GOLDILOCKS MY ASS

GDP softens in second quarter

Pace of US economic growth falls short of expectations to revised annual rate of 2.6%, hurt by weakened corporate profits.

September 28 2006: 8:41 AM EDT
WASHINGTON (Reuters) -- The pace of U.S. economic growth softened more sharply than expected in the second quarter and corporate profits rose feebly, according to a Commerce Department report Thursday that pointed to a significant easing in expansion.

Gross domestic product or GDP that measures total economic activity within U.S. borders advanced at a revised 2.6 percent annual rate, down from the 2.9 percent estimated a month ago and less than half the first quarter's 5.6 percent rate.

Wall Street economists surveyed by Reuters had expected second-quarter GDP to be unchanged at 2.9 percent but the government said inventory building was weaker than first thought and imports of services - which detract from domestic output - were higher.
Prices continued to bubble higher.

An inflation gauge favored by the Federal Reserve - a measure of personal consumption spending that excludes food and energy items - rose at a revised 2.7 percent rate instead of 2.8 percent reported a month ago. But that was still well above the first quarter's 2.1 percent and was the highest rate since 2.8 percent posted in the first quarter of 2001.

A cooldown in housing sales and prices is affecting the overall economy and it showed clearly in the GDP statistics. Investment in residential structures tumbled at the sharpest rate in more than a decade - down a revised 11.1 percent instead of 9.8 percent reported a month ago.

It was the third straight quarter in which spending on new housing declined and department officials said it was the biggest quarterly drop since 12.2 percent in the second quarter of 1995.
Corporate profits barely grew by a revised 0.3 percent in the second quarter rather than 2.1 percent that the Commerce Department estimated a month ago. That was a steep plunge from a 14.8 percent rate of profit growth in the first three months this year.

Businesses continued to increase their investment in new operations during the second quarter, but not as strongly as first thought and far less robustly than in the first three months of the year. So-called nonresidential spending was up 4.4 percent instead of the 4.7 percent estimated a month ago and was less than a third the 13.7 percent rate of growth posted in the first quarter.

The U.S. Federal Reserve has paused in its cycle of interest-rate rises, waiting to assess the economy's performance in coming months, and policy-makers are cautioning that some easing in the pace of growth should be expected.

In an interview with Reuters on Wednesday, Richmond Federal Reserve Bank President Jeffrey Lacker said "growth is going to be a bit below par for a quarter or two, maybe longer, but I'm looking for it to return to potential next year."

Similarly, Kansas City Fed Bank President Thomas Hoenig said Wednesday night he was anticipating growth will bounce back - but still stay below trend - in 2007 after dipping to an annualized rate in the second half of 2006 of 2.0 percent to 2.5 percent.
Why relying on GDP as a leading economic gauge can lead to poor decisions - Good numbers gone bad

D

ON THE EDGE OF GREATNESS OR PRECIPICE?

Housing stocks rebounded from awful plunge NOT because things are better, because as rates have fallen players came back for dead cat, this market is satiated, how could it not be? As Mish points out, it is isue of affordability, what was $200K is many HOT areas is now $400K or much higher. Rep Rich B was in Tues, he has house on Severn River (2400 sq ft, 500 ft of waterfront though, modest house!) listing? $1.9 M !! OH 3 bedrooms! LOL cant sell it.

You need ROOM for NEXT GUY you HAND OFF to ,to make a buck or the PONZI scheme COLLAPSES. We are only in warm up phase not even 1st inning and its Tampa Bay against O's !

I am AFRAID of oil because I feel the worlds economy ARE due to cool off, Nat Gas has COLLAPSED (lower again today) the fuel of choice of most major Utilities.....if I did play a few select would be TIGHT F'ing stops I would use.

Msh talks about M1 lack of growth how about ADJ monetary base, even when one understands its description, it may not be THE measurement but it is important stat, it hasnt BUDGED ALL YEAR!

Office furn companies are turning in SUPER earnings, but we lag economy up and then down. 6% across the board PRICE INCREASES are now just coming in and thru end of year.....only Chinese not raising, except within diverse US company like HON.

