Positive signs for economic recovery
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| Thu, 05-06-2004 - 11:32am |
The one thing that must be watched is the increase in wages which show the looming threat of inflation on the horizon.
If the economic recovery continues at a strong pace, it should be able to outpace the inflation rates however.
Lets hope that this trend continues.
http://moneycentral.msn.com/content/invest/extra/P83006.asp
Jobless claims lowest since 2000
Decline surprises analysts and bodes well for April employment report due Friday. Wages also show an increase, adding to fears of inflation.
By MSN staff and news services
The number of Americans filing initial claims for jobless pay dropped last week to the lowest level since 2000, the government said on Thursday, bolstering expectations for a strong April employment report.
But labor costs rose unexpectedly in the first quarter in a mild challenge to the Federal Reserve's view inflation is no threat, while productivity increased at a respectable 3.5% annual pace.
“It looks like a darn good morning from my viewpoint,†David Wyss, Standard and Poor’s chief economist, told CNBC’s “Squawk Box.â€
"It sure looks like the labor market is taking off," Wyss said. “Certainly everything’s pointing (to a big payroll jump tomorrow),†he said. “We’ve been fooled so many times in recent months that it’s hard to get too excited about forecasts of employment. It basically proves economists don’t know what they’re talking about. But everything there says another strong month for employment.â€
If there is a big rise in April payrolls, then a quarter-point interest rate hike in June is likely to come from the Federal Reserve, he added.Point. Click. Pay.
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Dollar, bond markets react
U.S. Treasury yields hit a two-year high on the unexpectedly rosy jobless number, and the dollar also gained as markets increasingly bet the Fed will increase interest rates later this summer.
First-time claims for state unemployment benefits shrank 25,000 to 315,000 in the week ended May 1, the Labor Department said. It was the third straight week of declines and highlights the picture of an improving labor market.
Wall Street analysts had forecast a slight fall in claims to 335,000 from a revised 340,000 the previous week.
"The jobless numbers are surprising low. It's more evidence the labor market is recovering quite nicely,'' said David Sloan, senior economist at 4Cast Ltd. in New York.
Grant Wilson, vice president of foreign exchange at Mellon Bank in Pittsburgh, agreed.
"We weren't expecting anything as (good) as this. It bodes well for the unemployment number tomorrow,'' Wilson said.
April non-farm payrolls are set for release at 8:30 a.m. EDT on Friday and are forecast to show 173,000 new jobs created. That would be a marked moderation from March, when 308,000 were added, but still evidence that labor conditions are tightening.
Last week's jobless claims data will make no difference to the April report, which was drawn from a survey in the middle of last month. But the upbeat tone chimed with a broad sense that the outlook was bright.
Wages creeping higher, too
In addition to lower initial claims, the four-week moving average of insurance filings, which smooths weekly fluctuations to provide a better picture of underlying trends, retreated by 3,750 to 343,250.
Also, the number of unemployed on the benefit rolls after claiming an initial week of aid dropped 69,000 to 2.935 million in the week ended April 24, the latest for which figures are available. This was the lowest since June 2001, in the middle of the recession, when 2.933 million people were drawing unemployment insurance.
The drop was a potentially positive development since the number had been indicating that while the pace of layoffs had slowed, companies were still not rushing to hire new workers and instead had been utilizing greater productivity to meet higher demand.
In a separate report, the Labor Department said productivity rose again in the first quarter, increasing at a 3.5% annual rate, as expected. But unit labor costs turned 0.5% higher, defying market forecasts for costs to be flat.
"The rise in unit labor costs is not worrying, but it is the least good performance in a year, and the chances are that the next few quarters will see bigger increases,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
Powerful productivity growth has helped companies keep a lid on compensation costs but the pick-up in employment had been expected to signal the end of this cycle and the Fed will take note of the uptick in costs.
The central bank is expected to hike interest rate for the first time in four years in the months ahead, but announced after a regular meeting on Tuesday it would be "measured'' in removing policy accommodation after leaving rates at a 1958-low of 1%.

Some of the new jobs...........
When Execs Go Temp
It started with clerical and factory workers. But here's why the preference for short-term workers now extends to the most highly skilled employees.
http://www.time.com/time/magazine/article/subscriber/0,10987,1101040426-612406,00.html
Willie Wingfield is working as hard as he can. He advises six Omaha, Neb., companies on their IT operations, evaluating and replacing their business applications. It's challenging, fast paced — and fleeting. Laid off in 2002, Wingfield, 49, has so far been unable to land another permanent spot and instead takes jobs through a temporary-services firm, usually for one-to-three-month projects. "I don't have a strong sense of security," he says. "As long as I can continue securing clients and billing enough to pay for myself, I'm there. But if the economy turns bad, the company may not be able to keep me on."
Temp work is no longer just about the assembly line or order entry. More and more highly skilled professionals — Wingfield has an M.B.A. and 23 years of experience — are turning to temp agencies while they struggle with a tough labor market. These accomplished workers — lawyers, accountants, engineers, biochemists — make up the fastest-growing segment of the temporary work force and account for as much as a third of the business of large temp firms. That's helped lift temp agencies, which tend to do well in a recovering economy, as companies use them to dip a toe into the hiring pool. Since April 2003, the temporary-services industry has gained 212,000 jobs, accounting for nearly one-third the total growth in payroll numbers.
The temp trend may be here to stay. The Bureau of Labor Statistics predicts that the staffing industry will add 1.8 million new jobs between 2002 and 2012, a 54% increase, with professional jobs growing 68%. Along with outsourcing and productivity-improving software, the rise in temporary hiring is one of the big structural shifts redefining the job market, according to a paper published by the Federal Reserve Bank of New York. By relying more on temps and contract workers in good times and bad, the report says, "all else equal, this approach yields a smaller permanent work force, more temporary workers and more permanent layoffs." The temp-services industry calls this "strategic staffing"--keeping a core group of full-timers while adding and subtracting temporary and contract workers as needed. Employees call it a new career path — or a raw deal that deprives them of job benefits and security. Either way, more workers are going to have to get used to it.
