March 28, 2024

Strategies: Economic Data Galore, but No Certainty

ROBERT HEILBRONER, the author and economist, was often asked where interest rates, the stock market and the economy were heading.

He would say he had no idea, though few non-economists believed him. As he wrote in The New Yorker in 1991, people thought he was hoarding the inside dope so he could make a killing on his own.

Alas, it wasn’t so. He really couldn’t foresee the future of financial markets, or of wages and prices, or of economic production — and he was sure that no one else could, either. Financial and economic forecasting was more art than science, he said. Yet there was a voracious demand for it.

But why? At least Mr. Heilbroner could answer that question. “The human psyche can tolerate a great deal of prospective misery,” he wrote, “but it cannot bear the thought that the future is beyond all power of anticipation.”

Two decades later, financial and economic forecasting has advanced technologically. Vast quantities of data are being analyzed and repackaged in inventive ways. Yet even the Federal Reserve has no certainty about where we are heading, notwithstanding its monumental and largely successful campaign to bolster the value of financial assets, from homes to stocks and bonds.

Is the economy slowing? Is the stock market’s epic rally preparing for a big fall? Are interest rates rising or falling?

There is a torrent of fresh numbers, but they form an ambiguous pattern.

Consider the employment outlook, perhaps the most crucial issue for working people and for the economy’s health. The Labor Department’s report on April 5 was discouraging at best. It showed that American employers added only 88,000 jobs last month, versus 268,000 in February.

That was the slowest pace since June, less than half the number that economists had expected. And the unemployment rate stood at 7.6 percent, shockingly high for a recovery that is nearly four years old. The rate would be even higher if not for the unusually large numbers of working-age people who have dropped out of the job market. There is very little to cheer about here.

On Thursday, the Labor Department issued a happier report. Initial jobless claims dropped by 42,000, to a seasonally adjusted rate of 346,000 in the week ended April 6, the biggest decline since November, and better than economists had predicted. Job losses may be moderating, even if job creation is too slow to put many people back to work.

There’s more. The effects of the federal government’s budget sequestration — $85 billion in spending cuts — are just beginning to be felt. It’s not clear whether there will be a big multiplier effect, amplifying unemployment and sapping growth, as Washington tightens the spigot and government spending shrinks nationwide.

The Fed, which has a mandate to promote “maximum employment,” hasn’t made up its mind about the state of the current labor market. At its last meeting, the Federal Open Market Committee said it was “not yet confident” that the Fed’s low-interest, expansionary monetary policy had ensured an improving outlook for jobs. And the policy makers worried about the risks of financial storms in Europe and elsewhere. That’s drawn from the minutes of the Fed meeting, which were inadvertently released on Tuesday afternoon, a day early, to a small group of bankers and others in an embarrassing breach of protocol. On Wednesday morning, after the general public finally got the news, the stock market resumed its long rally, with major indexes reaching new highs.

That may be because the Fed’s uncertainty about the economy’s strength suggests that it will keep adding fuel to financial markets. Its policies appear to have “supported gains in asset prices and encouraged the flow of credit to households and businesses,” the minutes said.

In fact, that old Wall Street mantra, “Don’t fight the Fed,” has generally been a good guide to financial markets, if not the rest of the economy, since the bull market in stocks began in 2009.

But the minutes also suggested that the Fed was worrying more about the risk of continuing its policies. In a close reading of the text, David Rosenberg, the chief economist and strategist at Gluskin Sheff in Toronto, found that the word “risk” appeared 27 times in the new minutes, compared with eight in December and five in October.

Yet Wall Street isn’t acting as though it expects the party to end soon. Perhaps that’s because another bank with deep pockets, the Bank of Japan, has started a new asset-buying spree of its own.

“Now that the Fed has another central bank joining them, watch out!” said Joseph Carson, director of global economic research at AllianceBernstein. “What happens when they all run out of assets to buy?” He noted that the Bank of Japan said it would buy about $600 billion of bonds and other assets in each of the next two years — roughly doubling the size of its balance sheet. That bank is focused on reviving Japan’s economy, but borders are porous and money flows are global.

Already, rising asset values have restored total household net worth in the United States, which took a beating during the financial crisis, Mr. Carson said. After peaking at $67.4 trillion  in 2007, household net worth dropped to $51.4 trillion in 2009, according to Fed figures. But he estimates that it reached $68 trillion  in the first quarter this year.

That’s great news for those with substantial financial assets.

“It’s fair to say that people in the upper-income brackets, who have the financial assets, have recovered much more rapidly,” Mr. Carson said. “Prices of financial assets have been rising rapidly. Wages have not. Job creation has not.” People in less exalted income brackets are still struggling.

That helps explain why the recovery has been so uneven. And, despite the conspicuous efforts of the central banks, it helps explain why the economy’s prospects are so uncertain.

