Economy Watch

Let me start this off with a thank you.

This marks the last entry of the Economy Watch blog, and I'd like to thank all of its readers. That includes those who only recently began reading to those who have been with me since I launched the blog in September 2008, when it seemed like the world was melting down.

You may have noticed the big overhaul of The Post's online business coverage, which we launched a couple of weeks ago, and which you can see here. The fresh look reflects The Post's new business news partnership with Bloomberg, which we hope will give Post readers a comprehensive report on business news.

The budget struggles of newspapers are no longer news. The Post simply cannot afford to hire enough reporters and editors to cover everything business readers want to know, from the commodities markets to the steel industry to options trading to overseas exchanges, and on and on.

With this partnership, The Post business staff will continue to cover what it covers better than any other organization: the intersection of economics and policy, or Wall Street and Washington. That means The Post will report on the Treasury Department, the Federal Reserve Board, tech policy, corporate lobbying, the works. For the rest, we'll lean on Bloomberg.

Part of this package is the brand-new Political Economy blog, which you can see here. Think of it as Economy Watch on Red Bull and HGH.

I'll write for the Political Economy blog, but I'll be one of many voices, as most of my colleagues will contribute, as well. The aim is to provide you with a fast-breaking, comprehensive report on the day's financial and economic news. Several voices are better than one.

If you've set up Economy Watch on your RSS feed, you will now be automatically directed to Political Economy.

I will continue to tweet on my Twitter account, theticker, which you can see here.

As for me, this has been a terrific nearly two years and an unparalleled education. When my former boss interrupted my Colorado vacation in September 2008 -- the weekend Fannie Mae and Freddie Mac were taken over by the government -- and told me that I was going to start writing a breaking economic news blog, well, I'm not ashamed to tell you that I had never heard of a collateralized debt obligation, or CDO.

But that all changed quickly. In two years, this blog has covered the bailout, the stimulus, cash-for-clunkers, an administration change, soaring unemployment, soaring deficits, the European debt contagion, mark-to-market accounting, stock market circuit breakers and lots and lots and LOTS of data, which I love.

I have never been a pelts-on-the-belt journalist. I have no delusions that I'm a cop. There's no one whom I want to nail to any wall. I like to figure things out and explain them as simply and powerfully as possible. This blog -- which sought to decipher the highly complex workings of the economy -- suited me perfectly.

Here are a few of my favorite posts:

By Howard Schneider
U.S. exports jumped more than 2 percent in May. But a surge in imports widened the country's trade deficit -- disappointing the effort to even out global trade flows.

The latest U.S. trade figures showed American businesses sold $152.3 billion of goods and services overseas in May, $3.5 billion more than in April.

Imports increased 2.9 percent to $194.5 billion.

The Obama administration is pushing to boost exports as a way to create jobs, and the increase was welcome news after a disappointing decline in April.

The overall widening of the country's trade deficit, however, showed how difficult it will be to rebalance the global economy so that the United States does not consume far more than it produces.

The U.S. trade deficit expanded in May to its highest level in 18 months, rising 4.8 percent to $42.3 billion, the U.S. Commerce Department reported Tuesday.

The monthly trade deficit with China alone jumped $3 billion, to $22 billion, a figure that manufacturing groups said showed that a focus on exports alone was insufficient.

The deficit represents "wealth and jobs heading overseas," said Scott Paul, executive director of the Alliance for American Manufacturing.

The trade deficit also represents a drag on overall economic growth at a time when the Federal Reserve and other analysts worry that the country's economic recovery is slowing.

By Steven Bernard
Stocks got a modest lift Monday from a fresh round of corporate dealmaking as investors await the start of earnings season. The Dow Jones industrial average rose about 2 points. The small gain comes after the Dow posted its best week since July 2009.

Major indexes rose modestly in early trading after insurance broker Aon Corp. said it will buy human resources company Hewitt Associates for $4.9 billion in cash and stock. Acquisitions are often taken as a positive sign that companies are more confident about their future business and willing to spend cash being held in reserve.

Meanwhile, Playboy Enterprises Inc. founder Hugh Hefner is offering to buy the remaining outstanding stock of the company to take it private in a deal that values the media company at $185 million.