Quality control issue with ALL Chinese desks, #1 in defects and damages

Transports made up ground Tues, but watch to see if any NEW Dow high confirmed, divergence could last for months of course or years? Mid caps and small caps lag this rally.

Dow 30 easiest to manipulate, least effected by Bear, but NEW CLOSING HIGH seems GUARANTEED being 50 pts shy......as this occurs will there be a MASSIVE SHORT covering SPIKE ?

Commercials wrong again net index? Program trading rules, hedgies using leverage.......but positions have NO ground under feet. Can NO Longer guess when JIG is up (mine though is AFTER NOV 7th IF Repub's get booted)......even as warnings from Lowes and HD come in, horrid misses by Home builders as we have evidence of trickle down pain......talk of sOFT landing dominates, not seen in job numbers yet, are these being hidden? for now?

Folks, non confirms aside, there was NO warning in 2000 when TOP was made, there wont be this time either. AMERICA has been LONG the stock market and has not run away even after Bear, this rally only infuses the planners mantra "LTBH" works.....even now given the chance to BE BACK TO EVEN OR BETTER does not appeal to the masses.

I am still IN CASH, when they pay me near 5% and totally safe, markets made by liquidity and credit debt not investment = castles made of sand. Debt is at all time records as % of GDP, it takes EVER increasing amounts of debt to product $1 of GDP, we are near the PUKE factor.....in the face of impressive move in Dow I remain risk averse.

D

CALL ME CRAZY

Dow zooming ahead, all is well. All is not well, as we approach bullish highs I see the Transports actually off 25 points as I post. And that leaves a large 700 points off it's double top highs.

This occuring with gas prices tumbling.

Key SPX level 1326-1328

D

BEND OVER and Kiss GOLDILOCKS GOODBYE

http://www.safehaven.com/article-5941.htm

Remember outcome of the tech bubble? Housing speculation bubble was worse and homes are less liquid, so may be the outcome.

I am IN CASH, paying me near 5%. SO WHY RISK ?

D

SAT MORNING POST ON FRI

Dow, Nasdaq Fall in Late Morning Trading
AP -
Stocks fell for a second straight session Friday amid continued pessimism about the health of the economy. Wall Street was caught off guard Thursday by a report from the Federal Reserve Bank of Philadelphia that showed regional manufacturing activity fell to a negative reading for the first time since April 2003.

10 yr yield is 4.6% are you bleeping kidding me? 90 day rate is 5.25% !

Transports don't appear willing to confirm move in the Dow.

Autumn is tomorrow, a cyclical normal time for trend change. Bottoms occur in October.

OIL quote $60.75 , gold under $600, oil stocks near or at new 52 week lows, what is going on?

SPX held at potential double top near 1326.

Deflation sniff. Death to debts or those overwhelmed, over extended.

I am on HIGH ALERT

Duratek

Will A Decline IN Oil Prices Ease Inflation?

http://www.mises.org/story/2331

Also today LEI release And Phila Fed report point to more evidence economy is slowing. Bond prices rallied on that news. STock market sold off all day down 79 points. Let's see if any follow thru tomorrow.

D

FED RATE DECISION

WASHINGTON (AP) -- The Federal Reserve left a key interest rate unchanged on Wednesday as falling energy prices helped to restrain inflation pressures.
Federal Reserve Chairman Ben Bernanke and his colleagues issued a brief announcement saying they would leave the federal funds rate, the interest that banks charge each other, at 5.25 percent.

