For Immediate Release
Chicago, IL – December 11, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC), Capital One (COF), Wal-Mart (WMT), Kroger (KR) and Ford (F).
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Here are highlights from Thursday’s Analyst Blog:
Initial Jobless Claims Back Up
So far there is no sign of the initial jobless claims series finding a high plateau the way it did in (and immediately after) the last two downturns. This holds out the promise that perhaps — just perhaps — this recovery will not be quite as jobless as is now feared. Both the current week and the four-week average are now comfortably below their year-ago levels of 552,000 and 530,500, respectively.
Still, the current level of jobless claims is not yet low enough to suggest that the economy is on balance creating jobs rather than losing them. We probably need to see the four-week jobless claims moving average drop below the 400,000 level for that to occur. But if the pace of decline in jobless claims over the last few months can be maintained (in mid-September, the four week average was at 554,250), it is possible for us to get to that level by the middle of February.
That would be very welcome news on the jobless claims front indeed, not only for the almost six million people who have now been out of work for more than six months, but for the economy as a whole. It means that they would actually start to have some disposable income and could spend on things that are not absolute necessities again. They would also have the personal cash flow needed to do things like pay their mortgages and their credit card bills. This would greatly improve the asset quality of the banks like Bank of America (BAC) and Capital One (COF).
The news on the continuing jobless claims front was mixed. Regular continuing jobless claims — the ones that are paid by the states and which run out after six months — dropped by 303,000 to 5.157 million. That is still well above the year-ago level of 4.354 million, but is down sharply versus the peak that was set back at the end of June at 6.904 million — a 36.9% decline.
Regular jobless claims, however, do not tell the whole story, especially in this downturn where the duration of unemployment has been a particularly severe problem. After the regular state benefits are exhausted, people move over to extended jobless claims that are paid by the federal government, in large part as part of the stimulus program. Combining the two largest of these jobless claims programs, they are now helping a total of 4.586 million people, up 137,500 from last week.
Still, the reduction in regular claims this week was far larger than the increase in regular jobless claims, which suggests we are making progress overall (unless, of course, there are a large number of people who are exhausting their extended benefits, but since the benefits were recently extended again, that seems unlikely). The extended jobless claims numbers are not in any danger of falling below year-ago levels any time soon. Last year there were less than 753,000 people getting extended jobless claims benefits (remember there was a small stimulus package passed in the spring of 2008).
The extended jobless claims have been of tremendous humanitarian benefit to those who are without jobs and have been so for a very long time. What would these 4.5 million people have done after their regular benefits had expired when there are still more than six people looking for work for each job opening? How much real poverty are we willing to stand for in this country? Already, one out of every four children in this country is on food stamps.
Aside from just the humanitarian and social stability benefits of the extended benefit program, it is also a very effective program for preventing further deterioration of the economy. The money people get allows them to actually go to Wal-Mart (WMT) to buy groceries rather than having to rely on our very overstretched network of food banks (please give generously). This keeps the employees at Wal-Mart and Kroger’s (KR) employed, not to mention the drivers employed who deliver the goods to Wal-Mart, and occasionally even U.S. workers who make the products they buy.
Good News on Trade Deficit
To the extent that we can continue to increase or level of energy efficiency, we can start to make a dent in the chronic budget deficits we face. If we are not able to, it will be extremely hard to bring them under control. However, there are a bunch of very encouraging long-term signs in this regard.
For starters, sales of pick up trucks and SUV’s have fallen far more this year than have sales of cars. Sales of smaller, more fuel-efficient cars have fallen much less than sales of larger less fuel efficient cars. While that hurts the profit margins of Ford (F) and General Motors, it provides long-term hope on the trade deficit. The slowdown in overall vehicle sales though means that the pace of fleet turnover has slowed down.
We will be reaping long-term benefits from the fleet turnover that has occurred. This is an aspect of the “Cash for Clunkers” program that is very much under-appreciated. The administration should consider resuming the program as part of its “Son of Stim” jobs program, but I didn’t see any reference to it in Obama’s speech earlier this week (which was, in any case, very short on details).
Keep in mind that it is the trade deficit, not the budget deficit, that drives our level of external indebtedness. If we really want to control how much of our paper that places like China and the Persian Gulf control, we need to bring the trade deficit down.
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