By Markos N. Kaminis
I think it was Popeye who used to say, “Thatʼs all I can stands! I canʼt stands no more!” Then he would squeeze open a can of spinach with his bare hand, sending the greens arching through the air and into his mouth, and in one great gulp, into his belly. His muscles would bulge sequentially one by one. Spinach digested, iron running through his veins, he would then do something incredible like motor across the surface of a lake via the power of his gyrating legs alone.
On Friday, I, like Popeye, said those words to myself after enduring a full weekʼs worth of the harshest of economic data… and myself answered (thatʼs the scary part). Myself replied, “If youʼre exhausted now Greek, prepare to enter a comatose state next week when the Employment Situation Report is published!” Seriously, the constant battering of dire economic data is like a nightmarish fight to the death with Mike Tyson in his prime, and absent the three knock down rule! Weʼre taking a beating here, and thereʼs just no end in sight!
Last week, jobless claims jumped into frightening territory, reaching 667,000, and the insured unemployed rate moved another tenth of a percentage point higher to 3.8%. While all these folks are getting laid off, nobody is finding a job you see. Unemployment is no doubt skyrocketing, and weʼll get the unavoidable horror story of a report detailing the chaos on Friday. I think thereʼs a decent chance the unemployment rate could have soared to as high as 8.0% in February, from 7.6% in January. The economistsʼ consensus is for 7.9% unemployment, according to Bloomberg. The real unemployment rate, the one that includes people who are working part-time, but wish they had a real job, and the people who have completely given up their job search for the fantasy of full-time blogging, is moving into the mid-teens!
Last weekʼs data dump was not limited to employment news. GDP, that sometimes considered noteworthy gauge of economic activity, was revised dramatically lower. GDP contraction deteriorated to 6.2% in the fourth quarter, marking a rare sharp revision from the 3.8% initial report. The grand shortfall was driven by expired export demand (-23.6%), fretful residential fixed investment (-22.2%) and sad equipment and software sales (-28.8%).
It was a week that saw Durable Goods Orders diminish by 5.2% in January, versus expectations for a 2.5% decline, according to Bloombergʼs survey of economists. Meanwhile, the Conference Boardʼs measure of Consumer Confidence sank to 25.0, a record low. Existing and New Home Sales both dropped precipitously, but the sectorʼs decline this particular month was attributed to the still pending status of fiscal stimulus in January. The theory goes that would-be real estate buyers knew great new incentives would soon avail themselves, and so they waited a little longer.
The coming week will offer more than unemployment data for reason to hide under the covers. Personal Spending threatens to dwindle into the nothingness as a direct result of rising unemployment. Construction Spending and Manufacturing Sentiment are likely to pound a few more painful blows home when reported on Monday. Tuesday brings Motor Vehicle Sales, though it would be more appropriate to call it the reporting of the lack of sales these days. Economists see the pace slowing to 6.2 million in February, compared to the anemic 6.8 million pace reported in January. You get the picture, thereʼs more bad news in store…
We should note that retailers received some good news this past week; the government might loosen the rules for them around bankruptcy and liquidation proceedings. Sounds wonderful right, like choosing the guillotine over hanging.
A few retailers (stressing “few”) exhibited some resiliency last week, managing costs well enough to surprise analysts despite tough declines in sales. The Gap (NYSE: GPS) was one of those few, and Dell (Nasdaq: DELL) did the same job in its business. Saks (NYSE: SKS) thawed the frozen hearts of its shareholders, when after reporting a terrible quarter, management declared its expectation for the luxury retailer to survive at least through ʼ09. This coming week, look for important reports from the likes of American International Group (NYSE: AIG), MBIA (NYSE: MBI), Toll Brothers (NYSE: TOL), Anheuser-Busch InBev (Brussels: ABI.BR) and AnnTaylor Stores (NYSE: ANN). You might want to also thank the Lord for the start of lent, and the opportunity to consume more spinach.