A "perfect jobs report" ??? Another economy thread....

6SpeedTA95 · 09-01-2006, 03:08 PM

Originally Posted by article

Stocks jump as the Labor Dept. says the economy created 128,000 jobs last month. Wage inflation looks well contained. GM cuts 4th-quarter production. Intel gets an upgrade; 'Madden' is a boon for Electronic Arts

After a week of encouraging economic numbers for Wall Street, the icing on the cake came in the form of the August employment report: solid but not strong job growth and a lower-than-expected growth in wages.

Wall Street was happy and, on what is normally a light day of trading, stocks moved smartly higher. At 2:10 p.m. ET, the Dow Jones industrials were sporting an 87-point gain to 1,467.

Non-farm payrolls rose by 128,000 in August, the Labor Department reported, about in line with economists' expectations for a gain of 125,000 jobs. July's payroll gains were revised up to 121,00 from 113,000, while June's job gains were revised up to 134,000 from 124,000.

The unemployment rate for August ticked down to 4.7% from 4.8%.

Wage inflation cooled for the month, with average hourly earnings rising 0.1%, compared with an upwardly revised 0.5% rise in July.

"In my mind this was an absolutely perfect jobs report," Mark Zandi, chief economist at Moody's Economy.com, told CNBC's "Squawk Box."

Those concerned about the effect the low wage gains might have on workers should note that wages are still up 3.9% year over year, which is consistent with solid productivity growth and a growing economy, Zandi said.

Stocks climb, resist profit-taking
The stock market jump was surprising all the pros, who expected early gains to be quickly followed by big profit-taking ahead of the long Labor Day Weekend. (Markets will be closed on Monday and reopen on Tuesday.)

But the market was holding on to its gains. In addition to the Dow's big increase, the Standard & Poor's 500 Index gained 7.6 points, 0.6%, to 1,311 at 2:10 p.m. ET. If the level holds, the S&P would be within 11 points of its May 10 high. The Nasdaq Composite Index rose 10.5 points, 0.5%, to 2,194.

Volume wasn't bad considering it's the Friday before a holiday weekend. Volume on the New York Stock Exchange was heading to about 1.1 billion shares. Nasdaq volume was on track for 1.4 billion shares.

Steel stocks were among the market leaders with the Dow Jones U.S. Steel Index ($DJUSST) jumping 2.6%. U.S. Steel (X, news, msgs) was up nearly 2.9%. Nucor (NUE, news, msgs) added 1.9%.

Even though oil prices were falling, energy stocks were mostly higher. The Amex Natural Gas Index ($XNG.X) was up 1.3%. Oil and gas producer Devon Energy (DVN, news, msgs) was up 2.75%.

Toyota Motor (TM, news, msgs) rose 0.3% after reporting a 17% increase in vehicle sales in August over a year ago. General Motors was up 2.3% after surprising Wall Street with an 8% gain in August sales. But the auto giant said it will cut fourth quarter production by 12%, CNBC's Phil LeBeau reported. Ford Motor Co. (F, news, msgs) shares fell 1.7% after reporting that August sales fell 11.6%.

Shortly after the start of trading another batch of economic numbers arrived. The University of Michigan revised its August consumer sentiment index to 82 from 78.7. That was a bigger revision that economists expected, but still below July's reading of 84.7.

Construction spending plunged 1.2% in July, the biggest drop in nearly five years, the government said. That's more evidence of a slowdown in the housing sector. Economists predicted construction spending to remain flat.

And the Institute of Supply Management said its August manufacturing index slipped to 54.5 from 54.7 in July, about in line with forecasts.

Intel upgraded
Dow component Intel (INTC, news, msgs) rose 1.9% this afternoon after ThinkEquity upgraded the stock to "accumulate" from "sell" and raised its price target to $23 per share from $14 per share based on expectations from aggressive cost-cutting measures, Briefing.com reported. On Thursday, News.com reported that Intel would cut as much as 10% of its workforce by Tuesday. Intel was the Dow's third-best performer in August with an 8.7% gain.

Also in the tech sector, video game maker Take-Two Interactive (TTWO, news, msgs) said after the bell Thursday that Wall Street's consensus for fiscal fourth-quarter profits of 38 cents per share and revenues of $405 million is too high. Shares sank 7% in morning trading.

And video game rival Electronic Arts (ERTS, news, msgs) said late Thursday that "Madden NFL '07" sold more than 2 million units in its first week on sale. That's the biggest launch in the history of the Madden football game franchise. Electronic Arts shares gained 0.25%.

Morning news roundup
Can Black Monday repeat? Program trading -- large buy and sell orders executed by a computer -- was blamed for the huge stock-market plunge in 1987 (registration required). Now that "the market has entered another period when investors are worried about inflation and whether rising interest rates will trigger a recession, market observers are wondering how program traders would respond to a serious price decline," The Washington Post reports.

A tale of two central banks. While the Federal Reserve says the U.S. economy can continue to grow rapidly without generating inflation, the European Central Bank hints at further rate hikes to stop inflationary pressure, The Financial Times reports.

Spend, spend, spend.BusinessWeek looks at why the consumer keeps shopping and is so averse to saving.

