- Posted September 10, 2012 by
The Cornfield Eye on the US Economy - September 10th
The US economy and markets continue to sway, dip and rise, with each new piece of news from Europe and Asia. Compounding the volatility in the markets are the political bickering in Washington DC.
The US economy continues to sputter on. The markets have good days and bad days, reacting to news both internally and from events occurring around the globe. There is no "great" news on the horizon.
The Markets: Bad news coming out of China sent US stocks sliding down 52 points after closing up this past Friday, says The Christian Science Monitor. Investors are remaining tepidly optimistic, however, in hopes that the Federal Reserve Bank System will provide more stimulus relief also known as QE3.
The Dow Jones industrial average fell 52.35 points to close at 13,254.29 on Monday. The Standard & Poor's 500 slipped 8.84 points to 1,429.08 and the Nasdaq composite fell 32.40 points to 3,104.02.
At the same time, according to CNN Money, eyes will be watching what happens in Europe this week as well:
Meanwhile, investors will be keeping tabs on Europe, as the German Constitutional Court is expected to hand down a ruling Wednesday that could impact the European Central Bank's plans to preserve the euro.
The European Central Bank announced its own bond-buying program last week, aimed at keeping the continent's debt crisis at bay.
Investors are also awaiting details on the European Union's proposal to create a new banking authority, general elections in The Netherlands and a meeting of euro area finance ministers later this week.
"The market is digesting last week's gains with a multitude of events ahead of us," said Art Hogan, a managing director at Lazard Capital Markets.
The Jobs Numbers: As has been widely reported, the US of A only added 96,000 private sector jobs in August and numbers for July and June were cut back by 41,000. Even though the jobs numbers were anemic at best, the unemployment rate dropped from 8.3% to 8.1%. However, the drop is not really good news when over 360,000 people simply dropped off the rolls of those still considered to be in the workforce.
Yahoo News reported:
The unemployment rate fell to 8.1 percent from 8.3 percent in July. But that was only because more people gave up looking for jobs. People out of work are counted as unemployed only if they're looking for a job.
The sluggish job growth could slow the momentum President Barack Obama hoped to gain from his speech Thursday night to the Democratic National Convention.
They could also make the Federal Reserve more likely to unveil a new bond-buying program at its meeting next week. The goal would be to lower long-term interest rates to encourage borrowing and spending.
Hourly pay fell in August, manufacturers cut the most jobs in two years and the number of people in the work force dropped to its lowest level in 31 years.
The unemployment rate declined in August, but for a bad reason: The government doesn't count people as unemployed if they've stopped looking for a job.
The number of people working or looking for work shrank in August by 368,000, the government said. The reasons vary, economists say.
Many people, after months of looking for a job without success, give up. But this group of "discouraged" workers doesn't fully capture the phenomenon.
"Record 88,921,000 Americans ‘Not in Labor Force’—119,000 Fewer Employed in August Than July" was the headline on CNSNews.com.
The Labor Department counts a person as not in the civilian labor force if they are at least 16 years old, are not in the military or an institution such as a prison, mental hospital or nursing home, and have not actively looked for a job in the last four weeks. The department counts a person as in “the civilian labor force” if they are at least 16, are not in the military or an institution such as a prison, mental hospital or nursing home, and either do have a job or have actively looked for one in the last four weeks.
In July, there were 155,013,000 in the U.S. civilian labor force. In August that dropped to 154,645,000—meaning that on net 368,000 people simply dropped out of the labor force last month and did not even look for a job.
There were also 119,000 fewer Americans employed in August than there were in July. In July, according to the Bureau of Labor Statistics, there were 142,220,000 Americans working. But, in August, there were only 142,101,000 Americans working.
Despite the fact that fewer Americans were employed in August than July, the unemployment rate ticked down from 8.3 in July to 8.1. That is because so many people dropped out of the labor force and stopped looking for work. The unemployment rate is the percentage of people in the labor force (meaning they had a job or were actively looking for one) who did not have a job.
The Bureau of Labor Statistic also reported that in August the labor force participation rate (the percentage of the people in the civilian non-institutionalized population who either had a job or were actively looking for one) dropped to a 30-year low of 63.5 percent, down from 63.7 percent in July. The last time the labor force participation rate was as low as 63.5 percent was in September 1981.
The Chevy Volt: Sales are up, but return on investment hasn't even made a dent yet on the hybrid electric car that General Motors and President Barack Obama are banking will the model that puts and keeps the American automaker on top.
Reuters tells the tale of the good, the bad and the ugly of the much touted Chevy Volt:
General Motors Co sold a record number of Chevrolet Volt sedans in August — but that probably isn't a good thing for the automaker's bottom line.
Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts. GM on Monday issued a statement disputing the estimates.
Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.
And while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.
GM's basic problem is that "the Volt is over-engineered and over-priced," said Dennis Virag, president of the Michigan-based Automotive Consulting Group.
And in a sign that there may be a wider market problem, Nissan, Honda and Mitsubishi have been struggling to sell their electric and hybrid vehicles, though Toyota's Prius models have been in increasing demand.
GM's quandary is how to increase sales volume so that it can spread its estimated $1.2-billion investment in the Volt over more vehicles while reducing manufacturing and component costs - which will be difficult to bring down until sales increase.
But the Volt's steep $39,995 base price and its complex technology — the car uses expensive lithium-polymer batteries, sophisticated electronics and an electric motor combined with a gasoline engine — have kept many prospective buyers away from Chevy showrooms.
Some are put off by the technical challenges of ownership, mainly related to charging the battery. Plug-in hybrids such as the Volt still take hours to fully charge the batteries - a process that can be speeded up a bit with the installation of a $2,000 commercial-grade charger in the garage.
From the Cornfield, this election will be centered dead square on the economy, jobs and the unsustainable national debt.