Economy Stuck In Low Gear|
According to the Bureau of Labor Statistics, 96,000 net new jobs were added in
August as the economy appears to be stuck in low gear, producing few new jobs
and stagnant paychecks. The economy has created just 1.8 million jobs in 2012
however, the numbers are not nearly enough to give a job to everyone who wants
to work. The decline in unemployment from 8.3% to 8.1% is due to a smaller labor
force, not an increase in jobs. Twelve million Americans are still looking for
work while another 7 million Americans that want a job, aren’t even looking.
Weekly earnings have reportedly fallen for two consecutive months and have risen
only 2% in 2012 so far, slightly faster than prices have risen. For Federal
Reserve Chairman Ben Bernanke, the weak economic growth means a reluctant
decision to employ another round of bond-buying by the Fed in an effort to give
the economy just a little more fuel. The decision by the Fed to buy more
government bonds - QE3 - from investors could come as early as next week. The
Federal Reserve policy committee said in August that it would act unless it saw
significant and sustainable acceleration in job growth which we have seen
neither, in the past few months. QE3 by the fed will provide only a slight help,
for the stalled economy. Fed Boss Bernanke would strongly prefer that Congress
and the White House agree on fiscal policies that would help the economy -
something that appears unimaginable, at least until after the election.
Jes Staley, chairman of JP Morgan (JPM) corporate and investment bank, said that
the division has been gaining market share and that the firm remains committed
to the universal banking model. Comments from Staley indicate he feels the IB
has never been in a stronger position in terms of client breadth, technology and
coordination with other JP Morgan businesses. Although summer trading remained
thin, activity in debt capital markets was strong, with fixed income, currencies
and commodities flow generated off the back of DCM activity. Staley said that
for every dollar of DCM issuance activity, JP Morgan frequently receives $3-$5
of FICC trading revenues. "Electronic equities trading, commodities execution,
international investment banking and international prime brokerage" were all
listed as areas JP Morgan is currently focused on expanding in. JP Morgan
remains committed to the universal banking model. Diversification helped JP
Morgan remain profitable throughout the financial crisis. Staley highlighted
that the investment bank firm has managed to keep 98% retention of its senior
management over the last three years.
On Friday morning, Google (GOOG) saw its shares cross the $700 mark for the
first time since December of 2007. The Web search giant is up more than 9% since
the first of 2012, underperforming the 14% gain seen by the S&P 500 in that time
frame. Since Google reported quarterly earnings on July 19 when the company
showed better-than-expected earnings on improvements in its core advertising
business, shares have climbed nearly 19%.
Chip-maker Intel (INTC) reported Q3 revenue will be lower than previously
expected, citing weaker-than-expected demand in a challenging macroeconomic
environment. The firm now expects revenue to be $13.2 billion, compared with its
previous expectation of revenue between $13.8 billion to $14.8 billion. In the
past few quarters demand for semiconductors has been shaky amid global economic
woes, weaker consumer spending and shortages of hard-disk drives following
flooding in Thailand. Broader economic worries have caught up with the Silicon
Valley heavyweight as worries have emerged that emerging markets and data-center
business could be slowing. Intel said on Friday they see customers reducing
inventory in the supply chain versus the normal growth in Q3 inventory and also
see softness in the enterprise PC market segment as well as a slowing emerging
market demand. Expectations for Q3 gross margin is around 62%, down from
previous expectation of around 63%. In July, Intel lowered its guidance for the
full year, saying "growth will be slower than we anticipated due to a more
challenging macroeconomic environment" and said its Q2 profit fell 4.3% as it
logged a jump in operating expenses, masking an increase in revenue.
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Sept 7, 2012