Article source: http://www.nytimes.com/2013/04/14/your-money/economic-data-galore-but-no-certainty.html?partner=rss&emc=rss

For Travel and Tourism, Hiring Is on the Rise, Cautiously

The industry — which includes hotels, rental cars, airlines and entertainment — shed jobs quickly as the economy spiraled downward. But in the last year or so, travel businesses have begun to hire again, albeit slowly and cautiously.

“Clearly, the travel and tourism industry suffered pretty heavily during the downturn,” said Adrian Cooper, chief executive of Oxford Economics, a London-based economic forecasting consultant with offices in New York. “Now we’re seeing an improvement in jobs in travel and tourism. It’s one of the healthiest sectors in the United States, and down the supply chain. There is still some ways to go, getting back to the peak in 2007.”

But, he added, “we see it outpace other sectors.”

One beneficiary has been Maria Sutherland, a graduate of the Fashion Institute of Technology, who has lost two jobs in the retail fashion business in the last two years. “I needed something where I was going to be secure,” Ms. Sutherland, 23, said.

So in September, after losing her second job when a retail store closed, she applied for the job of “insider” at the W Hotel in Union Square, to help guests secure hard-to-get restaurant reservations or theater tickets. In early December, she got good news. “I was ecstatic,” she said.

In the first half of 2011, the travel industry added 16,000 jobs a month, on average, though that slowed to an average 2,000 new jobs a month from July to November, said David Huether, senior vice president for economics and research for the U.S. Travel Association. Total employment reached a low of 7.3 million jobs in December 2009, and since then the travel and tourism industry has gained 224,000 jobs.

Two factors drive travel jobs, Mr. Huether said. International travelers to the United States support one of every eight travel jobs, while domestic travel supports the rest.

Even with the early signs of a recovery in the industry, said Henry H. Harteveldt, co-founder of Atmosphere Research Group, an airline and travel industry analyst based in San Francisco, “it’s been a very tentative recovery marked by a lot of financial and organizational discipline” by employers.

As to the travelers themselves, “travel is very opportunistic,” he said. “It’s discretionary. ‘I am going to keep a very tight grip on my wallet,’ is what people are saying.”

Bjorn Hanson, divisional dean of the Tisch Center for Hospitality, Tourism and Sports Management at New York University, offered a similar assessment of the hotel industry. “It’s a recovery but not an impressive recovery,” he said.

Putting the situation in perspective, occupancy for 2009 was 54.6 percent, according to Smith Travel Research, almost the lowest since the Depression. (The lowest was 53.4 percent in 1971.) Occupancy for 2011 was 59.8 percent and is projected to climb to 61 percent in 2012, Smith Travel Research said. Employment in the airline industry suffered, too, in the weak economy. The Bureau of Transportation Statistics, part of the Transportation Department, calculated 28 consecutive months of decreases in full-time employment for airlines, leading up to November 2010. Finally, in December 2010, employment began to improve.

Cruise capacity has also been growing, and is projected to grow 5 percent from 2011 to 2012, Mr. Harteveldt said.

The health of the travel industry affects related businesses, Mr. Cooper of Oxford Economics said, noting that the “supply chain to the travel industry is quite long.” Demand for air travel, for instance, affects not only airlines but also plane and parts construction and jet fuel.

Wages vary but even at entry level tend to be higher than minimum wage. Randy Pullen, president of Wage Watch, based in Scottsdale, Ariz., said there were “not many of those” minimum-wage jobs in the travel and hospitality industry. Even housekeepers, he said, make more than minimum wage, and tend to make more in cities like New York, Chicago, San Francisco, Washington and Seattle. In Arizona, they may make $10 plus tips, whereas in New York, it is $10 to $12. A bellman can make minimum wage plus tips for a total of $35,000, Mr. Pullen said.

Hotels have also been able to take advantage of the downturn, said Joseph McInerney, president and chief executive of the American Hotel and Lodging Association, by hiring people with a higher level of education and sophistication, like those with bachelor’s degrees from Cornell School of Hotel Administration or Florida International’s hospitality and tourism school.

The prognosis for 2012 is “very positive,” Mr. McInerney said. Job seekers may not be able to get their dream job initially but can work their way up, he said.

Sharae Martin, 21, started work last Thursday at the new Greater Cleveland Aquarium. “It’s very exciting to me because to me it feels like I am getting my independence back,” Ms. Martin said.

She said she was looking for a job in customer service when she heard that the new aquarium was hiring.

Though her goal is to become a pharmacist, for now she is happy to be working. “Now that I have a job, I’m secure,” she said. “I feel very good about my position in life right now.”

Article source: http://feeds.nytimes.com/click.phdo?i=9d68541d0d1d71ac3b3d00760f9ce99f