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No Recovery in Sight as Jobless Numbers Jump and the Trade Gap Widens

“The number of Americans filing new claims for unemployment benefits rose more than expected last week, but the underlying trend continued to point to some strength in the labor market.

Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 326,000, the Labor Department said on Thursday. Claims for the week ended March 22 were revised to show 1,000 fewer applications received than previously reported.

Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 317,000 in the week ended March 29.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, nudged up 250 to 319,500. This indicates a firmer bias in the labor market.

A Labor Department analyst said no states were estimated and there were no special factors influencing the state level data.

The government made revisions to the model it uses to smooth the claims data for seasonal fluctuations. It also revised claims data going back to 2009.

Despite last week’s increase, claims have been generally stable in March, which should support expectations of an acceleration in job growth during the month.

The government’s closely watched employment report on Friday is expected to show nonfarm payrolls increased by 200,000 jobs last month after rising 175,000 in February, according to a Reuters survey of economists. The unemployment rate is seen falling one-tenth of a percentage point to 6.6 percent.

A report on Wednesday showed private employers stepped up hiring in March for a second straight month.

The labor market suffered a setback in December and January when unseasonably cold weather gripped large parts of the country. With temperatures rising, a pick-up is in the cards, which should help to unleash pent-up demand and put the economy on a stronger growth trajectory.

The claims report showed the number of people still receiving benefits after an initial week of aid rose 22,000 to 2.84 million in the week ended March 22.

Trade gap widens sharply, exports tumble…”

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ADP Says the Private Sector Picked Up 191k Jobs :)

“The U.S. economy created nearly 200,000 new private-sector jobs last month, a closely watched economic indicator reported on Wednesday, feeding hopes about the economic recovery and a thaw in labor markets.

The ADP National Employment report said total private payrolls jumped by 191,000 in March, but sharply revised upward February’s figure, to 178,000 from 139,000. Analysts in a consensus estimate had expected a gain of 195,000 jobs.

Small business created 72,000 total jobs, ADP said…..”

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Non Farm Payrolls are Expected to be HUGE This Friday

“The Non-Farm Payrolls report — AKA The Jobs Report – comes out on Friday, and people are starting to get excited.

The Wall Street “consensus” estimate is in the 200K range, but optimism is building that the number could come in significantly higher.

Here’s Dan Greenhaus of BTIG (@danBTIG) relaying his talk with clients:

While the median estimate stands at 200K — up from 150K just one month ago — BTIG thinks job growth could be on the order of 225K while many with whom we’re meeting have been speaking of a much stronger snapback. If you believe, as we do, that weather was instrumental in weighing on the economy more generally, then this number should provide evidence for just such a belief. Conversations with clients suggest we’re not alone in the “possibly stronger” camp. On that front, [today’s] ADP report should be closely watched…..”

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Q1 GDP Growth Expected To Be Tepid Due to Weak Consumer Spending

“Tepid gains in consumer spending have helped send some economists’ first-quarter GDP growth forecasts below 2 percent, The Wall Street Journal reports.

The economy expanded 2.6 percent in the fourth quarter.

Consumer spending rose 0.3 percent in February, the government announced, but January’s increase was revised down to 0.2 percent from 0.4 percent.

Research firm Macroeconomic Advisers now predicts the economy will grow 1.3 percent in the first quarter, down from its prior forecast of 1.5 percent, according to The Journal. JPMorgan Chase cut its first-quarter projection to 1.5 percent from 2 percent.

Barclays Capital trimmed its prediction to 2 percent from 2.4 percent, and research firm MFR cut its forecast to 1.2 percent from 1.8 percent, The Journal reports.

Consumer spending accounts for about 70 percent of GDP. The nasty winter weather in much of the country may have kept numerous consumers at home during the first three months of the year….”