The decision represents a break for borrowers. It means that banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain at 8.25 percent.
The Fed also had left rates unchanged at their last meeting in August, breaking a record string of 17 rates hikes that had driven the funds rate to its highest level in more than five years.
The decision to leave rates alone for a second time had been widely expected in financial markets, given recent favorable developments on inflation. Oil prices have fallen by more than 20 percent over the past two months and a cooling housing market has contributed to a slowdown in overall growth.
The Fed is trying to engineer a soft-landing for the economy in which growth is slowed enough to keep inflation from getting out of hand without overdoing the credit tightening and raising the chances of a recession.
In its statement, the Fed continued to signal concerns about inflation, repeating a phrase it had used last time -- that the Fed's rate setting panel "judges that some inflation risks remain."
The Fed also said -- as it had last time -- that "the extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."
The Fed took note of the slowdown that has occurred in the economy, saying that "economic growth has moderated from its quite strong pace earlier this year" which it attributed to the cooling housing market and the impact of previous Fed rate hikes and higher energy prices.
The funds rate was at a 46-year low of 1 percent and the prime rate stood at 4 percent back in June 2004 when the Fed began a two-year credit campaign to raise rates. The Fed boosted rates a record 17 consecutive times before deciding to pause at the last meeting on Aug. 8.
The decision to keep rates unchanged Wednesday was supported by a 10-1 vote with Jeffrey Lacker, president of the Fed's Richmond regional bank, again casting the lone no vote. Lacker, who also dissented in August, argued again that another quarter-point rate hike was needed to keep inflation in check.

Putting 2 and 2 Together

On the eve of the Fed meeting, which I feel leaves no DRAMA in doubt, they will not raise rates, what then is left to ponder as the Dow is near 1% of its all time highs?

New 52 week highs are dropping off as we approach this milestone. The Transports are 600 points away from their March/July double top all time high.

Oil, commodities of all kinds copper, gold, silver are dropping like a stone. Some funds like the USO (OIL) just hit a new 52 week low!

When you look at how we got here, record bubble housing numbers, which fed ALL Kinds of economic areas like home remodeling, paint, furniture, mortgage lending, financials, real estate firms and construction companies......far reaching were the effects of this FED Induced bubble.

NOW IT'S GONE!

Housing stocks have tumbled, HD languishes, oil stocks declining sharply.

SPX earnings were being carried by RECORD EXXON and the like profits, that is now GONE!

The housing market, though some think soft landing HAS peaked, and has the look of a bubble which has popped.

YET, the stock market is poised a mere pittance away from a MAJOR MILESTONE! yet breadth, and many data points show a much weaker picture, a VERY SELECTIVE market advance.

I have no crystal ball, let's see where market goes after 2:15 today, but we have a 2 1/2 yr divergence in place as I have shown in prior charts and that will get resolved.

The Transports made their new all time highs as beneficiaries of Chinese imports, a surge in consumer spending on all things not made here. Now TRansports lag the party, how interesting.

Duratek

Oil Has Been Down Sharply

OPEC: Demand for crude will drop in 2007 cnn.com

Oil cartel says demand for its crude should slip by 800,000 barrels per day next year, cites expected jump in non-OPEC supply.

September 15 2006: 12:55 PM EDT

LONDON (Reuters) -- The Organization of the Petroleum Exporting Countries on Friday lowered a forecast for demand for its oil next year, when supply from rival producers is expected to surge.
Demand for OPEC crude, known as the call on OPEC, in 2007 will average 28.1 million barrels per day, 200,000 bpd less than forecast in August, the 11-nation producer group said in its September monthly report.
The outlook follows OPEC's decision this week to keep its oil output near a 25-year high despite a roughly $15 drop in prices since mid-July. But the group left the door open to a supply cut before the end of the year.
In its communiqué after the group's oil ministers met in Vienna on Monday, OPEC said non-OPEC supply in 2007 would rise at the fastest rate in more than two decades. OPEC pumps more than a third of the world's oil.
"The rebound in non-OPEC supply in 2007 is predicted to be at its highest level since 1984 - and market fundamentals indicate a clear imbalance between supply and demand," OPEC said in the communiqué.
Average demand for OPEC's oil next year will be 800,000 bpd less than the 28.9 million bpd expected in 2006, the report said.
While OPEC expects supply from outside producers to rise by 1.8 million bpd next year, analysts said that the chance it may underperform could increase the burden on OPEC.
"The call on OPEC could be much higher than they say," said Geoff Pyne, an independent analyst. "The risk must be non-OPEC supply won't materialize. That's certainly been the past risk."
Growth in non-OPEC supply has fallen short of forecasts in recent years, such as in 2005 when hurricanes hit oil facilities in the Gulf of Mexico, disrupting output.
In its report, OPEC also trimmed a forecast for growth in world oil demand in 2006 by 100,000 bpd to 1.2 million bpd, citing weaker than expected summer gasoline demand in the top oil consumer, the United States.
OPEC left its outlook for global demand growth next year at 1.3 million bpd, the same as last month.
The "world oil demand growth forecast for the year 2007 remains unchanged," the report said. "As in the current year, the lion's share of oil demand growth in 2007 will come from developing countries."

