Jobs Market Goes to the Movies

Payrolls grew in April, so what’s to grouse about?  Edward G. Robinson’s reply in Key Largo to Humphrey Bogart’s observation comes to mind.  “Yeah, that’s it! More! That’s right. I want more.”

The Bureau of Labor Statistics reported that 115,000 jobs were created last month, below the 160,000 or so economists were expecting.  Prior months were revised upward, though.  February job growth was pegged at 259,000, up from the previous 240,000 estimate, and March payrolls are now seen as having risen 154,000 vs. the 120,000 gain previously reported.

The average work week was unchanged at 34.5 hours in April. The manufacturing workweek edged up by 0.1 hour to 40.8 hours, and factory overtime rose by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees was unchanged at 33.8 hours.

In April, average hourly earnings for all employees on private nonfarm payrolls rose by 1 cent to $23.38. Over the past 12 months, average hourly earnings have increased by 1.8 percent.  In April, average hourly earnings of private-sector production and nonsupervisory employees rose by 3 cents to $19.72.

The unemployment rate dipped slightly to 8.1% from 8.2%, largely because participation in the labor market shrank.

BLS data in all their glory can be found at http://www.bls.gov/news.release/empsit.nr0.htm.

This tepid growth in jobs and stagnation in wages suggests the economy remained aloft in the first month of the second quarter, though its air speed drifted to levels that should cause concern in the cockpit.

Perhaps the warm winter skewed earlier figures abnormally higher and economic growth is settling back to a more realistic level.  Perhaps the specter of the unraveling of that great fossil museum known as Europe weighs on international corporations’ animal spirits.  And perhaps the sleeping housing construction sector is a cork still lodged in the champagne bottle.

Whatever the cause, expect sideways action in the stock and bond markets for the foreseeable future.  With most of the impetus from positive first-quarter earnings surprises now spent, international events (particularly elections in France and Greece) could take center stage in the investment melodrama.

For the faint of heart (and our ticker is none too aroused right now), we nominate dividend payers such as AT&T (T) and Philip Morris (MO).  Americans may not be working as much as they would like, but they’re not going to give up cell phones or smoking.  

Keeping Score

We shot a 97 on a par-64 municipal track this week. Like Mark Twain’s assessment of Wagner, It was better than it sounds. Really.

In fact, we cut 10 strokes off that in a later round – the first time we have broken 90 – by somehow eliminating enough three-, four- and, yes, even five-putts. Mirabile dictu! It's true! Drive for show and putt for dough.

Likewise, the U.S. economy's game won't be mistaken for one of Bubba Watson's Homeric drives, but the advance estimate of first-quarter gross domestic product showed that efficient work by the 14^th club in the bag kept e pluribus unum in the hunt.

The Commerce Department reported Thursday that real GDP advanced at a seasonally adjusted annual rate of 2.2% in the first three months of 2012, down from a 3.0% rate in the fourth quarter of 2011. Business investment and inventories were the big subtracting factors. But the big dog, the consumer, overcame those drags. Final consumption charged ahead at a 2.9% rate, adding two points to growth, up from 2.1% in the fourth quarter. It was the biggest contribution to expansion since the final months of 2010.

In all, the data buttressed our view that the U.S. has reached escape velocity and won't veer into a double-dip recession, like Europe appears to be doing. Indeed, the U.S. is once again the hope of the world. The American consumer is crucial to Europe and Asia, lands that depend on America's appetite for goods ranging from German cars to Chinese T-shirts. The increase in consumption should also translate into more investment and inventory building on these shores in the months to come.

The stock market responded, shrugging off the headline number, helped, obviously, by sterling earnings reports from Apple and Ford. Fully 71% of companies comprising the S&P 500 that have so far reported first-quarter results beat analysts' mean estimates, according to Bloomberg News.

Barring unforecastable cataclysms, we expect the rally to continue. The S&P 500 is trading at a trailing 12-months price-to-earnings ratio of about 16, compared with a historical mean of about 15, according to the Wall Street Journal. We expect the “P” to grow as the “E” keeps swelling in a growing economy. As in our historic breaching of the 90 threshold, momentum is serious scorecard medicine.

Apocalypse (Not) Now

Dare we say it? Those “green shoots” (a false spring in 2009) appear to be sprouting again in the United States, while foreign fields remain fallow. We argue that this dichotomy is seed corn for global economic expansion that can be wrecked only by the four horsemen of the Apocalypse – war, famine, pestilence, death, the latter of which comes to all of us in the long run, as Keynes famously said. We cannot reasonably forecast the other three, so we will stipulate, for the sake of our analysis, they will remain sidelined. This premise is, of course, a bit of a stretch given the apocalyptic tenor of the times, but assume it we must if we are to proceed down this primrose path.

