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Wednesday, December 29, 2010

Tepid Jobs Recovery and Higher Grain Prices as Year Ends

The unemployment statistics are published monthly on the website run by the Bureau of Labor Statistics and there are many analysis reports supporting the published rate data.

The persistently high unemployment rate is broken down by segment in a occupation based table with every segment showing a very flat 2010. Statistics are for November 2010 vs. November 2009. On January 7, 2011, we can see December's numbers.

Will the recovery begin to add 100,000 jobs a month on average any time soon?

We are finishing the year with gas prices above $3 in most regions. This is high for this time of year. We are far from the high $4 to $5 a gallon we lived through during the summer of 2008.

The folks on AgWeb have a 17 minute audio clip focusing on high prices for grains. The clip is produced mainly for the farming industry. The industry benefits from high prices they can sell their grains for in the short run.

The worldwide demand for both food and fuel will have a major impact on the 2011 economy.

A Review of the Outlook for 2010

Around this time of year, many people give their outlook for the coming year. In my blog post Outlook for 2010 I made several predictions. All but one of the forecast items proved true:

We can expect the Federal Reserve to leave rates low until the job market turns the corner.

The overnight rate stayed between 0 and 1/4% for the entire year.

Increases in government spending at the federal level will be partially offset by cuts in local and state government budgets.

State and local governments were definitely in cut mode. The federal government spending was huge as the stimulus money was spent in many areas. Here in Northern Virginia, we see the new Metro link from Tysons Corner to Dulles Airport project dominating the landscape.

Somewhere in the later half of 2010, I expect the job market to reverse course as employers slowly start adding people to their payrolls.

Unemployment remained stubbornly high with no relief the entire year.

Stocks should continue the up and down motion as the Dow Jones seeks higher ground.

Wall Street is in the green for 2010. All key indexes are up for the year and we are currently enjoying a year end rally.

Any increase in consumer confidence will translate into profit since companies have reigned in their fixed costs. Will restaurants start filling their dining rooms mid-week?

Despite lots of restaurants seeking Chapter 11 bankruptcy protection early in the year, the industry is flat to up and creditors are allowing most reorganization plans to gain approval.

Look to travel indicators for signs of increased mid-week business. When airlines and hotels begin to see increased volumes, restaurants will find business travelers in their seats. Don't expect many $100 bottles of wine on business expense accounts this year. Frugal is in vogue.

Hotel occupancy rates have improved and the year end party news from downtown Manhattan had a frugal flavor.

I expect oil to remain below $100 per barrel.

I'm still accurate with this prediction but the markets are unseasonably high as 2010 comes to a close.

Overall, 2010 will be better than 2009 as the long slow recovery takes root.

Overall, 2010 was a big improvement over 2009 for most Americans. The big group experiencing persistent unemployment is a notable exception.

Sunday, December 05, 2010

Morningstar Perspectives Features a Knowledge@Wharton Study

Warming up for my Outlook 2011 post, I discovered the excellent Perspectives column on This week, they clipped a study by Knowledge@Wharton on Post-Recession America. The study uses information from the recent census.

A startling statistic is the number of Americans living below the poverty level. One in seven people are living on incomes deemed below the poverty level. This is the highest rate of poverty since they made these statistics available in the 1960s.

Friday's unemployment rate increase to 9.8% is another reminder of the very slow pace of the recovery.

Back to the Knowledge@Wharton article, they cite falling incomes and birth rates. The drops were measured using 2009 vs. 2008.

I would characterize the mood of the article as somber but they had a hopeful ending for the poor. They expect the poverty rate to decline quickly as the employment picture brightens.

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