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VOL. 38 | NO. 11 | Friday, March 14, 2014

Examination of data reveals reasons for economic optimism

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The first week of the month always produces a torrent of economic data that is capped off by the Friday employment report from the Department of Labor.

Here is a summary:

Institute for Supply Management (ISM) Reports: Remembering that any reading of more than 50 signifies expansion, the ISM manufacturing index for February moved to 53.2, up from January’s 51.3 reading.

The index averaged 53.9 in 2013, so the U.S. manufacturing sector is bringing momentum forward into 2014.

Jobs: Friday’s nonfarm payroll report was anticipated with uncertainty because of the bitterly cold weather that blanketed the country during February. Partly because of this weather effect, economists had lowered their forecasts for job gains.

A median forecast of economists in a Bloomberg survey predicted 149,000 jobs to be added. February’s job gains exceeded that median forecast with a payroll increase of 175,000 jobs.

Furthermore, the December and January initial estimates were revised up.

Good news that job gains were better than expected. Bad news is that December, January and February have produced average monthly job gains of 129,000, which are markedly down from the 205,000 of the previous 11 months.

Unemployment ticked up to 6.7 percent, while labor force participation held steady at an anemic 63 percent.

Net Worth: The most encouraging report last week might be Q4 2013 Federal Reserve Household Net Worth, which increased to a record $80.7 trillion at the end of last year, well above the pre-recession 2007 high of $76.6 trillion.

Financial wealth in isolation registered at $66.9 trillion (thank you, five-year bull market), representing a 23 percent increase above the pre-recession high.

The American balance sheet continues to drastically improve, as total U.S. household debt was 109 percent of disposable income, compared to a peak level of 135 percent in 2007.

Balance sheet repair on both sides translated into a $9.8 trillion overall household net worth increase for the 2013, a jump of nearly 14 percent.

Equity markets reacted favorably to data week (and muted tensions in the Ukraine), as the S&P 500 once again broke thru to record highs. Interest rates moved rapidly higher as well, as the 10-year Treasury reached 2.79 percent, nearly 5 percent higher than the 2.66 percent reading at the end of last week.

Bottom Line: Last week’s economic data revealed manufacturing and service sectors continue to expand alongside a gradually improving labor market.

Household net worth is as high as it has ever been, as Americans have witnessed improvements on both sides of their personal balance sheets.

Mark Sorgenfrei Jr. is vice president and investment analyst for Waddell & Associates Inc.

Sources: Bloomberg, The Wall Street Journal, Reuters, Yahoo Finance, Marketfield Asset Management

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 0 0
MORTGAGES 0 0 0
FORECLOSURE NOTICES 0 0 0
BUILDING PERMITS 0 0 0
BANKRUPTCIES 0 0 0
BUSINESS LICENSES 0 0 0
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0