good article up this morning pointing out some job-hunting strategies. The main gist: network, network, network. And professional associations can be a good way to get started.

Stocks started the morning strong, but the rally has cooled as the Dow and S&P hover near their closing numbers yesterday.

Thursday Morning Quick Hits

February 26, 2009
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President Obama is scheduled to make remarks this morning on his first proposed budget. Details include an additional $750B of aid to the financial industry, and a deficit pegged at $1.75T for the year. Obama has pledged to cut that number in half by 2012.

General Motors continues to struggle as they reported a greater than expected $9.6B loss this quarter. The company managed to burn through more than $5B of cash and is expected to ask for more bailout money from the government.

The unemployment crisis continues as jobless claims hit a new record… again, topping 667,000 new applicants. Continuing recipients topped 5M for the first time in history as well.

Apple’s board is coming under fire from shareholders about withholding information regarding the health of Steve Jobs.

In the tech world, Salesforce crossed $1B of revenues for the year, while also posting quarterly net income of $13.7M. This is the first time a company based solely on web applications has reached that threshold.

The Dow fell yesterday, following Obama’s non-State of the Union, State of the Union, but has opened this session up despite the tough job numbers and the announcement from GM.

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