Banks feeling the housing pinch. Banks are more exposed to real estate than ever (subscription required), and the housing slowdown is coming at a time when other key businesses for financial institutions are being squeezed, The Wall Street Journal reports.

Towering profits? Barron's says more investment in cell sites bodes well for companies that own cellular towers (subscription required).

Betting on bonds. The Journal looks at two opposing views on whether the recent bond bull market (subscription required) can continue.

Information is as valuable as gold. Wall Street is buzzing (registration required) "about what looked like the work of tipsters trading on inside information to strike it rich on an $8.6 billion deal between two gold mining companies," according to the New York Post.

-- Kim Khan and Charley Blaine

This is good news, hopefully the market will rally on it. It is up 80ish points right now. We need to continue to have strong jobs growth during this housing downturn. Hopefully the market wont soften too bad. If we have a softlanding we'll keep right on sailing

motivez · 09-01-2006, 03:38 PM

I thought too low of unemployment was a bad thing?

When does that start to become a problem?

Ardentfrost · 09-01-2006, 03:41 PM

Originally Posted by motivez

I thought too low of unemployment was a bad thing?

When does that start to become a problem?

That'll only be a problem if you cut off immigration or make a situation that isn't attractive to immigrants.

If your country can't provide the labor needs of an industry, they gotta get em somewhere.

Publius · 09-01-2006, 03:42 PM

Originally Posted by motivez

I thought too low of unemployment was a bad thing?

When does that start to become a problem?

It's a gray area, and it shifts. Full employment is usually achieved around the 5% unemployment mark in the U.S. in the last 50 or so years, but through most of the 90s most economists believe the full employment unemployment level was closer to 4.5%.

So basically: we'll know it's a problem when it starts becomign a problem.

Scrum · 09-01-2006, 03:42 PM

Originally Posted by Ardentfrost

If your country can't provide the labor needs of an industry, they gotta get em somewhere.

That's when we open the labor camps.

6SpeedTA95 · 09-01-2006, 03:43 PM

Originally Posted by motivez

I thought too low of unemployment was a bad thing?

When does that start to become a problem?

It is which is why they're glad it was NOT 300,000 new jobs this month.

When does it become a problem? Thats up for debate most economist say 4 to 5.5% unemployment is full employment. Some say as low as 3.5 and as high as 6.5%. I think given historical trends its obvious that 6.5% is NOT full employment. However as you get into the low 5's and 4's you see signs of full employment. If things were to dip in into the low fours or upper 3's I think we'd start seeing significant signs of full employment.

motivez · 09-01-2006, 03:44 PM

Originally Posted by Ardentfrost

That'll only be a problem if you cut off immigration or make a situation that isn't attractive to immigrants.

Well, good thing that's not going on!

motivez · 09-01-2006, 03:45 PM

What are the signs of "full employment" and the consequences of it?

Ardentfrost · 09-01-2006, 03:46 PM

Originally Posted by motivez

What are the signs of "full employment" and the consequences of it?

All kinds of shit

Full employment - Wikipedia, the free encyclopedia

Publius · 09-01-2006, 03:48 PM

Originally Posted by motivez

What are the signs of "full employment" and the consequences of it?

The most significant sign when we go beyond full employment is that the economy will start to "overcook" and we'll see inflation rising quickly. On the backend you'll usually hit a recession as the government raises interest rates to curb the inflation, and you'll get a pretty sizable jump in unemployment rates (like we did in 2000/2001).

Best way to think of it: The economy is a car with a speed governor, with employment being how fast it's going. When the speed bounces of the speed governor, the engine will cut out for a minute and when you get back on it you're going slower than you were before.

Imperfect analogy, but it's pretty accurate.

6SpeedTA95 · 09-01-2006, 03:50 PM

Originally Posted by Publius

The most significant sign when we go beyond full employment is that the economy will start to "overcook" and we'll see inflation rising quickly. On the backend you'll usually hit a recession as the government raises interest rates to curb the inflation, and you'll get a pretty sizable jump in unemployment rates (like we did in 2000/2001).

Best way to think of it: The economy is a car with a speed governor, with employment being how fast it's going. When the speed bounces of the speed governor, the engine will cut out for a minute and when you get back on it you're going slower than you were before.

Imperfect analogy, but it's pretty accurate.

BINGO!.

civicmon · 09-04-2006, 01:39 AM

Full Employment typically causes a major spike in Inflation and the needs to slow it down, as noted above.

That was part of Japan and Hong Kong's problem with their bubbles in 1990 and 1997 respectively... both economies had full employment and nearly zero real unemployment (I think HK at the Chinese handover literally at 2% unemployment) and was causing inflationary problems, especally in Japan.

HK's situation was sort of like ours, they border China and could open the flood gates at any time. Japan's a bit more insular. Part of their low unemployment shot wages through the roof and helped fuel their 80s bubble.

Lot of countries, even ones that we wouldn't think of such as Taiwan and Malaysia are basically at full employment but they don't encourage much immigration because their economies really are still growing and wages are not at "developed" status... Malaysia's the best value in the world frankly, that's how low wages are as an aggrigate compared to developed countries.