unemployment rate Archives • Rutherford Investment

Market Rises Closer To All-Time High

Originally posted in the Daily Journal of Commerce, Portland OR

Published February 11, 2013
The equity market in the U.S. has continued the rally that began June 1, 2012. January’s 5.1 percent increase for the S&P was the largest since October 2011. The Dow surpassed 14,000 for the first time since 2007. What’s more, the market accomplished this in the face of a declining gross domestic product in the fourth quarter of 2012, when GDP dropped 0.1 percent instead of increasing as expected. Unemployment ratcheted up to 7.8 percent.

In response, the Federal Reserve said:

Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather related disruptions and other transitory factors. Employment has continued to expand at a moderate pace, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. Inflation has been running somewhat below the committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability. The committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate. Although strains in global financial markets have eased somewhat, the committee continues to see downside risks to the economic outlook. The committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery […]

February 13th, 2013|Categories: Daily Journal of Commerce|Tags: energy prices, global financial markets, household spending, inflation expectations, maximum employment, mortgage backed securities, price stability, unemployment rate|Comments Off

Market In Rally Mode In Third Quarter

Published October 15, 2012
U.S. equity markets have staged a strong rally since hitting a low point on June 1. At that time investors feared a global recession, Europe was facing disaster and the general outlook was despondency.

The market closed at 1,278.04 on June 1. It has since risen 12.7 percent through the third quarter in a stealth rally. The market closed at 1,440.67 on Sept. 30. In September, usually the worst month for markets, the S&P rose 2.6 percent, the Nasdaq rose 1.6 percent and the Dow rose 2.75 percent.

At the conclusion of the quarter, the Dow had risen in 11 of the past 12 months, falling only in May. The last time this happened was in 1959. The Dow has had a remarkable one-year run in which it has gained about 2,500 points, or 23 percent.

It was not all smooth sailing, because most of the September gains came in the first two weeks. Durable goods orders in July-August fell 13.2 percent. At the end of September, consumer sentiment fell. The nonmanufacturing index rose to 55.1, but less than the 55.3 expected. Second-quarter GDP was revised lower to 1.3 percent growth.

However, jobless claims fell slightly and the economy in September added 162,000 jobs – well short of the 250,000 needed to absorb new workers let alone those out of work for extended periods. By the end of September, government statistics showed that the unemployment rate was below 8 percent, for the first time during the Obama administration.

The market got a lift from the announcement by the Fed of another round of quantitative easing. Both the anticipation of QE3 and the implementation […]

October 15th, 2012|Categories: Daily Journal of Commerce|Tags: dow, global recession, jobless claims, market investors, nasdaq, qe3, quarter gdp, swing states, unemployment rate|Comments Off

Market In A Confirmed Uptrend

Published March 12, 2012
For the week ending March 2, the Nasdaq and the S&P 500 advanced 0.4 percent and 0.3 percent, respectively, but the Dow retreated a fraction. Both the Nasdaq and the S&P 500 have climbed in eight of the year’s first nine weeks; the Dow has risen six of the first nine.

For the year through March 2, the Dow is up 6.8 percent, the S&P is up 9.3 percent and the Nasdaq is up 14.2 percent. The market continues to be “in a confirmed uptrend,” according to Investor’s Business Daily.

The Dow crossed the 13,000 milestone, the ninth time it has done so since 2007. Along the way the index has sunk below and bounced above 12,000, 11,000, 10,000, 9,000, 8,000 and 7,000 more than 300 times. So it is not hard to see why a number contains no magic.

The Dow remains more than 1,000 points below its record high of 14,164.53, set in October 2007. The S&P remains 15 percent below its record close of 1,565.15, set the same month. U.S. gross domestic product grew 3 percent in the fourth quarter of 2011. The GDP is the broadest measure of all goods and services produced in the economy. This was up slightly from estimated growth of 2.8 percent. Economists surveyed by the Dow Jones Newswire had expected 2.7 percent.

