October 16, 2019

Stocks Lower After Disappointing Data

Stocks on Wall Street were lower on Wednesday after weak readings on service-sector growth and private-sector employment.

The Standard Poor’s 500-stock index was down 0.1 percent, the Dow Jones industrial average was 0.7 percent lower, and the Nasdaq composite index slid 1.1 percent in afternoon trading. The S.P. 500 had been near its record level of 1,576.09 points for the last several sessions.

Investors had expected market movements to be modest ahead of the release on Friday of the closely watched nonfarm payrolls report for March, with few major trading catalysts before then.

The latest ADP National Employment Report showed 158,000 private sector jobs were added in March, and the Institute for Supply Management said its services index fell to 54.4 last month.

“People aren’t worried about employment compared to the overall macro outlook, and they have a general idea that the economy is improving,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. “That should allow us to hold firm.”

While data has largely been positive and helped to propel the equity market in the first quarter, a few disappointments have made investors cautious. “Some data has indicated softening, but things should remain quiet until Friday,” Mr. Kaufman said.

In company news, Zynga surged 9 percent said it would begin offering poker and casino-style games in Britain in partnership with Bwin. party Digital Entertainment.

ConAgra Foods fell 0.7 percent. The company reported third-quarter earnings that fell 57 percent even as revenue grew.

Monsanto rose 1.6 percent after reporting earnings that beat expectations and raising its full-year profit forecast.

Verizon Communications ruled out a full takeover of Vodafone, turning the focus yet again to whether the two telecommunication giants can do a deal over their Verizon Wireless joint venture. New York-listed shares of Vodafone fell 2.9 percent, while Verizon was off 0.4 percent.

Issues in the euro zone will continue to be in focus a day after Cyprus concluded a bailout deal. The plan, which still requires ratification, would mean the country receives a 10 billion euro loan, and that it has until 2018 to carry out measures to shore up its finances. The country’s finance minister resigned after concluding the deal.

While investors have tended to use any market decline as a buying opportunity, the situation in Cyprus has been a major source of market uncertainty in recent weeks. European markets were flat to slightly lower in afternoon trading Wednesday.

Wall Street stocks rose on Tuesday, lifted by health care stocks, after a government decision on payment rates. Strong factory orders data also added to the positive tone.

Article source: http://www.nytimes.com/2013/04/04/business/economy/daily-stock-market-activity.html?partner=rss&emc=rss

Economix: More Evidence That Supply Matters


Casey B. Mulligan is an economics professor at the University of Chicago.

The supply of various types of workers has increased during the recession, continuing an earlier trend. That such trends continue to be associated with trends for employment contradicts the Keynesian claim that supply suddenly stops mattering during recessions and “liquidity traps.”

Today’s Economist

Perspectives from expert contributors.

A number of bloggers have pointed out that employment in Texas has been rising and has almost reached prerecession levels. Paul Krugman’s explanation is that the supply of people available and willing to work has been increasing in Texas, continuing a previous trend.

One example of that supply is the inflow of immigrants from nearby Mexico; another is the migration of Americans seeking cheaper housing. I might quibble about the details, but I agree that supply trends are crucial for understanding what has happened in Texas.

In previous posts I have pointed out that national employment per capita actually increased among the elderly during the recession. I, and other researchers, concluded that elderly employment deviated so much from the general population because of changes in elderly labor supply.

In reaction to my post, Dean Baker attributed the elderly increase during the recession to a previous trend. Because the previous trend was itself the result of supply, Dr. Baker’s explanation of the recession is essentially a supply increase, too.

So we all agree that in at least two cases labor supply increased during the recession, and in each case the result was more jobs for the affected groups, or at least fewer job losses than in the general population.

Recession-era supply episodes like these are important to identify, because they can prove or reject Keynesians’ fundamental assertion (so far unproven) that supply does not matter during a recession or a “liquidity trap” such as we’ve experienced since the recession began.

Consider, hypothetically, an immigration trend that continued even after the recession. In my view, the market would create jobs for many, but not all, of the immigrants and would continue to do so after the recession.

In the Keynesian view, immigration might create jobs before the recession, but could not create them once the recession began because “what’s limiting employment now is lack of demand for the things workers produce,” Professor Krugman wrote. “Their incentives to seek work are, for now, irrelevant.”

In the Keynesian view, all that extra supply does during the recession is add to unemployment rather than adding to employment. In other words, supply trends normally affect employment, but Keynesians assert that they cease to affect employment during a recession or liquidity trap.

The chart below shows monthly employment (left scale) and unemployment (right scale) in Texas since 2007. Despite the fact that our nation is in a liquidity trap (near-zero interest rates on Treasury bills, the results of the extra supply in Texas since 2009 have been to increase employment much more than increase unemployment.

Data From The Federal Reserve Bank of St. Louis

Or consider that more recent cohorts have found themselves in careers that involve less manual labor, producing a increasing number of people reaching age 65 and still willing and able to continue their work. In my view, elderly employment would rise and might even be rising enough to more than offset a demand reduction during a recession.

In the Keynesian view, all that extra supply does during the recession is add to unemployment rather than adding to employment.

When it comes to analyzing specific events during the recession, fiscal stimulus advocates often take the common sense approach that labor supply affects employment. But when it comes to making promises about the anticipated results of a large fiscal stimulus, they insist, without proof, that supply doesn’t matter.

Article source: http://feeds.nytimes.com/click.phdo?i=0f6248eb9c3abca3f58e3f21658d153e