Hedge Fund Disaster

Hedge funds feeling natural gas sting

Amaranth reportedly may have lost 35 percent as prices plummet; other losses seen.
September 18 2006: 6:20 PM EDT

NEW YORK (CNNMoney.com) -- Amaranth Advisors is the latest hedge fund to take a hit on falling natural gas prices, possibly having lost more than 35 percent of the fund's investment, according to reports Monday.
"Last week, the Amaranth multi-strategy funds experienced significant losses in their energy-related investments following a dramatic move in natural gas prices," Amaranth said in a letter to investors obtained by Reuters.
One trader said the loss could be devastating to Amaranth.
"That's a huge hit for a hedge fund to take," said Brian Hicks, co-manager of the Global Resources Fund at U.S. Global Investors. "That could drive a lot of the shareholders out."
A Denver-based analyst said rumors were circulating that another, larger New York-based hedge fund could be in a similar situation.
"I think the[re]'ll be some more stories emerging around [Amaranth]," said John Kilduff, an energy analyst at Fimat in New York. "We're waiting to see who else is getting taken away in the ambulance."
Natural gas prices dropped near 12 percent last week and have fallen roughly 20 percent since the start of the month as an anticipated active hurricane season in the Gulf of Mexico has so far failed to materialize.
Amaranth has $7.5 billion in capital under management, according to Reuters.
Amaranth's reported loss comes on the heels of MotherRock L.P.'s closure last month after that hedge fund suffered major losses in the natural gas market.
MotherRock had $430 million in assets under management at its height, according to an earlier report in TheWall Street Journal.

CHART OF THE WEEK

Click to enlarge

SAT MORNING POST

http://finance.yahoo.com/q?s=pnra

Tech somewhat, Dow 30 mostly, CONSUMER staples stocks like above, been batered....FOLLOW THE MONEY and that is not into OIL or GOLD IMHO

I suggest this will reverse, butnot until after NOV elections. NO OCT selloff lows? doesn't look like it, a test of 1326 SPX coming.....I also suggest not much fun until AFTER wed FED meeting.

FED leaves rates ALONE, won't this cause another FED IS DONE JIGGY WALTZ?

bears taken out to woodshed capitulate (many have).....normal bull in NOV is turned upside down as bulls turn to get spanked as DEM"S storm into majority as electorate THROWS out any Repub in BROAD LOUD message to imposter GW BUSH..take it to the bank!

L is sitting a smidgen away from broader buy signal, DOW is smidgen away from ALL TIME HIGH, but as we move ionto NOV/DEC, the MACD divergence will continue after over 2 1/2 years along with broad market non confirm like TRANSPORTS, as what WAS hot is not in a chase the donkey market, what appears unbeatable is a a mirage of chasing mkt for performance....with one leader PUNCTURED after another.

PLUNGING energy company profits, and slowing SPX earnings growth will be perfect setup for dissapointment, and a major bailout into JAN 2007 from this mkt.

Housing does not recover, continues to correct, finally job losses are counted.....worry shifts to slowing economy.....momo's bail leaving weak handed bag holder lemmings.

SPX energy has been main driver of historic earnings....has it not peaked?

PLUNGING commodoties have not yet broken Bond support levels, rates could begin to rise toward 5% again. Mortgage payments are reset. consumer confidence is FAR below historic peaks.

INcreasing cost to employers of workers in conjunction with falling productivity (should this continue) puts a HUGE damper on corporate profits.

