--- pms <laflame at aaahawk.com> wrote:
> OCC: 1st Quarter Derivatives Trading Rebounds From
> Tough 4th Quarter
Pam,
I just found this...a little more deailed report from the Quarterly Review.
As an aside note, the "Conference Board" reports underperformances in all the tech sectors and they see this as a sign that we'll be seeing lots of technology mergers "Says Fosler: 'Commodity players, diverse solutions companies, and small, high-risk new ventures are all eyeing each others' business models. Business services, which has become incredibly technology-intensive, is also part of this mix. It would not be surprising to see the technology sector sort itself out along the lines of the health care industry. The structure of what we think of today as the tech sector will change dramatically in the next few years.'
And now on to the Quarterly Report:
Growing consumer confidence and strengthening retail sales are among indications that a modest economic recovery with low inflation is under way, according to a Wake Forest University professor.
Contacts: Eric S. Whittington or Julie A. Palm (336) 758-5030 or (336) 758-4454 eric.whittington at mba.wfu.edu
WINSTON-SALEM, N.C. -- Growing consumer confidence and strengthening retail sales are among indications that a modest economic recovery with low inflation is under way, according to Wake Forest University professor Gary L. Shoesmith.
Real gross domestic product increased 5.8 percent during the first quarter, but 3.2 percent of that figure resulted from companies restocking inventories. Industrial production is on the upswing for the first time since late 2000. Production outstripped demand for U.S. products, with final sales (U.S. production sold) increasing only 2.6 percent.
Productivity gains and a longer workweek, rather than increased employment, accounted for an 8.6 percent increase in production. Manufacturing employment declined 6.8 percent in the first quarter. Shoesmith says that although losses in manufacturing employment are expected for several quarters after a recovery begins, the losses have been particularly severe in this business cycle.
Demand appears to be strengthening. Nondurable expenditures increased 8.4 percent in the first quarter, and personal consumption overall advanced at 3.5 percent. Consumer price inflation is at 1.2 percent, and housing gains continued with residential investment gaining 15.7 percent during the quarter.
Negative signs include an 8 percent drop in durable goods spending, a 5.7 percent decline in nonresidential investment and a 1.2 percent drag on GDP growth attributed to a growing trade deficit.
"Typically, the trade deficit narrows during recessions, but that has not been the case in this cycle," says Shoesmith, director of the Center for Economic Studies at Wake Forest's Babcock Graduate School of Management. "It's worrisome to think how large the trade deficit will become once U.S. spending strengthens later this year."
Shoesmith says housing and auto sales can't be expected to provide the boost they usually provide at the start of recoveries. Spending on durable goods has weakened, and Shoesmith sees little room for further improvement in residential investment.
"Overall, the data indicate that the U.S. economy is turning the corner, following a brief recession last year," Shoesmith says. "
-- Unless there is one or two more quarters of heavy inventory building, a gradual recovery is most likely."
United States: Another boost from inventory investment should provide 3.6 percent growth in real GDP in the second quarter, but GDP growth is forecast to slow after that. In all, 2.7 percent GDP growth is expected this year and 2.4 percent in 2003. Personal consumption is expected to taper off because of record levels of household debt.
Shoesmith says inflation should not pose a threat. Inflation dropped from 1.9 percent in the fourth quarter to 1.3 percent in the first quarter, and the forecast calls for 1.3 percent inflation this year and 1.7 percent in 2003. That is well below the 2.2 percent recorded for 2001.
The modest recovery and weak inflation threat should keep the Federal Reserve Board from raising interest rates until U.S. demand strengthens later this year. Treasury-bill rates are expected to remain below 2 percent this year and below 3 percent through the end of 2003.
Nonfarm job growth, which has been negative for the past four quarters, should begin seeing positive growth in the second half of 2002 and increase to roughly 2 percent by the end of 2003. Unemployment, which held steady at 5.6 percent in the first quarter, should increase to just over 6 percent during the second quarter and drop below 5 percent by year-end 2003.
Southeast U.S.: Poor job growth continues to plague the region, which suffered a 0.8 percent annualized drop in the first quarter and has seen a 0.9 percent decline over the past six quarters. During the first quarter, Georgia (-4.2 percent) and Alabama (-1.4 percent) had the largest losses in the region, which includes Florida, North Carolina, South Carolina, Tennessee, Virginia and West Virginia. Tennessee (1.9 percent) had the largest gain.
Employment numbers for the region are better than those from the previous downturn, when unemployment peaked at roughly 8 percent. This time, the jobless rate should stay below 6 percent.
Second-quarter job growth should be positive with gains increasing to near 2.5 percent by year-end 2003. On a yearly basis, a 0.5 percent decline is expected for 2002 with a 1.6 percent increase forecast for 2003. Florida should lead the way, followed by Tennessee. Georgia is expected to trail the other states in job growth, breaking a pattern from the 1990s, with a 2.7 percent decline this year and only 0.9 percent growth in 2003.
North Carolina: Job growth, which has alternated between positive and negative over the past seven quarters, increased only 0.1 percent in the first quarter following a 1.4 percent decline in the fourth quarter. The manufacturing and construction sectors continue to lose jobs, and job losses even occurred in the finance, insurance and real estate sector, which declined 3.7 percent for the quarter.
The state's 6.4 percent unemployment rate and its decline in real personal income now exceed the peaks reached during the previous business cycle. Job and income growth should recover gradually through 2003. Unemployment should begin to drop this summer. A 0.3 percent decline in employment is forecast for this year, followed by 1.3 percent job growth expected in 2003.
N.C. metropolitan areas: Jobless rates for the three largest areas are higher than those from the recession in the early 1990s. First-quarter unemployment was 6.2 percent in Charlotte, 6.1 percent in the Greensboro/Winston-Salem/High Point Triad, and 4.7 percent in Raleigh/Durham. Seasonally adjusted data indicate the downturns in Charlotte and the Triad are continuing but nearing bottom.
Modest recoveries are forecast to begin in Charlotte and the Triad in the next few months and modest growth is expected to continue in Raleigh/Durham. Unemployment should peak near current levels.
Southeast metropolitan areas: Each of the five areas-Atlanta, Birmingham, Greenville/Spartanburg, Nashville and Richmond-had 2001 unemployment rates revised upward. Greenville/Spartanburg had the biggest revision (up 0.6 percent to 4.6 percent), and Atlanta (up 0.1 percent to 3.5 percent) and Nashville (up 0.1 percent to 3.3 percent) had the smallest.
Atlanta, Greenville/Spartanburg and Nashville each had first-quarter increases in unemployment of at least 0.4 percent. Birmingham and Richmond saw small declines in unemployment. Modest job growth is forecast to begin in all five cities by the second half of this year.
For more information or to arrange an interview with Dr. Gary L. Shoesmith, please call Eric S. Whittington or Julie A. Palm at (336) 758-5030 or (336) 758-4454.
The Quarterly Review is available online at http://www.wfuces.org. The entire report and individual charts may be viewed and printed. Also available at the Web site is a state-of-the-art, menu-driven Southeast economic database. The database includes detailed national, regional, state and metropolitan area data on employment, average hourly earnings, housing permits and exports, plus leading and coincident indicators
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