Market Update — July 3rd

A few numbers and thoughts that I read this week…

The ISM Numbers (and Construction Numbers)

U.S. manufacturing.  According to the ISM, the U.S. manufacturing sector contracted in June for the first time since July 2009.  The ISM’s manufacturing purchasing managers’ index dropped to 49.7 last month from 53.5 in May. A reading above 50 indicates expanding activity.  Economists had expected 52.0.

The biggest drop was in new orders.  The decline in the ISM was led by the biggest one-month drop in new orders since October 2001. The new-orders index now stands at 47.8%, a level that’s extremely rare outside of recessions.

Manufacturing is still important.  Manufacturing accounts for approximately 19% of the economy’s gross output and approximately 9% of employment.

Manufacturing had been strong.  The manufacturing sector has been the most robust part of the economy coming out of the recession, but that momentum has now been lost.

Positive number for construction.  Spending on construction projects grew in May to its highest level in nearly two-and-half years, pushed by increased home building and other private-sector spending.  Construction spending increased by 0.9% in May to a seasonally adjusted annual rate of $830.01 billion. It was the highest level since December 2009.

Europe

Record unemployment.  The unemployment rate in the eurozone’s 17 nations rose to a record 11.1% in May, the highest level since the euro launched as a common currency in 1999.  In the broader 27 nations that make up the European Union, the unemployment rate remained at 10.3% — the same as in May.

The pain in Spain.  Roughly 25 million people were unemployed in the EU in May. Spain alone is home to more than a fifth, or about 5.7 million of those unemployed workers.  Spain’s unemployment rate is 24.6% — the highest in the region.

European manufacturing.  Manufacturing activity has been contracting for 11 straight months in the region, according to Markit’s Purchasing Managers’ Index. At 45.4 in the second quarter, the PMI was at its lowest reading since 2009.

The U.S. and Politics

Get ready for the pain.  Alan Greenspan was on CNBC and said, “The one thing that I think we have to recognize is starting from where we are at the moment, there is no way to resolve this issue without some pain.” He said, “There is no set of policies which can prevent the type of consequences of the imbalances we currently have.”

This is what bipartisan looks like?  A few months ago, the House of Representatives voted on Bowles-Simpson (to reduce our deficit and debt).  The vote was 328-38, AGAINST it.  Twenty-two of the supporters were Democrats and 16 were Republicans.

Young voters are Democratic.  Today’s voters under the age of 30 favor Democrats over Republicans by more than 14 percentage points.  Voters under the age of 30 were evenly divided between the two parties in the 1980s.

I remember a politician was being brought around my office (back when I was very young) and he said something to the effect of, “show me a young person who does not vote Democratic and I’ll show you a person with no heart; show me an old person who does not vote Republican and I’ll show you a person with no money.”  This was a takeoff of a Churchill quote (which was a bit more ugly…).

But the REALLY young voters aren’t as Democratic.  The 18 – 24 crowd isn’t as loving toward President Obama as the 25 – 30 crowd.  The youngsters still favor President Obama, but not by as much as the slightly older crowd.  The very young crowd is having a particularly difficult time finding jobs and that may explain their unhappiness. For 18 – 19 year-olds, the unemployment rate was 23.5%.  For those 20 – 24, the rate drops to 12.9%.

A lot of undecided voters.  Approximately 30% of the 18 – 29 crowd is undecided.

Old vs. young.  The federal government spends more than seven times as much on someone 65 or older as it does on a child. Even after you include state and local spending on public schools, total spending per person on children is less than half that for the elderly.

Slightly more support for the Affordable Care Act.  Among all registered voters, support for the law rose to 48 percent in the online survey conducted after Thursday’s ruling, up from 43 percent before the court decision. Opposition slipped to 52 percent from 57 percent.

Independents still oppose the new law.  Thirty-eight percent of independents supported the healthcare overhaul. That was up from 27 percent days before the justices’ ruling. Opposition among independents was 62 percent, versus 73 percent earlier.

Repeal is still a big desire.  In a new poll, 53 percent of registered voters said they were more likely to vote for their member of Congress if he were running on a platform calling for repeal, up from 46 percent before the ruling.

Repeal is bringing in money.  On Friday, Romney’s campaign said the former Massachusetts governor raised $4.6 million in the 24 hours following the Supreme Court’s decision.

Happy 4^th of July!

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