The latest report also included positive revision for household income in the last half of 2011, a potentially positive sign of stronger consumer spending to follow. Americans started spending more freely as the unemployment rate began to edge down. Personal expenditure rose 2.1 percent in the fourth quarter, more than anticipated.

Last […]

March 13th, 2012|Categories: Daily Journal of Commerce|Tags: disposable income, federal reserve, household finances, household income, unemployment rate|Comments Off

Markets’ Solid Starts Bode Well For 2012

Published February 10, 2012

There is an old saw about the equity markets: As January goes, so goes the year. But like many old saws, there is a basis in fact for this one. Note that the S&P jumped 4.4 percent for the month, with the tech-heavy NASDAQ up 8 percent.

In addition, the “first five days” theory holds that the S&P has never fallen in a year when the first five days of the year see gains of 1.8 percent or more. In the first five days of 2012, the Dow rose 1.8 percent.

The Dow index has matched the direction of January performance in 92 percent of years since 1970. In 85 of the Dow’s 114 years – 75 percent of the time – the January effect has held true.

Reasons for optimism have emerged. Most recently, the unemployment rate fell to 8.3 percent from 8.5 percent a month earlier and 9.1 percent as recently as August.

This is because net job creation in January was 243,000 – more than expected. Moreover, December job growth was revised upward, as was November from 100,000 originally to 157,000.

These jobs were created in the private sector; business added 257,000 jobs as the public sector continued layoffs. Small businesses added 95,000 jobs, while medium-size firms added 72,000. Large companies added only 3,000 jobs. Most Americans work at businesses ranging in size from small to medium; these are the ones that banks are becoming more willing to lend to.

Factory orders are up for the second consecutive month. Factory orders grew in Germany for the first time in four months. Orders also grew in Austria, Britain, Norway and Sweden. Northern Europe’s […]

February 13th, 2012|Categories: Daily Journal of Commerce|Tags: dow index, job creation, nasdaq, recession, unemployment rate|Comments Off

Low Job Growth Casts Doubt On Recovery

Published December 10, 2010

The U.S. economy added fewer jobs than expected in November. The weakness in the jobs report 17 months after the recession officially ended is a vivid reminder that we have a long way to go before a full-fledged recovery. The unemployment rate has been above 9 percent for 19 months, the longest period for such an elevated level since World War II.

Retailers are becoming more cautious with the combination of weak job numbers and the extension of jobless benefits in doubt. Congress could deliver a double whammy to Christmas if it fails to extend unemployment benefits and fails to deliver an extension of tax cuts. The air could go out from what started as a robust holiday season.

Private-sector employers added only 50,000 jobs last month, significantly fewer than the 250,000 needed just to accommodate workforce growth. The jobless rate rose to 9.8 percent, the highest level since April. Economists had expected a growth rate of 144,000 jobs and a jobless rate of 9.6 percent.
Retail shed jobs going into the Christmas season. Manufacturing lost 13,000 jobs, the fourth decline in
a row. Government shed 11,000 jobs, mostly at local levels where tight budgets have caused
problems.

The weak numbers caused Vice President Joe Biden to say there is no denying the numbers were
disappointing. Ben Bernanke recently said that job creation is the most important job the government
faces; this was the motivation behind the Fed’s latest bond purchase program. Bernanke said the
jobless rate could grow if the economy continues to grow at its sluggish rate. He is particularly
concerned about those who have been out of work for an extended time.

The broader measure of unemployment, which includes […]

December 14th, 2010|Categories: Daily Journal of Commerce|Tags: average hourly earnings, household consumption, tight budgets, unemployment benefits, unemployment rate, workforce growth|Comments Off

Is This Recession The New Normal?

Fear lingers as worry of a double dip fades. What can the Federal Reserve do? The past quarter brought numerous gloomy headlines. The specter of a double-dip recession, a depression or inflation loomed.

