For Immediate Release
Chicago, IL – January 29, 2010 – 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: Fannie Mae (FNM), MGIC (MTG), Wells Fargo (WFC), Bank of America (BAC) and JC Penney (JCP).
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Here are highlights from Thursday’s Analyst Blog:
Initial Jobless Claims Dip
We got mixed news in the Initial Claims for Unemployment Insurance report. This week, initial jobless claims fell by 8,000 to 470,000, and last week’s figure was revised down to 478,000 from 482,000. However, the level was well above the consensus expectation of 450,000.
The decline and the revision to the prior week were not enough to keep the four-week moving average from rising. It increased by 9,500 to 456,250. Given the weekly noise in the numbers, the four-week moving average is generally considered a more reliable indicator.
This is the second week in a row that the four-week average has risen. The four-week average has been in a steep descent since it peaked in mid-April, and until this point has not shown any signs of forming a high plateau the way it did following the prior two economic downturns. Let us hope that the upticks over the last two weeks does not indicate that such a plateau is forming.
We probably need the four-week moving average to get down to close to 400,00 to indicate that the economy is on balance adding jobs. Relative to peak levels of over 650,000, or even the year-ago level of 547,000, we are getting pretty close to that point, but are not there yet, and progress seems to have stalled. The numbers are always a bit flaky around the holidays, and the four-week average still incorporates them, so perhaps we should not get too worried…yet.
Continuing Jobless Claims Improve
The news was better on the continuing jobless claims front. Regular continuing jobless claims, which are paid for by State unemployment insurance funds and run out after 26 weeks, fell by 57,000 to 4,602 million. However, with almost 40% of all the unemployed now out of work for more than 26 weeks, regular claims do not come close to telling the whole story. Looking at them in isolation is a serious mistake.
After regular benefits expire, people move over to extended benefits, which are mostly funded by the ARRA, also known as the Recovery Act or Stimulus Package. Those now number 5.612 million (combining the two largest programs), or more than a million more than regular continuing jobless claims. There was good news there as well, as extended claims dropped by 305,000 this week (actually two weeks ago, and regular claims are one week ago, but released today). Without those extended benefits, those people and their families would be left with no income at all.
After 26 weeks of reduced income (relative to what they were earning when employed) on regular benefits they have probably already drawn down much of their savings and run up their credit card balances. They would be far more likely to default on their mortgages if their income fell to zero.
More Strain on Housing Market?
This would make the housing situation much worse. That would not be good for firms throughout the mortgage complex from Fannie Mae (FNM) to the mortgage insurers like MGIC (MTG) to the major mortgage issuing and servicing banks like Wells Fargo (WFC) and Bank of America (BAC).
With the extended benefits, the unemployed can still afford to shop for basics, although they may end up being steady customers at the Salvation Army rather than at JC Penney (JCP). Still better that they are shopping in the Salvation Army thrift stores than sleeping in Salvation Army homeless shelters, which is where they would be without the extended benefits. Better not only in a humanitarian sense, but better for the overall economy as well. The dollars they spend go back into the economy, and in the process help keep other people employed.
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