Our first stop is the land of e pluribus unum. Times being what they were, Americans took the jobs, some 200,000 of them a month for a while, according to the Bureau of Labor Statistics. But no, from out of nowhere (as that famous economist Howard Cosell used to intone), job growth slipped in March – a late frost that threatened to wither those ephemeral seedlings seen sprouting. Another month of lackluster job growth could prove fatal to the outlook for the American spring, particularly if hourly wages remain stagnant.

We remain sanguine, though. For one, oil prices have yet to choke and they have likely peaked. We don’t expect one of our four horsemen, war with Iran, to ride again for some time, and the latest American Petroleum Institute data show inventories on the rise. What’s more, economic growth, though far from boiling, should maintain escape velocity with the latest trade data forcing economists to up their forecasts for first quarter expansion toward the 3% annual rate that offers enough momentum to prevent a stall.

No, the US is probably OK until January, when across-the-board federal spending cuts are slated to kick in. Far be it from us to forecast political outcomes, but it’s hard to believe there won’t be some dickering to soften the fiscal blow no matter who is President or which party controls Congress.

Surely what matters now lies elsewhere in the world, specifically the European Union (our pestilential horseman) and the People’s Republic of China (saddling the famine entry). The former is the biggest worry. Contagion is … well, contagious. Recall, the US financial mess that spread abroad and so artfully ameliorated by Bernanke and company. Expect further selloffs in US equities if Spain’s bond auction goes poorly this week. The EU’s German-dominated direction is perversely aimed at austerity when only growth can save the day. But we think it’s more or less baked in the cake.

Strangely, alarm bells are ringing over the famine nag, the world apparently scared that an undernourished China signals a dearth of demand in the western world. China recently reported another slowdown in growth, but lost in the story is that this outcome is exactly what the Chinese authorities planned – slower growth to prevent overheating and achieve the elusive soft landing of which central bankers’ dreams are made.

For those as optimistic as we are, buy the S&P 500 on weakness. Specifically, we like Ford (F) and Riverbed Technology (RVBD). The former is confident enough to have begun paying a dividend again. We like the latter’s prospects in wide-area network optimization as global growth maintains momentum.

For the more faint of heart, tried and true makers of products that cater to our vices should withstand economic turmoil. In this vein, we like Altria (MO), purveyor of the iconic American cigarette for which we and a host of others have a weakness.

However, we don’t think the Marlboro man need ride to the rescue. He can remain dismounted along with the horsemen of end time.

2012 Confidential

With more than a month and a half of 2012 under our belt and the fate of the Western world teetering in the balance, we make these fearless prognostications for the remainder of this anno domini.

Gasoline goes to $5 a gallon and Barack Obama is re-elected anyway. The Republican field is so unpalatable that even Rick Santorum may be a tastier dish than Mitt Romney, which is to say unelectable. The argument has shifted from the Obama defense that the economy “would have been worse” if its life jackets hadn't been distributed to the Republican pout that “it would have been even better” if, for instance, Motown had not been bailed out. Either conceit is a dog that won't hunt.

The world will remain asynchronous. The United States took its lumps and is now pulling out of it. It's Europe's turn now to pay the piper for fecklessness. The Old World will pull out of it, too. By the end of 2012, U.S. consumption growth will be the engine that gets the euro zone and its environs back on the growth path. Buy France Telecom (FTE) for the lush dividend.

Uranium stocks will double as nuclear power gains currency. Buy Denison Mines (DNN) and Cameco (CCJ).

The Southeastern Conference will not have a representative in the BCS championship game. Call us a conspiracy theorist, but the other conferences are so sick with envy of the riches the SEC keeps piling up that they'll rig the computers.

The St. Louis ball club will repeat as World Series champions without Albert Pujols, who will hit .260 for the Anaheim ball club.

Speaking of St. Louis, the University thereof will be the surprise team in the NCAA basketball tournament. The Billikens are quietly 21-5. Pick them to get to the sweet 16 when the office bracket sheets are distributed.

Red Sox manager Bobby Valentine will bow to umpires when presenting lineup cards and curse them only in Japanese, thus avoiding ejection the entire season.

Apple and Nike will announce a joint venture to market smart-phone swoosh logos that athletes can use to tweet with while competing on the field, court or golf course.

The next sports scandal will be a gambling fraud at the next Super Bowl. The National Anthem singer will string out the song beyond the over/under prop bet time at the behest of organized crime. Hey, who would have thought a safety would be the first score of this year's game?

We will break 100 more than once this year and our lost sand wedge will be returned.

Requiem for a Sand Wedge

Accepting that you’ll never be happy again yields a certain happiness, just as knowing that one’s favorite sand wedge, forgotten on a green in the shadow of War Memorial Stadium, will remain forever in the bag of a scoundrel who found the forlorn stick and kept it for himself. Your short game will never be quite the same, but there is satisfaction in believing that whatever metaphysical power guides the universe will invest the wayward wedge with the power to poison the gentleman’s game from here to eternity.