Each day seemed to bring more negative news and reason for gloom. Not surprisingly, markets reacted, and after a strong July, equity markets dipped in August to an overall minus number for the year. It did not help that investors withdrew about $34 billion from equity mutual funds for the year and placed $32 billion into international and emerging market funds, or that the “flash crash” of May 6 caused many investors to wonder if they were playing with a stacked deck.

Job losses continued to mount last month with the unemployment rate hitting 9.6 percent. The Obama administration took solace in the fact that the private sector in August added 67,000 jobs – about one fourth of the number needed to provide jobs for new entrants into the workforce.
The question the market seems to be wrestling with is: Are we about to experience a “new normal” for growth in the U.S.?

Historically, on average, the U.S. economy has grown about 3 percent per year – also about the rate of inflation. Bonds have historically returned the rate of inflation plus 3 percent, for a total of 6 percent. Equities have historically returned about 9 percent.

As every investor knows, the last 10 years have been anything but normal, and the U.S. economy seems to be growing less than normal. Is this the “new normal”? Should we expect less than 3 percent growth, or even none? Is the structural growth rate of the U.S. […]

September 13th, 2010|Categories: Daily Journal of Commerce|Tags: double dip recession, emerging market funds, federal reserve, fixed income markets, job losses, mutual funds, private sector, rate of inflation, unemployment rate|Comments Off

Economic Data Suggest Reasons For Optimism

As I have stated before, the economy won’t hit the bottom until housing prices stabilize. Recent reports show that single-family home prices in the U.S. posted a slight 0.2-percent increase in the third quarter. This was the first quarterly gain in two years. The biggest increases were in the West, despite California, Arizona and Nevada being some of the most troubled states. Sales of new homes unexpectedly increased in October.

Sales of new single-family homes increased 6.2 percent. Sales of existing homes increased 3.7 percent. All of these reports augur well for the economy.

Also, job losses in November slowed to 11,000, the fewest since this recession began, and the unemployment rate fell unexpectedly, indicating that the economy is in a healing process. Unemployment remains stubbornly high, at around 10 percent, although most believe the real level is much higher. Nevertheless, payroll data reflect a notable improvement in the jobs market. Some think that firings have been too aggressive and that firms will have to start hiring in the next few months. There is a long way to go, however; nearly 8 million people have lost their jobs since the start of the recession.

Average hourly earnings rose a penny in November and the average workweek expanded by 0.2 hours.
Another report showed U.S. factory orders rose for the sixth time in seven months in October, posting a larger-than-expected gain of 0.6 percent. In the third quarter, the U.S. economy grew 2.8 percent, expanding for the first time in more than a year.

The economy still faces stiff headwinds, including higher taxes and more regulation. But perhaps the strongest is banks’ reluctance to lend. Banks have taken billions […]

March 18th, 2010|Categories: Daily Journal of Commerce|Tags: money supply, Rutherford Investment Management, unemployment rate, william rutherford|Comments Off

Bill Rutherford Quoted By MarketWatch.com

Beyond the pail: Where to invest in a post-bailout world

by Jonathan Burton, MarketWatch

SAN FRANCISCO (MarketWatch) — Wall Street is bound to get its bailout, in one form or another. The government’s rescue package will be costly to taxpayers, politically controversial — and quite possibly not the last. It will also dramatically change the landscape for U.S. stock investors.

The bailout has a singular task: to grease the locked wheels of the financial system and get credit moving again. What investors need to remember is that even if this plan works, the deep problems plaguing homeowners, consumers and the broader economy won’t magically disappear. The Troubled Asset Relief Plan isn’t called TARP for no reason. It is intended to avert a flood of Depression-era size, but the ground around us will still be soaked. […]

September 26th, 2008|Categories: Bill Quoted|Tags: bailout package, economic slowdown, economy, federal reserve, jonathan burton, morningstar, pat dorsey, recession, stock market, unemployment rate, william rutherford|Comments Off