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China’s Money Woes Begin to Hurt the Global Economy

“Over the past month, we have explained in detail not only how the Chinese credit collapse and massive carry unwind will look like in theory, but shown various instances how, in practice, the world’s greatest debt bubble is starting to burst, resulting not only in the first ever corporate default but also in the bursting of the associated biggest ever housing bubble. One thing we have not commented on was how actual trade pathways – far more critical to offshore counterparts than merely credit tremors within the mainland – would be impacted once the nascent liquidity crisis spread.

Today, we find the answer courtesy of the WSJ which reports that for the first time in the current Chinese liquidity crunch, Chinese importers, for now just those of soybeans and rubber but soon most other products, “are backing out of deals, adding to a wide range of evidence showing rising financial stress in the world’s second-biggest economy.”

While apologists of China’s collapse have been quick to point out that China’s credit collapse would be largely a domestic issue, with little foreign creditor exposure at either the public debt, or private – corporate – debt levels, one thing nobody can deny is that if and when Chinese trade routes grind to a halt, the downstream impacts would be devastating, and spread like wildfire as the offshore supply chain is Ice 9’ed.

More from the WSJ:

 Most purchases are private, with little data on the volumes affected, but traders at Asian trading firms say they are seeing a sharp rise in canceled contracts this year while other buyers are demanding heavy discounts.

The U.S. Department of Agriculture confirmed that China has canceled orders for 517,000 metric tons of soybeans, used to make cooking oil, and compares to imports of 63.4 million tons last year. South American soybean contracts have also been canceled because of weak demand, says trade journal Oil World.

The cancellations are a big worry for the commodity markets as exporters around the world had relied for years on China’s insatiable appetite for a wide range of raw ingredients. But now as jitters rise over the health of the economy, the fallout is rippling through into agricultural commodities, just weeks after the price of copper and iron ore tumbled on worries they had been used in risky Chinese financing deals.

For now the impacted importers are those dealing purely with commodity products, such as rubber. The problem is that once one importer defaults on a contract, suddenly counterparty risk regarding all of China (and certainly those using commodities on Letters of Credit, recall China Commodity Funding Deals) soars, forcing other offshore exporters to collapse liquidity terms when dealing with Chinese buyers…”

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Empire Manufacturing Strikes Out Again, Outlook Dims

“Since July of last year, the Empire Fed manufacturing index has only beaten expectations once as March data once again fell below consensus (5.61 vs 6.5 est.) – hardly confirming the weakness is weather-driven. The underlying sub-indices were ugly with the most worrisome being the outlook – despite some optimism for capex, the general business conditions 6-months ahead fell by the most since Oct 2011 to its lowest since July 2013 – which once again suggest this weakness is anything but weather-driven…”

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Data Shows China’s Economy Is Slowing Rapidly

“BEIJING (Reuters) – China’s economy slowed markedly in the first two months of the year, with growth in investment, retail sales and factory output all falling to multi-year lows, a surprisingly weak performance that raises the specter of a sharper cooldown.

The weaker-than-expected data is bound to amplify global investors’ worries about slackening growth in the world’s second-largest economy, and will almost certainly feed speculation that Beijing may loosen policies soon to bolster growth.

China’s industrial output rose 8.6 percent in the first two months of 2014 from a year earlier, the National Bureau of Statistics said on Thursday, missing market expectations for a 9.5 percent rise.

That marked the worst performance for China’s factory output growth since April 2009.

“Policy easing should be imminent,” said Hao Zhou, an economist at ANZ Bank in Shanghai, adding that Thursday’s data implied that China’s economy may grow 7 percent in the first quarter.

Sources told Reuters earlier this week that China’s central bank is prepared to take its strongest action since 2012 to loosen monetary policy if economic growth slows further, by cutting the amount of cash that banks must keep as reserves.

A cut would be triggered if growth slips below 7.5 percent and towards 7.0 percent, and would be expected only in the second quarter, according to the sources who are involved in internal policy discussions.

Other sectors of the economy also appeared to have lost steam…..”

