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The market remains resilient in the face of bad news.  The S&P 500 is down just 0.5% on the non-farm payrolls and ISM services reports.  The NFP was essentially in-line with estimates with 663K job losses last month and 8.5% unemployment.  February estimates were revised higher by 80K.   The ISM came in at 40.8 which was worse than the 42 analyst’s expected.  The devils are in the details of course.

6 of the 10 relevant indices are contracting more rapidly with 9 of the 10 still in full blown contraction.  Respondents said:

  • “We are definitely feeling the recession in terms of business activity on all fronts.” (Transportation & Warehousing)
  • “The general state of the building industry is still very difficult with demand still low. We are starting to see some inflation in commodities and expect to have limited sales for this month.” (Construction)
  • “Business is significantly down. Very few new projects. Many layoffs.” (Finance & Insurance)
  • “Healthcare is also seeing a slowdown in volume.” (Health Care & Social Assistance)
  • “Business is still flat and appears like it will remain that way through the second quarter of this year, causing cutbacks on purchases and increased requests for cost savings.” (Professional, Scientific & Technical Services)
  • “Things are still slow due to the current economic conditions. Areas that are traditionally active this time of year are experiencing moderate activity levels.” (Wholesale Trade)


The chart below is a fantastic sign of the times and what I believe is a false dawn in the economy.  October was such a horrible month – the economy literally stalled for weeks – that it is nearly impossible for sequential growth to not improve.  The bottom red line represents this improvement in sequential growth, however, the top red line shows that the overall economic deterioration on a longer-term basis is still very real.  To refer to a past analogy -what we’re essentially seeing is a boxer who gets KO’d in his first match and then throws a party when he gets TKO’d in his second career match.  This is not real improvement.  It’s just not the utter debacle it was a few months ago.  That is not improvement.   Beware the bottom callers.  They are out in force now.


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