Listening to Market Noise by the Media

Includes: CAT, GPS, HD, JWN, KSS, M, SKS, TGT
by: Econophile

I am tired of the cheerleading by the mainstream press where they see every positive sign as a sure sign of recovery and every negative sign as "unexpected." Every article I read on new data from the Wall Street Journal or Bloomberg is the same--with mind numbing regularity. Worse is that they always find some economist to give them a positive quote to the effect that we are "turning the corner" or "the recovery is self-sustaining."

Here are some examples from recent news. These aren't cherry-picked:

Wholesale inventories

Wholesale inventories rose by 0.6% in January; sales increased 0.8 percent, the 11th consecutive increase.

WSJ: "far above expectations." The title of their article was "Wholesale Inventories Surge."

Bloomberg: "larger than anticipated." Bloomberg always likes to line up some optomistic economist:

'Firms are seeing more reason for optimism in the outlook and are looking to build inventories to fill future sales growth,' said Zach Pandl, an economist at Nomura Securities International Inc. in New York.

It sounds good but here is the reality if you look at inventories vs. sales ratios:

Click to enlarge:

Don't you have to have sales to spur inventory? This chart was right in the Commerce Department report which they all saw.


Initial jobless claims rose by 18,000 for the latest reporting week of April 3, up to 460,000.

WSJ: " jobless benefits rose unexpectedly last week."


More Americans unexpectedly filed claims for jobless benefits ...

They like to get someone who is bucking the report to make us feel better and it's either Home Depot (NYSE:HD) or Caterpillar (NYSE:CAT):

Home Depot Inc., the largest U.S. home-improvement retailer, is adding store jobs for the first time in four years as it expects a rebound in sales, Chief Executive Officer Frank Blake said.

More on the unemployment situation later.


A lot of retailers reported good sales in March (Saks (NYSE:SKS) + 12.7%; Gap (NYSE:GPS) + 11%; TJ Maxx + 12%; Target (NYSE:TGT) + 10.3%; Macy's (NYSE:M) + 10.8%; Nordstrom (NYSE:JWN) + 16.8%; Kohl's (NYSE:KSS) + 22.5%). This is good stuff.


Shoppers opened their wallets even wider than expected in March.

Here is their rosy economist:

'It's a blow-out month, the biggest monthly increase we've seen since we began tracking monthly retail sales in 2000,' said Ken Perkins, president of Retail Metrics.

Bloomberg: "Gap, Saks Lead Largest Monthly Sales Gain in a Decade."

OK, this is pretty fair reporting. But it's not a blow-out. Look at this one-year time frame chart which shows PCE, personal savings, transfer receipts (payments from the government), and disposable personal income:

Click to enlarge:

Looks pretty flat to me. While the transfer payment numbers aren't as current, you should know that they account for 20% of personal income.

New jobs

Job Openings in U.S. decrease to 2.72 million in February (- 4.6%). They fell for the first time in three months. There are more than 5 people vying for every opening, up from about 1.8 when the recession began in December 2007.

WSJ: They didn't even report this.

Bloomberg: I have to admit they didn't gild the lilly here. But they again mention again that Home Depot is

hiring for the first time in four years.

One in five U.S. jobless--20%--are unemployed after a year according to a new Pew study.

WSJ: Again they missed this story.

Bloomberg: Kudos. They reported this fairly because it was Pew's data. They did mention that 162,000 new jobs were added in March.

162,000 jobs added in March. Of those, 48,000 were government workers, many related to the U.S. Census. These aren't real "economic" jobs. See my article: "Unemplyment Remains Unchanged in March."


created jobs at the fastest pace in three years.

Their headline was:

Employers Added Most Jobs in Three Years in March.

They noted that YoY employment was down another 1.8% and that the unemployment rate was unchanged at 9.7%. Toward the end they mentioned that the broadest measure of unemploment (U-6, Marginally Attached Workers) was up from 16.8% to 16.9%. And at the very end they note that average hourly earnings (wages) for workers declined 0.1%.

Bloomberg: Pretty much the same. Instead of Home Depot adding jobs, this time they used another favorite, Caterpillar as an example. Funny, they forgot to mention that wage earnings declined, again. Both articles quote economists who think things are getting better.

Institute for Supply Management’s index of non- manufacturing businesses (services) rose to 55.4 from 53 in the prior month. This is another good sign, especially if looked at in isolation.


'It looks like the recovery is definitely here in the service sector,' said Adam York, an economist with Wells Fargo Securities.

Bloomberg: 'Higher than anticipated.'

'The recovery is looking increasingly self-sustaining,' said James O’Sullivan, chief economist at MF Global Ltd.

Private-sector jobs in the U.S. dropped by 23,000 this month. This ADP report was at odds with the BLS numbers which showed employment gains.


The news rattled investors and economists who had expected March would show a gain in payrolls.

Economist Joel Prakken, chairman of Macroeconomic Advisers said the ADP report didn't include any weather rebound or census hiring and that the numbers were reasonable.


Companies in the U.S. unexpectedly cut payrolls.

They also blamed it on the weather and quoted Mr. Prakken as well. They again cited Caterpillar as a company that is hiring.

Personal spending (PCE) increased by 0.3% in February, but personal income was flat and savings were lower. PCE is really weak overall. No one connected the dots that said consumers had to resort to savings to make purchases. See my article: "Consumers Draw Down Savings For Personal Consumption." PCE is really weak overall.

WSJ: They reported the facts. They didn't make a note of the connection between a rise in PCE and a decline in savings.


'Consumer spending in the U.S. rose in February for a fifth consecutive month.' 'Considering the circumstances, this is a fine performance with the job market still not strong,' said Michael Moran, chief economist at Daiwa Securities America Inc. in New York.

They noted that savings declined as a result of spending and declining wage earnings.

Oh really? (Click to enlarge)

Disclosure: No positions