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Marc Faber says 4% growth is ok for China

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U.S. GDP Revised to 2.4% from 3.2%

“The U.S. government slashed its estimate for fourth-quarter growth as consumer spending and exports were less robust than initially thought, leaving the economy on a more sustainable path of modest expansion.

Gross domestic product expanded at a 2.4 percent annual rate, the Commerce Department said on Friday. That was down sharply from the 3.2 percent pace reported last month and the 4.1 percent logged in the third quarter. Economists polled by Reuters had expected growth would be cut to a 2.5 percent pace.

It is not unusual for the government to make sharp revisions to GDP numbers, as it does not have complete data when it makes its initial estimates. In fact, the latest figures will be subject to revisions next month as more information is received.

The revision left GDP just above the economy’s potential growth trend, which analysts put somewhere between a 2 percent and 2.3 percent pace.

Consumer spending accounted for a large chunk of the revision after retail sales in November and December came in weaker than assumed.

Consumer spending was cut to a 2.6 percent rate…”

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EU Economists Expect Weak Growth, Defaltion and Debt to Weigh Heavy

“BRUSSELS — European Union economists on Tuesday forecast tepid growth for most of the region through 2015, while warning that lingering debt burdens and the specter of deflation could sabotage the recovery.

The forecasts, published by economists at the European Commission, see a mild recovery over the next two years. The impact of budget austerity, a major drag on growth since the euro-zone debt crisis flared in 2009, is expected to fade this year. Meanwhile, policy overhauls in the euro zone’s weaker economies are starting to bear fruit, helping to boost their export sectors, the commission said.

Growth in the euro area is forecast at 1.2% this year and 1.8% next, after two consecutive years of contraction. That won’t be enough to make much of a dent in euro-zone unemployment, which is seen hovering near record highs of 12% in 2014 and 11.7% in 2015. The commission report forecasts growth in the broader EU—buoyed by strong momentum in the U.K.—at 1.5% this year and 2% next.

But the tepid recovery faces some daunting obstacles. Debt owed by governments, households, businesses and banks remains too high in many of the bloc’s countries, the commission report says. And low inflation in the euro zone, or even the threat of outright deflation, threatens to make the debt problems even worse.

The commission forecasts inflation in the euro zone at 1% this year and 1.3% next, well below the European Central Bank’s target of just under 2%….”

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China’s PMI Drops to a Seven Month Low, Now in Recession Territory

“BEIJING—China’s factory activity lost ground in February, as a key gauge of manufacturing slipped to a seven-month low, signaling further economic weakness and rattling markets.

Some analysts called for more government support for the world’s No. 2 economy to ensure that momentum doesn’t slow further. But Beijing may be comfortable with an economy that is expanding—though at a slower pace—as it seeks to focus on longer-term structural changes that will reduce the reliance on government investment and export-led manufacturing for growth.

The preliminary HSBC China Manufacturing Purchasing Managers’ Index, a gauge of nationwide manufacturing activity, fell to 48.3 in February from 49.5 in January, HSBC Holdings HSBA.LN -0.87% PLC said Thursday.

A reading above 50 indicates expansion from the previous month, while a reading below 50 indicates contraction.

“There is continued downward pressure on the economy,” said Ding Shuang, economist at Citigroup. “Economic growth will continue to decline to 7% over the next two quarters.”

With domestic demand weak and the global economy still recovering, China’s economic growth slowed to 7.7% in the final quarter of last year from 7.8% in the third quarter.

A government official said this week that the government is looking for growth in industrial output of about 9.5% this year, down from 9.7% last year. Manufacturing is still a major driver of growth, and such a slowing would point to overall weakness ahead. A weaker Chinese economy would mean softer global demand for commodities from grains and metals to coal and oil.

The Australian dollar slipped against the U.S. currency after the release of the manufacturing PMI data. Australia is a major supplier of resources that fuel China’s economic expansion. Hong Kong’s benchmark stock index and shares in Tokyo were also under pressure.

