UNEMPLOYMENT INCHES UP DESPITE JOBS GROWTH... This morning's employment report showed 171,000 non-farm payrolls were added in October, which was more than economists expected. Upward adjustments to non-farm payrolls were also noted for August (from +142,000 to +192,000) and September (from +114,000 to +148,000). Despite the bigger-than-expected jobs growth, the unemployment rate moved from 7.8% in last month's report to 7.9% as more workers were actively seeking jobs.
According to the Labor Department, employment growth has averaged 157,000 per month so far in 2012, about the same as the average monthly gain of 153,000 in 2011. In October, the average workweek for all employees on private non-farm payrolls was 34.4 hours for the fourth consecutive month. Average hourly earnings for all employees declined 1 penny to $23.58. Over the past 12 months, average hourly earnings have risen 1.6%, whereas inflation has risen 2%, signaling wages are not keeping pace with inflation so far.
Will the jobs data have an impact on the presidential election? Presidents Gerald Ford, Jimmy Carter and George H.W. Bush were all defeated in their reelection bids with unemployment above 7%. Ronald Reagan was reelected despite that situation, although the jobless rate was coming down rapidly.
INFORMA RELEASES NOVEMBER CROP PEGS... Sources familiar with Informa Economics say the firm has released its November crop production estimates ahead of the Nov. 9 USDA Crop Production Report. The firm's corn and soybean crop estimates are reportedly above USDA's October projections. Following are details:
Corn: Informa estimates the crop at 10.738 billion bu. with a yield of 122.4 bu. per acre. In October, USDA estimated the crop at 10.706 billion bu. with a yield of 122 bu. per acre.
Soybeans: Informa estimates the crop at 2.925 billion bu., with a yield of 38.6 bu. per acre. In October, USDA estimated the crop at 2.860 billion bu. with a yield of 37.8 bu. per acre.
Cotton: Informa estimates the crop at 17.202 million bales, with a yield of 791 lbs. per acre. In October, USDA estimated the crop at 17.287 million bales with a yield of 795 lbs. per acre.
IS THE STOCK MARKET A PREDICTOR OF PRESIDENTIAL ELECTIONS?... One of the most popular "studies" indicating who will win the presidential election has to do with stock market performance. This "theory" states that if the overall movement in the stock market is up for the two months prior to the election, the incumbent party wins. If it's down for those two months, the challenger party wins. Since 1900, this indicator has been 90% accurate with only three misses -- 1956, 1968 and 2004. This year's performance suggests President Obama will win reelection.
SANDY'S IMPACTS COULD BE LONG-LASTING... Superstorm Sandy, which blasted the East Coast earlier this week, will go down as one of the most costly storms on record. For an economy that's struggling to grow, that's not a positive. Aside from the tragic personal loss of lives and property, the economic impact is the biggest potential negative.
Assessing the cost and economic impact: Total economic impact is likely to be in the $30 billion to $50 billion range when taking into account complete losses, including all insurance claims and lost production. That would put Sandy well in front of Hurricane Irene last year, but short of Hurricane Katrina that caused around $120 billion in damages in 2005. Keep in mind, the storm damage doesn't reduce gross domestic product (GDP) but lost production does. Estimates are that the area hit by Sandy accounts for nearly 25% of U.S. economic activity and the corridor between Washington D.C. and New York City alone amounts to about 15% of U.S. GDP. As a result, economic activity is likely to take a short-term hit in the final quarter of this year as the region works to get back up and running fully, although it won't kill the recovery. Longer-term, the recovery from Sandy is likely to have somewhat of a positive economic impact as reconstruction efforts fully take hold and as individual households eventually replace lost goods.
Energy impact already being felt: Oil companies along the East Coast shut down operations ahead of the storm. At the same time, consumer demand slumped as businesses closed and consumers were locked down. Once the storm passed, consumers started buying gas again, but there are concerns demand could be dampened in the weeks ahead. There are also questions on the supply side. Refineries are in the process of assessing damage and trying to get back up and running. But it will take time to get operations back to normal -- even if damage was minimal. As a result, there will be a limited supply of refined products available in a heavy usage region.
Ag impact should be limited: The overall impact to agriculture should be limited. Unlike Katrina in 2005, this storm will have little impact on grain transportation, especially grain exports. Very little U.S. grain is exported from the East Coast. And when we checked with the Port of Wilmington (North Carolina), they indicated aside from heavy rains and high winds, the port had avoided the "wrath of Sandy." Corn imports scheduled to arrive from South America into the port should be unaffected.
Consumer spending on meat undoubtedly slowed for several days as Sandy pushed through and "chop house" demand will also take a hit until things get back to "normal." That's a concern since the heavily populated East Coast is a key consumption region. But any impacts to meat demand should be relatively short-lived and fairly easily absorbed.