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Market Reaction - Street Talk

Author: Stephen Stanley, chief economist, Greenwich Capital
Date/Time: 6 Oct 2005 9:44 AM
 

Gary Rosenberger, the author of the various reality based Economic Forecasting Service" stories that have appeared on the Market News wire, has left Market News but is still compiling his stories independently and has forwarded his latest take on the jobs market to me this morning (if you want to contact him directly, his phone number is listed at the end of the story).

The story, which is appended below, is generally upbeat considering the devastating blow struck by Hurricanes Katrina and Rita. Job placement firms outside of the Gulf Coast area have, if anything, seen a pickup in business, which seems to be associated to a significant degree with temporary needs generated by the hurricanes (insurance adjusters, relief logistics, etc.). Apart from that, though, several contacts noted what seemed to be solid underlying business, including two firms in the Midwest, which has up to now been the weakest region, an IT-focused firm in Washington state, and a regional firm in Virginia.

The comments were not entirely positive. Several contacts were concerned that a high percentage of their business was for temporary, rather than permanent, placements. Part of that development relates to temporary needs associated with the hurricane, but the mix also reflects to some degree caution about the economic outlook in light of high energy prices. As a result, some of the contacts are a little worried about their business prospects six months out. In my view, this is a natural development and an understandable concern, but, as energy supplies come back online, gasoline and heating costs should ebb, and once we get through the winter heating season, the economy and labor markets should be fine.

More generally, labor markets were viewed as tighter but not tight, except perhaps for a few regions where placement firms were having difficulty filling positions. Wages seem to be creeping up a bit but not so much as to suggest extreme pressures. All in all, considering that a metropolitan area with over 300,000 workers has been all but shut down for over a month, the tone of the comments in the story is about as positive as anyone would have the right to expect.

Author: Stephen Stanley, chief economist, Greenwich Capital
Date/Time: 7 Oct 2005 10:53 AM

Gary Rosenberger sent along his reality based Economic Forecasting Service" story on the foreign trade sector for August in advance of next week's trade balance release. Let him know your thoughts (his contact info is at the end of the story).

I thought it was particularly interesting in light of the potential for disruptions caused by the hurricanes. In fact, his contacts suggest that the hurricanes have been of secondary importance, shifting around goods from affected to unaffected ports, but not moving the aggregate numbers much. Instead, the most interesting development has been a change in the trends of the trade flows. There was broad agreement that exports have strengthened on a relative basis, suggesting a narrowing in the trade gap.

Meanwhile, import flows related to the looming holiday season have so far been limited. The verdict is still out on whether this reflects expectations of a soft season, and thus less ordering of merchandise, or whether firms are simply waiting longer to ship their orders, consistent with the dogmatic insistence of retailers for just-in-time distribution. Several years removed from the disastrous season caused by the longshoreman strike in October of 2002, retailers may be regaining confidence in their ability to move goods quickly from the manufacturer to the store.

One other note about September (even though the official September trade data will not be released until November). At first glance, it would seem reasonable to look for a huge jump in energy imports last month. However, this may not have occurred. While prices were undoubtedly somewhat higher, they had already spiked prior to Katrina. In addition, many of the refineries on the Gulf Coast depend on imported oil from Mexico or Venezuela. Since these facilities have been closed for a month, they have not been accepting shipments of crude. Import volumes were definitely off last month.

 

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