HSBC economist Qu Hongbin said that China needs to make policy adjustments to ensure sufficient momentum in the economy. “We believe Beijing policy makers should and can fine-tune policy to keep growth at a steady pace in the coming year,” he said.

Nomura economist Zhiwei Zhang said he expects Beijing to act. “We reiterate our view that the recovery in China is not sustainable and that GDP growth will slow to 7.5% year on year in the first quarter and 7.1% in the second quarter despite favorable base effects,” he said, adding, “we expect the government to loosen monetary policy in the second quarter to support growth.”

But others said that the weak measure of the nation’s manufacturing health was partly due to the timing of the Chinese Lunar New Year holiday.

They also noted that government policy makers have so far been comfortable with slightly slower growth, though they are carefully watching the employment situation….”

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State of the Union: Your Slowly Getting Screwed in More Ways Than One

“Wages aren’t keeping up with food inflation, creating a problem for American families.

While consumer prices overall have risen 6.4 percent since 2011, chicken has jumped 18.4 percent, ground beef 16.8 percent and bacon 22.8 percent, CBS News reports.

“Food inflation is far greater than the government thinks it is,” ConvergEx market strategist Nick Colas told CBS.

At the same time, median income has gained only 1 percent a year, CBS reports. That makes it difficult for parents to save for their children’s college expenses. College tuition has increased 6 to 8 percent a year for the last five decades, according to CBS.

While some economists see the overall economy in fine shape, “middle-class families are quietly struggling,” writes CBS correspondent Michelle Miller.

Colas is concerned. “The disconnect is severe…”

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Empire Manufacturing Falls More Than Expected

“The New York Fed’s Empire State manufacturing survey fell to 4.58 in February, below Wall Street expectations.

Economists expected that the New York area index dropped to 9.01 in February from 12.51 the month prior….”

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Jobless Claims Spike and Retail Sales Crater

“The number of Americans filing new claims for unemployment benefits rose last week, government data showed Thursday.

A separate report showed retail sales slid 0.4 percent n January from December, the Commerce Department said. Excluding autos, retail sales were flat.

Initial claims for state unemployment benefits rose to a seasonally adjusted 339,000 from 331,000….”

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EM Worries Subside as China’s Exports Pop 10.6%

“BEIJING—China’s exports jumped unexpectedly in January, a potentially positive sign for the world’s second-largest economy even as it raised fresh doubts about the reliability of China’s trade data.

The country’s exports rose 10.6% compared with January last year, up from a 4.3% year-over-year rise in December, official customs data show. This is well ahead of the median 0.1% growth forecast by 11 economists polled by The Wall Street Journal and suggests a gradual recovery of demand in western economies is helping to boost China’s trade.

“These are very strong figures, mainly reflecting the recovery of developed nations, especially Europe, with exports to the European Union up more than 10%,” said Shen Jianguang, an economist at brokerage Mizuho Securities.

The strong performance comes as other data, including purchasing-managers indexes, suggested the crucial manufacturing sector may have slipped into contraction at the start of the year….”

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Despite fears subsiding the rally in Asia goes flat



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Non Farm Payrolls Come In Up 113k, The Unemployment Rate is 6.6%



“Payrolls in the U.S. rose less than projected in January as retailers cut back after the holidays and government hiring fell. The unemployment rate unexpectedly declined to 6.6 percent.


The 113,000 gain in employment followed a revised 75,000 increase the prior month, Labor Department figures showed today in Washington. The median forecast of economists in a Bloomberg survey called for a 180,000 advance. The unemployment rate dropped to the lowest level since October 2008 even as more Americans entered the labor force.


Retailers and government agencies cut payrolls by the most in more than a year, while construction firms and manufacturers boosted employment. Broad-based improvement in job growth is needed to help generate bigger wage gains and spur the consumer spending that accounts for almost 70 percent of the economy.


“We’re making progress but the progress is still slow,” Stephen Stanley, chief economist at Pierpont Securities LLC in StamfordConnecticut, said before the report. On many fronts, “the labor market isn’t performing in a way that is satisfactory. We’ve had decent job growth but not a sustained period of strong job growth.”


