Consumer Spending

JOB OPENINGS AND LABOR TURNOVER: AUGUST 2008

On the last business day of August, there were 3.3 million jobopenings in the United States, and the job openings rate was 2.3percent, the Bureau of Labor Statistics of the U.S. Department ofLabor reported today. The job openings rate decreased from 2.5 to 2.3percent in August while the hires rate and total separations rate wereessentially unchanged. This release includes estimates of the numberand rate of job openings, hires, and separations for the total nonfarmsector by industry and geographic region.

Although the month-to-month changes in job openings, hires, andturnover data are often small, the trends over time are notable. Thejob openings rate remained essentially flat from August 2006 throughSeptember 2007, followed by a downward trend through August 2008. Thehires rate has trended downward since August 2006. At 3.0 percent orlower in three of the last four months, the hires rate has beenessentially at the lowest level since May 2003. The separations rate,after trending down from December 2007 through May of this year, hasheld steady at 3.2 percent for the past three months. With the hiresrate trending downward and the separations rate leveling off recently,the hires rate has been lower than the separations rate several timesin recent months.

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Spending-June 2008

Deloitte-Index shows an upturn

Full article Deloitte

Excerpts:

The Deloitte Research Leading Index of Consumer Spending (the "Index") increased in June putting a break on the free fall the Index has experienced since October 2007. The Index attempts to track consumer cash flow as an indicator of future consumer spending.

"The upturn in the Index is a result of key indicators performing relatively better than in previous months," said Dr. Ira Kalish, Consumer Business director Deloitte Research, a subsidiary of Deloitte Services LLP. "The tax burden decreased, and we saw a lower decline in real wages compared to the previous month. However, house prices continue to pull the index down sharply and a weak employment situation is the key risk for consumer spending in the months ahead."

The Index, which comprises four components—tax burden, initial unemployment claims, real wages and real home prices—increased to 1.62 percent, from a revised gain of 1.26 percent a month ago.construction, manufacturing, and professional and business services and retail trade sectors.

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President Bush threatens to veto a Democrat-sponsored housing bill.

CEI Expert Available to Comment: Center for Entrepreneurship Director John Berlau on the past failings of federal housing policy:

“But far from bringing stability to the mortgage market, over the past decade — under both the Clinton and Bush administrations — the Federal Housing Administration's underwriting methods have rivaled the carelessness of many subprime lending practices, and have contributed to current housing woes. The delinquency rate on FHA-baked mortgages has been close to that of the subprime category and has sometimes even exceeded it. In the last quarter of 2006, for instance, the delinquency rate for subprimes had increased to 13.33% in the industry's National Delinquency Survey . But in the FHA category, the rate had risen to 13.46 percent — “a new record.’”

REAL CLEAR POLITICS

The Good News You Missed on Food Prices

By Steven Malanga

Full article Steven Malanga RCP

Excerpts:

Over the last several decades groceries have been one of the real bargains in America, and the average rate of inflation on dozens of food items tracked by the U.S. Bureau of Labor Statistics has consistently been less than increases in the purchasing power of the average American family. As a result, the percentage of income that families devote to their food purchases has fallen sharply since the food inflation of the 1970s, even though more and more Americans (like Sen. Schumer’s family, judging by his testimony) have opted for buying more premium-priced items, like organic foods. Recent price spikes have done little to reverse years of moderation in the cost of food.

The good news started for most consumers in the 1980s and has continued since then. In the decade before, food prices rose at average annual clip of 8.4 percent, which was more than a full point above the overall inflation rate. But in the 1980s, the rate of inflation on food items declined to 4.6 percent annually, nearly a point below general inflation. That downward momentum continued in the 1990s, when food prices rose by a mere 2.8 percent annually, a trend that has pretty much continued in the new century until the last few months.

You probably missed the many media stories over the years about what a bargain food has become, or maybe there simply weren’t many such stories. But one result of these very moderate increases in food prices is that we are paying less, sometimes considerably less, relative to our purchasing power today for a whole range of products, including many staples. ###

Consumer Price Index +0.3%

Sep 2007 Unemployment Rate 4.7%

Oct 2007 Payroll Employment +166,000

Oct 2007 Average Hourly Earnings +$0.03

Oct 2007 Producer Price Index +1.1%

Sep 2007 Employment Cost Index +0.8%

3rd Qtr 2007 Productivity +4.9%

3rd Qtr 2007 U.S. Import Price Index +1.0%

Sep 2007 Unemployment Initial (UI) Claims 327,000

Oct 27 2007 UI Claims 4-Week Average 327,000

Oct 27 2007 Federal Minimum Wage: $5.85

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The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:

Personal income increased $47.4 billion, or 0.4 percent, and disposable personal income (DPI) increased $40.6 billion, or 0.4 percent, in September, according to the Bureau of Economic Analysis.

Wages and salaries

Private wage and salary disbursements increased $33.4 billion in September, compared with anincrease of $17.0 billion in August.

Goods-producing industries' payrolls increased $2.0 billion,compared with an increase of $2.1 billion; manufacturing payrolls increased $0.3 billion, comparedwith an increase of $1.0 billion.

Services-producing industries' payrolls increased $31.5 billion,compared with an increase of $14.9 billion.

