I am seeing accounts that exports out of Japan and China are seriously declining so by extension it might make sense that some production is returning to the US. This blip has been called the “re-industrialization” of America, but mostly it is about a zero sum game with Japan who has an extremely overvalued currency, and labor cost and demographic issues. The US does have cheap labor now, but if any of the currency or labor costs variables change there goes the advantage. I have also reported on auto channel inventory stuffing. There has also been demand pulled forward because of the bonus depreciation on equipment. The situation is far too much in flux for firms to invest much into a US industrial revival.
There is a social/commercialized network bubble underway, and apparently hiring is going on there. Here we are asked to believe people spend most of their time online talking about what they bought and ate at the mall and thus ad spending can be cut. Meanwhile sectors like newspapers are dying on the vine and to the detriment of real information which has become Murdochized. It is a sad commentary when real critical news has to be picked up by Aljazeera and Russia Times. In this great interview with the former, Dylan Ratigan and Buddy Roemer discuss the whys as it relates to politics and governance.
But I digress, as on the other hand up to 150,000 bank layoffs are getting underway this year. Included in this are reduced bonuses and head counts on Wall Street, and those have inflated salaries. AMR is laying off 15,000. There is also a drilling downturn getting underway in the formerly hot gas patch.
But the bottom line comes from stepping back and looking through the lens of the last four months, using the government fiscal year to date (October to now) , which incorporates XMAS hiring. Lee Adler noted a surge in January which is now fading. In using this data in the past, anytime you get something spiky it will usually have to do with YoY timing or an outlier. Charles Biderman at Trim Tabs sees nothing here. The four month wages withheld data shows very little improvement either, which to me casts serious doubt at least on the quality of any job improvement.
Per the Daily Treasury Statement, so far in the current fiscal year total withholding is 618.5 bn vs 616.7 bn YoY, hardly an employment boom. Corporate taxes collected are 74.5 bn vs 68.9 bn. If you are wondering how corporations do so well, their tax level is scrapping along the lowest to GDP in forty years. It seems that an” unexpected” $100 billion hole has appeared in corporate tax revenues caused by the aforementioned bonus equipment depreciation. [NYT] If we have such a great economy wouldn’t be nice if taxes picked up a few degrees? Instead total taxes collected fiscal year to date is 726.6 bn vs 715.0 bn YoY, about a 1 1/2% increase. Still the CBO is still looking for a 14.7% increase in revenue, due any time from outer space apparently. Unless the payroll tax cut is dropped, at this run rate federal tax revenue is going to fall far short of the lofty projection for FY 2012.

Since I wrote my piece on natural gas (the details are here) , we have received a lot more clarity about the sector. As advertised we are now seeing the effects of the CHK cutback announcement. There was a very substantial drop of 32 in one week. CHK is the big marginal player and this is very likely to continue. What it means is that as we approach the cooling season we should start to see the effects on production. Remember that shale gas well production is very front loaded, meaning a well drill this year is far more productive than one drilled in 2009-2010 or even 2011. The key will be on coal, and not surprisingly the Appalachian producers are reporting cutbacks. I’d like to see 2.80 or lower stick for a month or so on the October futures to push even more use into NG and away from coal.

Yesterday was the lowest non-holiday trading volume in a decade.
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