Today’s report showed 262,000 Americans were not at work because of inclement weather in January, little changed from the same month last year, suggesting conditions played a more limited role than in December. In the Jan. 10 release of the prior month’s data, the Labor Department had said poor weather kept 273,000 people from work, the most for any December since 1977.


Construction, Manufacturing….”


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ADP Reports the Private Sector is Creating Less Jobs

“Private companies created 175,000 new positions in January, a bit lower than in expected but in keeping with the pace of job creation over the past two years, according to the latest report from ADP and Moody’s Analytics.

Economists expected the ADP to report that private companies created 180,000 jobs in January, down from the downwardly revised 217,000 positions in December,

“Nothing changed in December or January fundamentally,” Moody’s economist Mark Zanki told CNBC. “The economy is still improving.”

Tim Boyle | Bloomberg | Getty Images
A job seeker, right, talks with a McDonald’s representative at a job fair for concession employment opportunities in International Terminal 5 in connection to the redevelopment of the international terminal at O’Hare International Airport in Chicago.

As has been the case throughout the labor recovery, services created by far the bulk of the growth, with 160,000 new positions added. Professional services declined sharply, adding just 49,000 jobs after averaging 65,000 over the past two months.

Manufacturing jobs, meanwhile, fell by 12,000 though construction added 25,000.

Small businesses also led the way, with 75,000 jobs, though that was the lowest figure since August. Large firms, with more than 500 employees, added just 34,000 positions….”

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State of the Union: “Welcome to $MCD, May I Take Your Order”

“The place in which you live may be killing the American Dream, according to a new study by the National Bureau of Economic Research, suggesting that America may not be the land of opportunity.

Inequality is inhibiting the opportunity for upward mobility in the United States particularly in communities in the South.

On average, a 10 percentile increase in parent income is associated with a 3.4 percentile increase in a child’s income.

However, the probability that a child reaches the top 20 percent of the national income distribution from a family in the bottom 20 percent varies from 4.4 percent in Charlotte, N.C., to 12.9 percent in San Jose, Calif.

The researchers found that the mobility gap cannot be attributed to local tax and spending decisions, local school quality or local area colleges and tuition. Labor markets also didn’t matter.

Instead, the mobility gap is influenced on five pertinent factors:

1. Race. Less upward mobility happens to occur in densely black populations, the researchers note. It is a rich-poor issue rather than a black-white issue, as children of all races from areas with large black populations have less upward mobility.

2. Segregation…..”

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GDP Comes in Slightly Better Than Expected

“Robust household spending and rising exports kept the U.S. economy on solid ground in the fourth quarter, but stagnant wages could chip away some of the momentum in early 2014.

Gross domestic product grew at a 3.2 percent annual rate, the Commerce Department said on Thursday, in line with expectations.

While that was a slowdown from the third-quarter’s brisk 4.1 percent pace, it was a far stronger performance than earlier anticipated and was welcome news in light of a 0.3 percentage point drag from October’s partial government shutdown and a much smaller contribution to growth from a restocking by businesses.

Earlier in the quarter many economists were anticipating a growth pace below 2 percent given that an inventory surge accounted for much of the increase in the July-September period.

Growth over the second half of the year come in at a 3.7 percent pace, up sharply from 1.8 percent in the first six months of the year. It was the biggest half-year increase since the second half of 2003.

Consumer spending was the main driver of fourth-quarter growth, but there was also help from other segments of the economy such as trade and business investment.

The advance fourth-quarter GDP was released a day after the Federal Reserve said “growth in economic activity picked up in recent quarters.”

The Fed on Wednesday announced another reduction to its monthly bond purchases and appeared to shrug off a surprise sharp slowdown in job growth in December.

Consumer spending rose at a 3.3 percent rate, the strongest since the fourth quarter of 2010. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, advanced at a 2 percent pace in the third quarter….”

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