Oh, it was a cheap thing – a bargain close-out inscribed with the name of the “wee ice man,” the man who believed as we do that putting is not golf. The American League employs the designated hitter, so why not a designated putter for those of us challenged by this feminine activity? Our choice would be Paula Creamer. We’d even let her use the pink ball she favors.

Cheap or not, it filled us with confidence when we heard the magical click of club head striking the cover of our Titleist, sending it like an exploding kernel of popcorn to a designated area near the cup, the face of the shiny wand smudged with a new fleck of candy red from the identifying inscription applied by a Sharpie to the ball.

We miss it so. There is a permanent longing to regain it, an ache so sharp yet so sweet, that, as we said, it begets a wistful nostalgia, an ennobling emotion, filled with the grandiosity of self that we gain only by losing – in this case a bloodied scepter now serving another master.

This sporting life affords us few opportunities for this peculiar satisfaction, so we savor it more than the well-struck tee shot delivered by a brutish driver. No, it is a finer thing than that, this world we have lost, always on the horizon, forever out of reach but glimmering with the promise that it can be regained. Now, if we can only enlist Ms. Creamer to pinch putt for us.

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Our tattered flag is still waving after taking a beating, for entertainment purposes only. Let’s put 5,000 destroyers on Navy -7 over Army today to wrap up the college football season. Bowl picks to come.

Earthbound

Could Arkansas ever play in the national championship game? When pigs fly. After a flashy start, these Hogs remained pedestrians, pushed back into the mire by a Honey Badger named Tyrann Mathieu and his geaux-geaux Acadians in Baton Rouge.

This leaves the door open for one-loss teams Stanford and Virginia Tech to sneak in, assuming Oklahoma can vanquish Oklahoma State next week.

We were 3 and 2 last week, but nevertheless lost 300 from our goodwill bundle because, for the first time this year, our lock of the week let us down. The setback brings our year-to-date total to plus 10,790. For entertainment purposes only, we will double down on rivalry Saturday. You know, throw out the record books when these teams tangle.

Let’s put 2,000 BCS computers each on:

Michigan -7 ½ over Ohio State (Wolverines’ Denard Robinson dots the “i” for Buckeyes’ band)

Auburn +21 over Alabama (War Eagles, Plainsmen, Tigers – pick a nickname – will stun Tide. Michael Dyer outrushes Heisman hopeful Trent Richardson)

Illinois -11 over Minnesota (Just because the Golden Gophers stink)

Baylor -13 over Texas Tech (The Bears boast our vote for the Heisman – RG III)

Lock of the Week – Over/Under

Iowa State vs. Oklahoma over 60 (Sooners’ secondary exposed by aforementioned Griffin last week. Expect beaucoups points)

Agents of KAOS

Like the Republican presidential clown show, the BCS scrum has become a race to the bottom. Only Maxwell Smart and 99 can outwit this sharp-as-tacks crowd. Last night, the Cowboys, nee Aggies, of Stillwater were exposed as the latest pretender, much to the chagrin of our beloved Sooners, who were looking to knock off an undefeated Oklahoma State two weeks hence and insinuate themselves back into the championship picture.

Our pre-season pick of OU and Arkansas in the national championship game, though still possible, looks unlikely. Both will have to win out and Oregon must stumble. Alabama, though, will probably remain the highest-ranked one-loss team, and LSU with its wins against Alabama, Oregon and West Virginia, could be in the picture as well, even if it loses next week to Arkansas, who we expect to fall tonight to Mississippi State in Little Rock.

We stumbled last week, going two of five, losing 300 poll points to bring our straw vote to plus 11,090 on the year. But, hey, we're a leader not a reader. And our work as a historian has profited us handsomely so far. Our latest client is a little weak on his colonial period, so we've got to get to work and leave you with these Tiffany's gifts. For entertainment purposes only, let's put 1,000 Freddie Macs each on the following and 2,000 on our lock of the week.

Mississippi State +13 over Arkansas (Hogs have fed too much at the trough of luck. Bulldogs' Chris Relf leads team to upset)

Houston -20.5 over Southern Methodist (Casey Keenum leads Cougars. Alas, Houston will be the only undefeated team not making it to the championship)

Southern California +14 ½ over Oregon (Trojans have enough horses to keep it close)

Kansas State +8 over Texas (How can the Longhorns be the favorite after scoring just a safety and a field goal against Missouri last week?)

Lock of the Week – Over/Under
Wisconsin vs. Illinois over 51(Both teams can score, though the Illini have been anemic of late. Badgers prevail late on a Russell Wilson TD toss)