Government wage and salary disbursements increased$4.5 billion, compared with an increase of $5.8 billion.

Consumer Price Index -0.1% Aug 2007

Unemployment Rate 4.7% Sep 2007

Payroll Employment 110,000(p) Sep 2007

Average Hourly Earnings +$0.07(p)

Sep 2007 Producer Price Index +1.1%(p)

Sep 2007 Employment Cost Index +0.9% 2nd Qtr 2007

Productivity +2.6% 2nd Qtr 2007

U.S. Import Price Index +1.0% Sep 2007

Unemployment Initial (UI) Claims 308,000

Oct 6 2007 UI Claims 4-Week Average 310,250

Oct 6 2007 Federal Minimum Wage: $5.85

U.S. Department of Commerce

Industry Competitiveness and Regulatory Analysis

Office of Competition and Economic Analysis

May Consumer Spending Rises Less Than Forecast:

In May 2007, consumer spending in the U.S. increased less than forecast and the Federal Reserve's preferred inflation gauge, core prices, cooled, signaling modest growth is restraining price pressures.

The May gain of 0.5 percent in spending, matched the rise in April, the Commerce Department reported today. Core prices, which exclude food and fuel costs, rose at the slowest pace since 2004 in the year ended May.

Economists forecast spending would rise 0.7 percent, according to the median of 76 estimates in a Bloomberg News survey. Nonetheless,

The Federal Open Market Committee yesterday said the decline in its preferred gauge of inflation isn't enough to satisfy policy makers.

Central bankers left interest rates unchanged and said inflation remained their biggest concern pending more evidence that a deceleration would be sustained.

FIRST QUARTER 2007 DATA FROM THE QUARTERLY FINANCIAL REPORTU.S. MANUFACTURING, MINING, AND WHOLESALE TRADE CORPORATIONS

After-Tax Profits and Sales, First Quarter 2007 - Seasonally Adjusted

Manufacturing Corporations

In the first quarter of 2007, seasonally adjusted after-tax profits of U.S. manufacturing corporations totaled $119.0 billion.

First quarter 2007 after-tax profits were up $6.3 (±0.5) billion from the $112.8 billion recorded in the fourth quarter 2006, but down $3.7 (±0.7) billion from the $122.8 billion recorded in the first quarter of 2006.

First quarter 2007 seasonally adjusted sales for these manufacturers totaled $1,463.9 billion, up $22.1 (±6.1) billion from the $1,441.8 billion recorded in the fourth quarter of 2006, and up $25.8 (±10.7) billion from the $1,438.1 billion recorded in the first quarter of 2006.

After-tax profits per dollar of sales averaged 8.1 cents for the quarter, compared with 7.8 cents in the previous quarter, and 8.5 cents in the first quarter of 2006.

Nondurable Goods Manufacturers

Nondurable goods manufacturers’ seasonally adjusted after-tax profits in the first quarter of 2007 were $68.1 billion, up $3.1 (±0.3) billion from the $64.9 billion recorded in the fourth quarter of 2006, but not statistically different from the $68.4 billion recorded in the first quarter of 2006.

Seasonally adjusted sales for the quarter were $720.9 billion, up $10.7 (±3.2) billion from the $710.3 billion recorded in the fourth quarter of 2006, but not statistically different from the $716.3 billion recorded in the first quarter of 2006.

After-tax profits per dollar of sales averaged 9.4 cents for the quarter, compared with 9.1 cents in the previous quarter, but not statistically different from the 9.5 cents recorded in the first quarter of 2006.

Durable Goods Manufacturers

First quarter 2007 seasonally adjusted after-tax profits for durable goods manufacturers were $51.0 billion, up $3.1 (±0.6) billion from the $47.8 billion recorded in the fourth quarter of 2006, but down $3.4 (±0.5) billion from the $54.4 billion recorded in the first quarter of 2006.

Seasonally adjusted sales for the quarter were $743.0 billion, up $11.5 (±4.6) from the $731.5 billion recorded in the fourth quarter of 2006, and up $21.1 (±7.1) billion from the $721.9 billion recorded in the first quarter of 2006.

After-tax profits per dollar of sales averaged 6.9 cents for the quarter, compared with the 6.5 cents in the prior quarter, and 7.5 cents in the first quarter of 2006.

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What will happen to consumer spending for the rest of 2006 and all of 2007?

Some would say the bigger question is what will happen to interest rates going forward?

As to the latter, respected sources like the Wall Street Journal have insisted for many months, that the Federal Reserve should have started raising rates, long before it did, but failed to keep its eyes sufficiently on commodity prices, so that the disparity will eventually result in some mischief, causing higher inflation than necessary.

To examine some huge numbers, which would seem significant, it is noteworthy that since late June, the value of household holdings of [stock] equities has increased by about $800 billion.

This comes close to matching the loss in home values, estimates of which are in the area of $1 trillion.

Some economists, especially supply side types, feel the market is still substantially undervalued.

Another 200 or 300 point rise in the market, were it to occur, might easily close the gap between stock equities and household wealth.

However, it is generally believed that spending based on stock equities is not as confident as it is on home equity.

So, Christmas shopping draws near. Maybe that will give us a clue.

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