Fluent in Russian and trained as a doctor's assistant, George Borayev, 23, of Asheville, N.C., was initially thrilled with his temp job as a real-life "interpreter of maladies" for immigrants seeking medical help from the county health department. "I was excited to get this job," Borayev says. "It uses my language, and it's in the same field as my degree." He worked happily as a contract employee for almost two years until this spring, when a tax bill close to $2,000 and a $1,000 emergency root canal pushed the drawbacks of perma-temping right in his face. "Of course I'd really rather have all the benefits I hear people talking about, since I work pretty much full time here," Borayev says. "I'll keep working at this, and hopefully they might take me as a full-time employee. But I don't know if it will ever happen." The vast majority of temporary employees work close to 40 hours a week, as Borayev does. But as long as they stay under that limit, they are not considered full time and therefore not entitled to federally mandated overtime pay or health benefits available to permanent workers.
For most companies, temps represent a chance to control costs: while hourly wages are usually higher for temps, employers can save the 20% to 35% of salary they pay for permanent employees in taxes and benefits. Georgetown University expanded its internal temporary-staffing service two years ago to include such professionals as grant administrators, researchers and auditors. These nonclerical workers account for about a third of the hundreds of temporary spots Georgetown fills each year. "I think it's a result of the university's trying to make the most of its resources," says Diane Charness, manager of Georgetown's temporary service. "Part of it is economics; part of it is wanting to be flexible."
Some longer-term temps enjoy the best of both worlds: they get the same benefits as full-time employees without feeling the need to give face time or flatter the boss. Steve Israeli, 33, of Brooklyn, N.Y., has been working since July 2002 through the New York City agency TemPositions, most recently as an IT manager for a state agency. Laid off by Lucent in 2002, he says he is making more than he was at his last full-time job and, after years of waiting, got his first chance to be a manager. "This is my career, absolutely," Israeli says. James Essey, CEO of TemPositions, says that by moving his best employees to more responsible positions at different client firms, "I actually can provide these folks with career paths, much as it used to be in the old days." At many firms, IT departments have been "downsized so much that there really is not a lot of career advancement."
But as this army of high-skilled temps gathers strength, there are costs to the companies that tap their talent. Jeff Wittman, 41, of Indianapolis, Ind., is about to start his third auditing assignment in six months. "I'm having fun," he says, but he misses the relationships that can be built over time by staying with one company. That sense of detachment can run deep. "When I first went into nursing, employers felt responsibility for their employees," says Chris Springer, 41, a temp in Omaha. "But you don't see that anymore in the U.S. So now I say, 'Show me the money.'"
The big question is whether temporary staffing might further delay or dampen the long-awaited boom in permanent, full-time jobs. The overall March payroll numbers in the U.S.--308,000 jobs gained since February — were encouraging, but temporary staffing so far has shown few signs of slowing. This year the industry may even exceed its record-high average daily employment of 2.54 million in 2000, according to a report by the American Staffing Association, to be released next month. "Using these flexible staffing models in certain parts of your business — it makes too much sense not to do it," says Bill McVail, a business-services analyst with Turner Investment Partners. "Will that to some extent have an effect on the eventual bounce-back? It could." So while the next job boom may be just around the corner, it also might be temporary — in more ways than one.
http://www.nytimes.com/2004/05/06/business/06CND-GREE.html?ex=1084507200&en=02c27d465969b4db&ei=5062&partner=GOOGLE
The head of the Federal Reserve voiced a note of concern today about the effects of America's soaring national budget deficit on the country's long-term economic stability.
"We in the United States have been incurring ever larger deficits," the Fed chairman, Alan Greenspan, said. He added that "we have lurched" from a budget surplus in 2000 to a deficit that is projected by the Congressional Budget Office to amount to 4.25 percent of gross domestic product this year, or about $500 billion.
The "yawning" budget deficit, he told a banking conference, was a bigger concern to him than the equally growing trade deficit or high household debt.
"Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances," Mr. Greenspan said.
He added that one issue that worries most analysts is the inadequate national saving rate, which he described as "meager."
Another concern, in the face of the widening budget gap, is the commitment made by the United States to senior citizens, he said.
"We have legislated commitments to our senior citizens that, given the inevitable retirement of baby-boomer generation, will create significant fiscal challenges in the years ahead," he said, his words transmitted by satellite from Washington to the conference in Chicago.
"Has something fundamental happened to the U.S. economy and, by extension, U.S. banking that enables us to disregard all the time-tested criteria of imbalance and economic danger?" he asked.
Then, answering his own question, he said: "Regrettably, the answer is no. The free lunch has still to be invented."
Mr. Greenspan has made clear his objections to budget deficits in the past, and today's remarks were equally forthright. He also clung today to his belief that consumer debt is not a worrying factor, even though his beliefs are not accepted by all traditional economists.
It is also somewhat at odds with the Congressional Budget Office, which in March published new calculations showing that the budget deficit now stems almost entirely from tax cuts and spending increases rather than from lingering effects of the economic slowdown.
Nifty charts here:
http://jec.senate.gov/index.cfm?FuseAction=Charts.Detail&Image_id=75&ImageGallery_id=9
GDP up, too.
http://jec.senate.gov/index.cfm?FuseAction=Charts.Detail&Image_id=66
More strong economic news:
http://forum.belmont.edu/cornwall/archives/000791.html
Renee