And beauty products seller Avon Products Inc. agreed to buy Silpada Designs for at least $650 million as it tries to expand its jewelry business.

The small gains come as investors prepare for the start of earnings season. Until last week, stocks had been sliding on signs that the economy is not growing nearly as fast as economists and investors had hoped. Earnings over the next few weeks will provide insight into whether sluggish retail sales, waning consumer confidence and high unemployment have actually hurt businesses’ profits.

In morning trading, the Dow Jones industrial average rose 1.81, or less than 0.1 percent, to 10,201.36. The Standard & Poor’s 500 index rose 0.58, or 0.1 percent, to 1,078.54, while the Nasdaq composite index rose 12.72, or 0.6 percent, to 2,209.17.

Even with the surge, the Dow is still down 9 percent from its high of the year reached in late April.
Associated Press

UPDATED at 12:21 p.m. with impact of automakers:

The number of new jobless claims filed last week dropped by 21,000 to 454,000, the lowest number in eight weeks.

Even more promising, the number of continuing claims dropped by 224,000 to 4.4 million.

The four-week moving average of new unemployment claims, which smooths out week-to-week volatility, dropped by 1,250 to 466,000.

Note, however, that this is just a first pass at these data. We'll take a closer look at the context later today to try to figure out whether the raw numbers are as encouraging as they look or whether there are reasons for the drop in new claims that may speak to larger economic problems.

UPDATE: One of the reasons that fewer people applied for unemployment last week was U.S. automakers. The Big Three are not shutting down production as much as they typically do in July. So those workers are still in jobs.

Economists say that the economy cannot start meaningful new job creation until the number of new weekly jobless claims gets down into the low 400,000s and stays there. The weekly number has refused to budge past the mid-400s,000s.

The national unemployment rate in June was 9.5 percent. The number is down from 9.7 percent the previous month, but mostly because so many people left the labor force, not necessarily because more people got jobs.

We'll see how the markets respond to the jobs data when they open in less than an hour and find out whether Wall Street can put together a three-day rally.

UPDATED at 11:47 a.m.:

Stocks are trying to hold onto their momentum as mid-day trading draws near, but it's a fight. All three major indices are off their highs of the day and have been trending downward since shortly after opening.

The Dow is up .35 percent.

The S&P 500 is up .11 percent.

The tech-heavy Nasdaq is turned negative, and is down .11 percent.

Stocks open up in mild rally

10:40 a.m.: Stocks opened in a mild rally this morning and will try to make the first three-day winning streak in weeks.

The Dow is up 0.82 percent.

The broader S&P 500 is up 0.73 percent.

The tech-heavy Nasdaq is up 0.77 percent.

Stocks were helped by this morning's better-than-expected new jobless claims report, which showed the first substantial drop in weeks.

Traders are anticipating a strong earnings season, but retailers reported mixed June results this morning.

Costco was up, but based on international sales. Target was up modestly but missed Wall Street expectations. Limited Brands and Macy's, however, reported solid revenue gains.

The big winner this morning was Abercrombie & Fitch, which beat expectations.

Here's me talking about the recent market swoon, private-sector unemployment and other fun topics.

Stocks staged their first back-to-back winning days since mid-June, after starting off slowly but then picked up strength and staged a day-long rally of the sort we haven't seen in a while.

The Dow rose 274 points, breaking back up through the 10,000 level, closing up 2.8 percent at 10,018.28. All 30 Dow stocks finished in the green.

The broader S&P 500 closed up 3.1 percent at 1,060.27. The Dow picked up 274 points today.

The tech-heavy Nasdaq closed up 3.1 percent at 2,159.47.

Financials and materials led the rally today. Financials in the S&P 500 rose 4.4 percent today. One day after mini-rally prompted by bargain-hunters, traders seemed to be buying on anticipation of positive coming earnings. Financial services holding company State Street led the rally when it forecast second-quarter earnings that exceeded expectations.

The last time stocks had back-to-back winning days was June 17-18.

The Dow is now up 2.5 percent for July but down 3.9 percent for the year.