Ford, INTC andmany other companies are forced to SHED workers to prop up earnings, same old 2000 song, see home builders etc do this en masse. GOOD money used for stock buybacks instead of investment, leave the US barren in any attempt at being competitive worldwide. Foreign suppliers have been MAIN beneficiary to the Consumer Spending BUBBLE unleashed from reckless FED policy.

With more talk of soft landing and willingness of speculators to bottom fish Home Builders, more trickes await than treats in the near future.

When BPSPX breaks support at 48 we will know for sure, it is also just underneathe downtrend line.

CAVEAT? is previous posts chart showing little adj monetary growth........tells me it better begin expanding or market will reflect this and maybe PPT and GS propping market in attempt to save BUSH

Duratek

PINTO !!!

Ford running out of gas!

Watching action CLOSE, a DEEP RED finish to day, would leave a NEW HIGH and lower close for week.

Transports already RED and NOT confirming new Dow highs.

D

ADJ MONEY SUPPLY DECLINING

http://research.stlouisfed.org/publications/usfd/page3.pdf

This is VERY worrisome and warns of some kind of top is upon us, IMHO

Duratek

SEARCHING FOR A TOP

It only took one year of MACD (also other momo indicators I use) divergences to seal a top of the longest running bull market in history. In RED you can see it has now been diverging as price rises for 2 1/2 years!

So either the MACD rises above downtrend line or price falls below uptrend line, IMHO

Bear did not correct maladjustments, and extremes from bubble action, in 2001 when FED began to draw down rates to a mere 1%, they decided to create ANOTHER FINANCIAL BUBBLE instead of dealing with after math of stock bubble bursting.

We see AIR coming out of housing bubble, so IMHO it is only a matter of time before the market begins PHASE II of the Secular Bear Market.

Duratek

FIRE IN THE HOLE

All this talk about inverted yield curves and Recession is rather rediculous, as we all know the FED can avert any bad situation, and it's diferent this time.

I ask you, why are 10 yr yields falling? Oil is falling. Gold is falling. home prices are falling. Is this the inevitable pull of DEFLATION>? Or are we in the Goldilocks scenario?

Housing was a greater % of GDP back in the 60's and 70's, but currently with Hedonic pricing of computers, I feel this distorts this data, Hedonic pricing of computers had much less of an effect on GDP 30 years ago then it does now in the computer age.

I wonder if in the 60's and 70's they used their homes as ATM machines as thy do now? my friends it's all about BUILDING equity not sucking it dry. Home owners, especially new ones will be upside down on their mortgages if home prices fall even slightly because of the overleveraged positions they hold as result of new fangled loans like interest only.

The US $$ rose unexpectly this week, helping to put pressure on precious metals. I think partly due to Japan's Central Bank (BOJ) deciding to leave rates unchanged a rediculous .25% !! How strong is that economy they couldn't withstand .50% ??

Chinese goods are putting pricing pressure on all sorts of American goods. Chinese goods so far have eaten the commodity price surges, whereas US manufacturers are passing it along to Consumers. chinese goods are SO CHEAP they even put downward pressure on USED GOODS markets.

There isn't a shortage of a damn thing with seemingly limitless capacity in China to produce, where do you see too many dollars chasing too few goods?

The US is more competitive in manufacturing in what items? We are a consumptive society that produces very little outside of military machinery.

We are exceedingly at the mercy of Foreign lenders, not a good situation.

How is life at home? Bush wants to usurp our Constitution, AKA Vendetta. He knows what's best and he has helped to instill fear of TERRORISM so Americans will do anything, give up anything to be "safe", when his BOLD RECKLESS actions are helping to create the very thing we wish to avoid.

Has there been a lessening in blodshed anywhere? What has been accomplished by setting IRAQ for sectarian violence/Civil War? Was there a FLOOD of terrorists coming into Iraq before we invaded? The American public has been lied to and sold out and they do nothing? SEND A MESSAGE in NOVEMBER! Vote THEM OUT!

SO, this September is going to be different? No stock weakness? I DOUBT IT! SUmmer rally has begun to peter out and most of the rise coming from a pullback in SUPPLY (selling pressure) NOT from DEMAND (buying pressure).

I think the HIGHS are IN, and a DEFENSIVE posture is called for.

How important is housing to our economy? It adds to demand for employment at LOWES Home Depot, furniture stores, paint, remodling and new construction jobs, demand for nails, rubber, steel concrete etc.....demand for all commodities OIL etc, Demand for Banking services, real estate brokers, title searchers, lawyers, road construction, fabric , designers and archetects and so on and so on.

Have we not taken this housing bubble as far we can? These jobs we added are now in SERIOUS trouble.

I am asking the question, where are these jobs going to be absorbed? What other part of our economy will be growing to offer support?

WHY is oil now falling, broken through all akinds of supports? I say sure some speculation is pulling back but so is demand, supply is currently sufficient for demand.

And what elese will fall? RECORD oil company profits, which have been VERY supportive of record S and P profit growth. SO have financials, both charts of Banking and Energy have turned bearish. Housing has long time turned bearish even though it has seen a little dead cat bounce leately.

Home owners are stuck with rising property taxes. And new home owners with HUGE mortgages on elevated home prices they had to pay......debt is at HISTORIC levels as a % of just about anything.

I think we begin to see a little pushing away from the credit buffet. Merchants will begin to see this and cut prices to attract sales, even as they get squeezed at the wholesale level with nice price increases.

I don't see a soft landing, I think the 3 bears ate Goldilocks.....

Duratek

CHARTS OF THE DAY

WHY have Transports been weak with price of OIL/gas declining? Because there is NO correlation, they rose with price of gas, they passed on rising costs to manufacturers and retailers. Who then passed them on to CONSUMERS.

In the last 7 quarters S and P companies bought back nearly $650 BILLION of thier stock, reducing shares outstanding of course, which of course supports earnings they report as profits are divided by less shares. These are record numbers I believe and have supported market rally.

As they do this, like INTC announces AXING of some 10,000 jobs!

We have RECORD UNSOLD HOMES INVENTORY, and PRICES are PLUNGING, but we feel NO ILL EFFECTS?

Bond rally is due a breather, IMHO Gold is rising as the US dollar rises??!! Gold rally due a breather but we are IN seasonally strong period for the metal.

Per BLS data, productivity Y/Y is falling as costs to employers are rising. NOT a good condition,
GOLDILOCKS scenario my ass.

When will the job losses related to air coming out of housing bubble show up on stats? after NOV elections?

Some financials have been weak during this rally, COF JPM to name a few......AUG productivity on tap at 8:30

Duratek

GLITTER OF GOLD? SAT POST

I understand the nature of inflation and deflation, and gold would do better than many items in deflation.

So far we have leaking air from housing bubble…if it leaks slowly we get more inflation, if it tumbles at some point, we get deflating demand for all kinds of things and deflationary “pressure” . SHARES could deflate while the metal not so much.

And we know how to fight deflation. FED is watching Inflation.

When never sure, we don’t put ALL eggs in one basket. $$ collapse could put pressure of currencies in general, GOLD should shine.

If housing is slowing and we see the numbers coming down, jobs will be shed like hair on a new convicts head. We don’t see this in the numbers t he gov shows you…yet.

121,000 added last report visa vi CES net birth death…stroke of pen. Next month those wont be there.

If reality is we have upsurge in unemployment the market will react violently to that….and the next one in Sept could start the ball rolling to FEAR of economy and we get our Oct bottom.

Duratek

RUDE AWAKENING

*(look for Sat Morning Post sometime tomorrow)

BEST OF KURT RICHEBACHER
August 8, 2006
A RUDE AWAKENING AHEAD
Pundits worldwide are pondering what is irking the American investor. Is he scared of rising inflation and interest rates? Or is he scared of Fed overkill and weaker economic growth?
We have no idea what people in general are thinking or expecting. But what we have been reading until quite recently suggests to us the complete absence of any serious concern about the U.S. economy. Forecasts even from the international organizations envision economic growth above 3% as far as the eye can see. Some admit the probability of a little slowing in the second quarter, but after that, it is off to the races again. There is no talk even of a soft landing, because nobody sees any serious slowdown of the economy in the first place.
Economic data are, admittedly, mixed. So they certainly appear to most people. Not to us, though. Recent data have shown a sharp slowdown in economic activity in conjunction with continued acceleration in inflation. For the CPI, the annual inflation rate reported for May surged to 4.2%, from 3.6% in April. Focusing on the most important aggregates, we observe a distinct downshift in economic growth now in its third or fourth month, and accelerating.
Manifestly, these most important components are consumer spending, employment, income growth, residential building and asset prices.
In the last letter, we expressed the view that a recession and a bear market in asset prices are inevitable for the U.S. economy. It goes without saying that this will have very serious consequences for the rest of the world. Recent economic data leave no doubt that both are on their way. What keeps triggering rebounds in U.S. stocks is only the "bad news is good news" syndrome, reflecting the hope that economic weakness will stop the Fed’s rate hikes.
During the last three months, March–May, for which full data are available, consumer spending has risen 0.3% (1.2% annualized). Reported retail sales for June are down 0.1% before inflation adjustment. Year over year, they increased 5.7% before and 1.4% after inflation.
Nonfarm payrolls grew in the second quarter by 108,000 per month, well off the first quarter’s 176,000. It was the slowest quarter since Q3 2003, when the economy finally pulled out of the jobless recovery. The private sector added only 86,000 new jobs during the quarter.
Residential building contributed 0.38 percentage points to real GDP growth during the last two quarters (Q4 2005–Q1 2006). This compares with 1.18 percentage points in the first half of 2005. Consider that building has the highest multiplier effects, generating jobs and additional spending. Retail trade and residential building together account for 75% of GDP.
It is no secret what has mainly pulled the U.S. economy out of its 2001 recession. The Greenspan Fed succeeded in offsetting the depressive impact of plunging stock prices and business investment on the economy by inflating house prices, which lubricated an unprecedented consumer borrowing-and-spending binge. For the first time in history, a central bank systematically engineered an asset and credit bubble for the explicit purpose of precipitating economic growth.
"Asset-driven" economic growth became the new conventional label for this new pattern of growth. Policymakers and quite a few others have apparently come to appreciate it as a valid alternative to the traditional income-driven economic growth. It is not. It is the road into the next asset bust.
Appearances of a few years are deceptive. Asset-driven economic growth is a badly flawed and dangerous alternative for two reasons: First, asset prices cannot rise in perpetuity; and second, it involves exorbitant credit and debt growth, lured by the rising asset prices and excessively optimistic expectations.
Growth by way of the old-fashioned business cycle never ended, because it was self-sustaining. Bubble-driven growth invariably ends when asset prices stop rising. In the U.S. case of the late 1920s and Japan’s case of the late 1980s, asset prices collapsed, with huge damage to the balance sheets of banks, firms and private households…….
It is by now a moot question whether the U.S. economy will slow down. It is happening, and at a pretty fast clip. Most important aggregates — employment, retail sales and housing starts — are generating solid recession warnings. Firing people is apparently the first response by businesses. Over the past three months, private sector job gains were 44% below the average monthly gains in 2005. Recall it was a labor-intensive bubble.
Most people, apparently, expect a brief, mild economic downturn, followed by a quick economic rebound. First of all, the high inflation rates are sure to put considerable restraint on the Fed’s easing.
But what are the demand components that will probably respond to the new easing? After so many years of prior spending excess and, moreover, asset prices in a sharp fall, the consumer is sure to retrench. Nor is there, for sure, pent-up demand in residential building. There is talk of pent-up demand in business fixed investment. We see mostly companies, which appear to have a strong preference for mergers, acquisitions and stock buybacks, boosting shareholder value. In short, the U.S. economy’s rebound after a brief "pause" is an illusion.
There will be a rude awakening.

PLACE YOR BETS

http://www.briefing.com/Investor/Public/MarketAnalysis/Calendars/EconomicCalendar.htm

PLACE TO GO FOR am data.

Net Birth (CES) Death "adjustment" accounted for ALL the months jobs.

Pure BS is what you get. 1308 is area of interest here, a SOUND break of 1302 could usher in some selling, a few bearish divergences are showing up.

D