Oil was up 3.5 percent at $74.51 per barrel. Gold is back down under $1,200 per ounce.

UPDATED at 2:49 p.m.:

Well, today's little bargain-hunting rally looks like it had enough steam to last until, oh, about noon. Since then, it's been all downhill as the buyers have gone home.

Stocks dipped briefly negative after 2 p.m. before recovering slightly and are now dancing around the flat line. This underscores the idea that today's opening was driven by bargain-hunters, not by underlying fundamentals.

The Dow is up .12 percent.

The broader S&P 500 is up .18 percent.

The tech-heavy Nasdaq is up .03 percent.

Stocks give up some opening gains, remain in green

12:56 p.m.: Stocks have given up some of their earlier gains but remain in positive territory, as bargain-hunters look for value.

The Dow is up .65 percent.

The broader S&P 500 is up .74 percent.

The tech-heavy Nasdaq is up .62 percent.

Stocks rebound after last week's sell-off

11:12 a.m.: Stocks are rallying 90 minutes into the trading day, posting their biggest gains in nearly one month, as investors and traders search for bargains produced by last week's downturn.

The Dow is up 1.5 percent and back up above the 9800 level.

The S&P 500 is up 1.7 percent.

The Nasdaq 1.9 percent.

European markets are strongly positive with less than 30 minutes to go before closing.

Some of the bargains being snapped up today are last week's big losers, including lots of heavy-industry/growth-oriented names, such as Caterpillar and Alcoa.

Do remember: Stocks crashed through their "support levels" last week, meaning the floors over which they had traded for some months. So today's rally -- so far -- is really just a few steps up from the basement and not quite back to the first floor, is one way to think about it.

In other economic news out this morning, the Institute for Supply Manufacturers' June index for activity in the service sector came in slightly lower than expected, but not by a lot.

I wrote this piece in Sunday's paper, in which I wrapped up a lot of dismal economic data from last week and noted that most of the wobbly economic recovery we've had so far has come from various government stimuli, which will run out at some point, or have to be redoubled, raising our deficit and debt. Either way, not a pretty picture.

But a couple of alert readers latched onto something I wrote toward the bottom of the article, where I commented on this Paul Krugman piece discussing the Long Depression that began in 1873.

I wrote:

"The fastest that information and capital could move in this sprawling nation in 1873 was about 80 mph -- the top speed of a steam locomotive. When bad times hit back then, they tended to settle in for a good, long time."

If I had been smarter, I would have written:

"Despite the fact that the first money transfer by telegraph had occurred two years earlier, the fastest that information and capital could move to most people in this sprawling nation in 1873 was about 80 mph -- the top speed of a steam locomotive. When bad times hit back then, they tended to settle in for a good, long time."

But I didn't. My alert readers pointed out that, in 1873, there were several dozen telegraph companies and, in 1871, Western Union sent its first money transfer via telegrah.

So, fair enough. That's the advantage of having readers smarter than you are. (And a symptom of evidently forgetting much of what I learned in my history of science and technology classes in college.)

But consider this: Train robberies were rampant in the late 19th century. Jesse James committed a train robbery in Iowa in 1873. Butch Cassidy's gang robbed a Wyoming train in 1899.

Why did outlaws rob trains? As another famous robber, Willie Sutton, once said, "Because that's where the money is." He was speaking of banks, but you get the point.

By 1900, train robberies had dropped off substantially for numerous reasons, including better security. But a big reason was the prevalence, by then, of wire transfers of money around the U.S. Less actual currency was being physically transferred.

These days, we're used to fast uptake of new technology -- consider the DVR and cellphones. But that wasn't always the case. When I discussed the Long Depression in Sunday's piece, I was thinking about its impact on regular folks in 1873 -- think of the Minnesota farmer or Savannah shopkeeper. And not all of them had access to the cutting-edge business technology of the day. For many of them, their fortunes rose and fell on the rails, not the telegraph wire.

All that being said, this sort of back-and-forth with my readers is exactly the sort of thing that makes this blog better, so I appreciate it.

As we do every month, let's unpack the data buried in today's June jobs report from the Labor Department's Bureau of Labor Statistics: