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Over the past two days we have gotten some incremental data points on the US housing market, none of which leaves me convinced that a real turn in housing is near.  Regarding today’s Case-Shiller news, I’m not going to get too excited about a statistically insignificant data point.


Based on the Case-Shiller data, the worst of the housing market is over with home prices, as reflected by the 20-City Composite, rising in November for the sixth consecutive month (on a seasonally adjusted basis).  The S&P/Case-Shiller home-price index increased 0.2% from last month, after a 0.3% rise in October.  Year-over-year, the index was down 5.3% from November 2008; the smallest year-over-year decline in two years.


The fact that the worst for the housing market is in the rear view is not new news and has certainly been discounted by the 62% increase in the S&P 500 since March 9, 2009.


Our “HOUSING GONE WILD” post from yesterday discusses the decline in the December existing home sales number.  This falloff in home sales, combined with other factors, which we outline below, strengthens our conviction that job growth will be the lifeblood of any sustained “recovery” in housing.


Outside of recent demand driven by tax credits, there is clearly underlying softness in the housing market.  Though it may try, the government cannot afford to support the market in perpetuity. 






If aggregate demand is not sufficient, there could be significant excess capacity in the market.  Census data shows that household formation has been slowing meaningfully over the past number of years and we believe that 2010 will fall in line with that trend. 




In addition, there has been an increase in rental households in the United States.  Home ownership is likely to become less of an option in the future with access to capital tightening and the cost of it increasing.  The chart below illustrates the boost in rental households in the United States since 2005.  As a percentage of total households, rental properties are still not at 1999 levels (red line in chart). 


HOUSING – GOVERNMENT SUPPORT VS GRAVITY - rental units as   of total


Any change in the level of immigration into the U.S. would impact overall demand for houses and we have heard, anecdotally, from some restaurant companies that people are leaving as jobs disappear.  Specifically, in reference to regional QSR demand trends, CKR management stated, “So it's really a state-by-state issue and illegal immigrants leaving one state for another state will hurt the restaurant business in the state they leave, not because we can't employ them but, I mean, where do you think those guys eat? They are late farm laborers and construction workers and you've got severe unemployment in certain Western states which will impact June…”


Supporting CKR’s comment, the Brookings Institute recently reported that the number of arrests at the U.S.-Mexico border, which is an indication of illegal crossing activity, dropped by more than 23% in 2009 to a 34-year low point.  The article attributes the lower number to “precipitously declining economic opportunity combined with beefed-up enforcement.”




Building permits seem to be indicating a possible increase in construction going forward.  Should this come to pass, it could add further stress to an already fragile market that has been leaning on Uncle Sam’s crutch.  In addition, inventory growth in recent years will continue to burden the market (as illustrated in the second chart below).






While housing inventory growth has slowed, the tsunami of inventory that came online in the years before the crash has not been absorbed.  In addition, there is the unquantifiable SHADOW INVENTORY, which reflects those homes that are on the balance sheets of financial institutions.  Although we have seen a decline in inventory, mortgage delinquencies as a percentage of total loans continue to rise.




Consumer appetite is certainly not going to meet this supply with unemployment at 10% and credit card debt data indicating a consumer that is hunkering down (as shown below).  Complicating this fact further is our “RATE RUN-UP” theme.  We believe the Fed is behind the curve and that 30-year mortgage rates are going higher.  The simple math behind a median home price of $178,300 at a rate of 5.11% yields a monthly interest payment of $759; at 6%, the monthly payment is $892 (17% higher) and at 6.2%, the monthly payment is $921 (21% worse).


Increasing jobs is the only way to get the economy weaned off government life support.




Howard Penney

Managing Director


Political Winds

Last night Keith and I attended a fundraiser for Chris Dudley, who is running for the Republican nomination for governor of Oregon.  For us it was less about being politically partisan, but more about supporting friends and keeping our Hedgeyes on the political process.   While I was impressed with Chris last night, the more interesting point was the nature of his candidacy and its potential implications for additional races in midterm elections.  Chris is a Republican, but he is also the consummate non-politician.  He has never run for or held political office, though he has had successful careers in sports as an NBA basketball player, in business as a financial advisor, and in the non-profit world with his work supporting Type 1 Diabetes.


Time will tell whether Chris wins or is successful as a governor, but to the extent that candidates like Chris Dudley are increasingly successful it is likely a positive sign for the political process.  The electorate is clearly becoming disenfranchised with the career politician and voting for the party that they are “supposed to vote for”, as we saw with Scott Brown’s win in the Massachusetts Senate race.  While that win was primarily a vote against healthcare, it was also a vote against the said political establishment.  A former NBA player like Chris Dudley doesn’t necessarily represent a populist candidate, but he likely does represent what the electorate will be increasingly looking to support in this age of massive government distrust.


The next couple of days are a veritable Super Bowl of Politics and will provide us further insight into the current direction of the political winds in this country.  The major event will of course be President Obama’s State of the Union address tomorrow night.  As Keith wrote earlier this week, Obama needs a win.  While he likely won’t garner a major victory from this address, the speech will of course be an opportunity for him to set the tone for the upcoming year and potentially regain some momentum.  Over the last two days the Gallup poll has measured President Obama’s disapproval rating at 47%, which is the worst of his Presidency.  Most notable is how split his approval rating is among party lines.  According to a release yesterday from Gallup:


“The 65 percentage-point gap between Democrats' (88%) and Republicans' (23%) average job approval ratings for Barack Obama is easily the largest for any president in his first year in office, greatly exceeding the prior high of 52 points for Bill Clinton.”


Perversely a President Obama that continues on the current path, which is clearly disenfranchising both Independents and Republicans, will likely lose substantial ground for his party in the midterms, but will be good for the Buck Breakout.  This administration is more and more so being viewed as bad for the U.S. economy and by default the dollar. So the less power for the Obama administration, the better for the buck.


Earlier in the day tomorrow, both Hank Paulson and Tim Geithner will testify before the House Oversight Committee.  The focus will clearly be on Secretary Geithner and his perceived favoritism to the Piggy Bankers of Wall Street. The anti-banking sentiment, whether the profits created from the bailout are the bankers fault or not, is clearly popular politically.  As a result, both Geithner and Paulson should expect some political grandstanding in Congress tomorrow.  Ultimately, President Obama will be forced to decide how long he is going to support Geithner and how long he will accept his Treasury Secretary as a drag on his approval rating. 


The other key event is of course the ongoing Federal Reserve’s two-day monetary policy meeting, which ends tomorrow.  To some extent this meeting will take a back seat to the ongoing controversy surrounding whether Chairman Bernanke will be reconfirmed.  His term expires this Sunday, and Senate Majority Leader Harry Reid has indicated that Bernanke’s confirmation vote for a second term could come either Thursday or Friday.  While it seems that Bernanke will be confirmed, he is, much like Timothy Geithner, coming to represent the jobless recovery that benefitted the banks, but not the masses. (Currently job seekers outnumber job openings by a six to one margin.)


President Obama has an economic team that has a long history of working with the financial sector, and has implemented policy as if there were a part of the sector.  While President Obama is now backtracking and trying to aggressively regulate the banks, this too is receiving mixed reviews.  Last night Chris Dudley was asked about the President’s new proposed banking regulations and his response was basically that voters will see through this intention. In effect, “you can’t regulate banks after they have paid you back.”  He has a good point-- the opportunity to regulate, or re-regulate, was a year ago, when the U.S. government was bailing out the banking system and the system was indebted to the government.  This, ironically, was exactly what Paul Volcker recommended.  Of course, Obama wasn’t listening to him then.  Over the next few days, we will all be listening and watching.



Daryl G. Jones
Managing Director


The Freight Cost Tailwind Fade

The Freight Cost Tailwind Fade


It’s likely we’ll be observing a change in tone this earnings season, as management teams discuss the puts and takes on gross margin guidance.  While the majority of gross margin improvement has been the result of prudent inventory management and historically low clearance levels, freight costs have also been on the decline over this past year.  For a glimpse into the early freight headwind, we take a look at Celadon Group, a large domestic truckload carrier that services a wide range of companies including Wal-Mart, Procter & Gamble, and Phillip Morris.


Celadon Group’s reported results suggest freight costs are on the rise.  Representing a wide range of industries,  Celadon transports tobacco, consumer goods, automotive parts, home products and fixtures, lawn tractors and assorted equipment, light bulbs, and various engine parts with in the US, Canada, and Mexico.  The steady rise in fuel costs as a percent of revenue since Celadon’s Q3 ‘09 (calendar qtr Q1 ‘09) and the sequential increase in fuel costs since October ‘09 suggests that the freight tailwind is drawing to a close.  Retailers and wholesalers are likely to use rising freight costs as one reason to temper gross margin expectations in the coming year.  In the absence of accelerating top line growth, this could be a topic that continues to build and adds pressure to robust earnings growth expectations.  With so much focus on prices at the pump and the negative impact on the consumer wallet, it might be time to shift focus to the cost of goods.


The Freight Cost Tailwind Fade - 1


The Freight Cost Tailwind Fade - 2



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China macro variables drive an incredibly high R Square with VIP volume in Macau.



It makes sense that as a discretionary consumer source, VIP revenue in Macau would be tied to Chinese macro variables.  However, we didn’t expect this level of correlation.  We regressed VIP Rolling Chip (volume) against a number of China macro variables.  The most powerful and statistically significant variables were GDP and interest rates.  This regression produced an R Square of 0.97 and both variables were statistically significant.  In other words, y-o-y change in GDP and sequential interest rate moves explained 97% of the change in VIP volume.  The correlations can be seen in the chart below.




The strong relationship between these variables is disconcerting considering the China view of our Hedgeye macro team.  They have been calling a sequential slowdown in GDP and liquidity for China.  It is becoming increasingly apparent that they may be right.  So far we haven’t seen a slowdown in Macau’s VIP segment.  Through January 20th, Macau gaming revenues were reportedly up 67% for the month.  That rate of growth will slow in the last two weeks of the month since Chinese New Year fell in January (26th to 28th) of 2009 but will occur in mid-Feb this year.


To be clear, the Mass business is also tied to the China macro variables as can be seen in the chart below.  However, the betas driving VIP are much larger and statistically more significant.  So who is at risk?  In terms of companies whose stocks are traded on US exchanges MPEL and WYNN are most exposed in that order and LVS while still generating a significant portion of its revenues VIP, is more of a Mass operator particularly in terms of profits. 



Risk Management Time: SP500 Levels, Refreshed...

The thick red line in the chart below highlights the most important duration (the intermediate term TREND) in our 3 duration model: TRADE, TREND, and TAIL.


As a reminder, our risk management framework doesn’t try to solve for every investor’s individual duration. However, it does seek to absorb the stresses considered by 3 large constituencies of investors across the following durations: short term, intermediate term, and long term.


Currently, our risk management levels are as follows:


1. TRADE (immediate term, 3 weeks or less) = 1125

2. TREND (intermediate term, 3 months or more) = 1096

3. TAIL (long term, 3 years or less) = 969


The red line at 1096 is exactly that – a stop sign (or a  wait and watch line). A breakout above that line puts the TRADE line back in play up at 1125. A breakdown below it puts the TAIL line of risk in play (-11.6% lower).


Obviously you can drive a truck through this range of , but that’s the point. That’s why the VIX is breaking out from both a TRADE and a TREND perspective right now. The next move, above or below 1096, is going to be big.


If 1096 doesn’t hold (on a closing basis), first short term line of support between 1096 and 969 is the dotted green line down at 1076.



Keith R. McCullough
Chief Executive Officer


Risk Management Time: SP500 Levels, Refreshed...  - spkm


R3: Aerobics Revisited


January 26, 2009


By now, anyone ranging from a casual observer to an industry expert is at least aware of the latest trend in athletic footwear- The Toning Category.  Call it a fad, hype, or just flat out ridiculous.  However, the data supports a picture of a robust and growing trend.  Even with increased competition in the space, both Skechers and Reebok continue to show substantial growth. 





By now, anyone ranging from a casual observer to an industry expert is at least aware of the latest trend in athletic footwear- The Toning Category.  Call it a fad, hype, or just flat out ridiculous.  However, the data supports a picture of a robust and growing trend.  Even with increased competition in the space, both Skechers and Reebok continue to show substantial growth. 


With limited sales data given the infancy of the product category (which was essentially launched in early Summer ’09), the trajectory makes this one of the more successful footwear launches since Crocs became the fastest footwear brand to reach $1 billion.   While much of the focus has been on SKX given its first-mover advantage at retail, the success of the Reebok equivalent “EasyTone” is notable.  There is no question Reebok has suffered major contraction in the U.S since it was acquired by Adidas in 2005.  However, we wonder if this current momentum can be used to spark a reinvention of the brand?  After all, Reebok made its initial mark in the aerobics category and this trend certainly seems similar.  Does a women’s focused athletic brand make some sense?  Yes, for sure.  But we can’t help but remind investors that there hasn’t been a successful women’s athletic brand… ever. 


Take a look at the charts below:


R3: Aerobics Revisited - Shape Ups and EasyTones


R3: Aerobics Revisited - Shape Ups 2


R3: Aerobics Revisited - Easy Tones 2


R3: Aerobics Revisited - ADI Reebok Tree EasyTones 1 10


Eric Levine

Zach Brown




  • Despite the economy and any lessons that may have been learned from a Manhattan real estate bubble, retailers are flocking to Times Square to open new flagship locations. The latest addition to the former Virgin Megastore in Times Square is Forever 21, with speculation that the fast fashion retailer is opening a 90,000 square foot store. Disney, M.A.C., and Swarovski will all be neighbors at the old record-store location.
  • Given that Shopper Events LLC is likely to pick up the majority of the 10,000 product samplers laid off by Sam’s Club, it’s interesting to note the power of the in-store sample. According to independent research, a Wal-Mart customer is 15% likelier than an average U.S consumer to be influenced by sampling events. In Wal-Mart Stores alone, 2.8 million samples are given each week.
  • For the first time since 1992, annual coupon usage is set to increase with annual distribution hitting all time highs. According to Inmar, a transaction settlement provider for retailers, 3.3 billion packaged goods coupons were redeemed in 2009, up 27% from 2008. The average face value of such coupons was $1.44.




Parham Joins Columbia - Susan Parham has joined Columbia Sportswear Co. as vice president of global apparel, accessories and equipment. She succeeds Mark Koppes, who has left the firm, and reports to Mick McCormick, executive vice president of global sales and marketing. Parham was the founder of Lessons Learned, a consulting firm covering disciplines from design to sales, where her clients included Columbia, Nike Inc., Lucy Activewear Inc., Liz Claiborne Inc. and Jos. A. Bank Clothiers Inc. <wwd.com>


Target promotes a technology executive - Target Corp. has promoted Beth Jacob from Target technology services senior vice president and chief information officer to executive vice president and CIO. Jacob oversees Target’s technology service team, which supports Target.com and other e-commerce initiatives. Jacob’s team includes a group working with the retailer’s Target.com team to develop Target’s own e-commerce platform, which is set to launch by the start of the holiday shopping season in 2011. Target announced last year it would move off of Amazon.com Inc.’s e-commerce platform. Amazon, which has provided Target’s e-commerce platform for several years, will continue to support Target.com until the new Target site is launched. Jacob, previously, has held a number of positions within Target, including vice president of guest operations and vice president of guest contact centers.  <internetretailer.com>


Overstock.com expands international sales to 32 more countries - Overstock.com Inc. announced today that it has expanded its international service to 32 new countries, including Bolivia, Costa Rica and Pakistan. The e-retailer now sells to shoppers in 91 countries. International shoppers enter the same URL as domestic customers to shop on the site. Overstock employs geolocation technology to recognize where shoppers are coming from and displays prices in local currency. Prices automatically adjust to the most current exchange rates, Overstock says. The functionality is provided by the FiftyOne Global Ecommerce service from E4X Inc.  <internetretailer.com>


Jo-Ann Stores promotes its chief operating officer to president - Fabric and craft specialty retailer Jo-Ann Stores Inc. has named its chief operating officer, Travis Smith, the company’s new president. Smith will remain chief operating officer and continue to oversee marketing, merchandising and inventory operations for the retailer, which sells through stores and through Joann.com. He will also supervise the company’s information technology.“The promotion of Travis acknowledges the outstanding business results our company has achieved under his inspired leadership,” said CEO Darrell Webb. Webb will remain CEO and chairman of the board of directors at Jo-Ann. Smith, who was named chief operating officer last February, was previously Jo-Ann’s executive vice president of merchandising and marketing.  <internetretailer.com>


Cabela’s puts web and catalog channels under a new chief marketer - Cabela’s Inc., a multichannel retailer of hunting, fishing and camping gear, has promoted senior vice president of merchandising and marketing Patrick Snyder to executive vice president and chief marketing officer. Snyder will be the first executive to consolidate responsibility for the retailer’s catalog and web operations, the company says. Snyder is among six executives promoted last week in a move designed to grow the retailer’s direct-to-consumer channel as well as improve overall multichannel operations, CEO Tommy Millner says.  <internetretailer.com>


Revitalized SharperImage.com hires a marketing chief from Brookstone - SharperImage.com, which relaunched its e-commerce site in October following the 2008 bankruptcy of Sharper Image Corp., has hired another executive from Brookstone Inc. as it ramps up its marketing plans. Steve August will be senior vice president and chief marketing officer for SharperImage.com, overseeing all direct marketing efforts, including through the web, catalogs, affiliates, portals and direct customer promotions. He will also be responsible for customer analytics and database modeling.  <internetretailer.com>


1-800 Contacts names a new marketing chief - Online contact lens e-retailer 1-800 Contacts Inc., which sells online through 1800Contacts.com, has named Joan Blackwood as senior vice president and chief marketing officer. Before joining 1800Contacts, Blackwood was chief marketing officer for Monster.com, an online job listing service. Prior to Monster.com, Blackwood directed marketing for business software company Computer Associates.  <internetretailer.com>


Consumer Web Site Firm Eyes IPO - Everyday Health Inc., which operates more than two dozen consumer-oriented health content Web sites, has filed a Form S-1 with the Securities and Exchange Commission to conduct an initial public offering of stock. The Brooklyn-based company, which recently changed its name from Waterfront Media Inc., has experienced strong revenue growth and heavy losses since inception in 2002. It hopes to raise up to $100 million before expenses from the IPO, with unspecified net proceeds going to the vendor and selling private shareholders. The number of shares being offered and the expected price range has not been determined. Managers of the IPO include Goldman Sachs & Co., J.P. Morgan Securities Inc., Jefferies & Company Inc. and Needham & Company LLC. The company's portfolio of Web sites includes EverydayHealth.com, RevolutionHealth.com, Drugstore.com, CarePages.com, and WhatToExpect.com, among others. The sites combined have 38 million registered consumers and attract an average of 25 million unique visitors a month. Revenues primarily come from advertising, sponsorships, and the sale and licensing of content. <healthdatamanagement.com>


CVC Venture Pays $773 Million to Buy Matahari Department Store  - CVC Capital Partners Ltd.’s Indonesia venture paid 7.2 trillion rupiah ($773 million) to buy the department store unit of PT Matahari Putra Prima, the country’s biggest retailer. Jakarta-based Matahari Putra sold its 90.76 percent stake in PT Matahari Department Store to Meadow Asia Company Ltd., a venture it established with U.K. buyout firm CVC Capital, Benjamin Mailool, president director of Matahari Putra, told reporters in Jakarta yesterday. The retailer plans to buy a 20 percent stake in Meadow, with an option to purchase an additional 10 percent, Mailool said. The CVC venture gains a department-store operator with at least 27 locations in Asia’s third most populous nation, according to Matahari Putra’s Web site. Retail sales growth in Indonesia, Southeast Asia’s biggest economy, accelerated to 33.9 percent in November, the fastest pace in two years.  <bloomberg.com>


Lotte to Acquire Buy the Way for $236 Million - Lotte Group, the operator of 7- Eleven outlets in South Korea, agreed to acquire convenience- store chain Buy the Way from private-equity fund Unitas Capital for 274 billion won ($236 million). Korea Seven Co., more than 50 percent owned by Lotte Shopping Co., said in a regulatory filing today that the acquisition will “strengthen business competence.” Korea Seven will increase its stores by 68 percent as it gains a chain that generated revenue of about 610 billion won last year in Asia’s fourth-largest economy. Retail sales growth in South Korea, where store operators are buying rivals to expand, accelerated to 12.2 percent in November, the fastest in more than a year. <bloomberg.com>


Forever 21 Launches Larger Format - Forever 21 has opened its first department store-style location in an effort to strengthen its customer base and provide more choices. The 85,000-square-foot unit, a former Mervyns space, is in the Macerich-owned Los Cerritos Center in Cerritos, Calif., about 20 miles from downtown Los Angeles. Forever 21 executives said the “emporium” format that launched on Friday permits a larger selection in categories such as lingerie, swimwear, shoes and plus-size apparel, than the fast-fashion chain is able to accommodate in its average stores of about 40,000 square feet. “The new department store concept offers our customers a greater assortment of value merchandise,” Forever 21 founder Don Chang said. “In this difficult economy, we’re happy to be able to offer much more affordable fashion-forward apparel.” Chief operating officer Larry Meyer said the new concept would help the chain appeal to customers over age 24, a demographic that represents more than one-third of Forever 21’s customers, with 45 percent falling between 18 to 24 and 20 percent under 18. Most, but not all, of the larger locations will get the new design, depending on store location and market.  <wwd.com>


The Walking Co. Looks to Close 40 More Stores - The Walking Company is seeking court approval to close 40 additional stores. The retailer filed for bankruptcy in early December with a plan to close 90 of its original 210 stores immediately. A U.S. bankruptcy judge in California last week set a court hearing for Feb. 16 for the company to discuss "post holiday" store closings, according to Reuters. According to a court order filed last week, the company was given approval to begin "holiday" or "soft closing" procedures at those "underperforming" stores during the holiday shopping period beginning Dec. 18.The company said the 40 additional stores it is now seeking to close were "either unprofitable or only marginally profitable." The closing of those 40 stores will bring its store count to 130. <sportsonesource.com>


Wall Street Bonus Babies Could Boost Retail - President Obama might become “visibly angry” when outsized Wall Street bonuses come up, but retailers catering to the well-heeled in New York and other financial centers have a somewhat different reaction — something more like “ka-ching.” Setting aside the propriety of billions of dollars in bonuses to bank executives after the near collapse of the global financial system, the payouts could help luxury retailers. Bonuses can account for 90 percent of a Wall Street titan’s annual take-home pay and should start hitting personal bank accounts in time to boost March sales. Andrew Mitchell-Namdar, co-owner and vice president of marketing at Mitchells/Richards/Marshs, based in Westport, Conn., said, “The bonuses help in two ways — the actual bonus, but then psychologically it also impacts up or down depending on what the bonus is. We are very linked to Wall Street; we can see the trends in our business.” Mitchell-Namdar is optimistic that a strong bonus season bodes well for spring and that customers, particularly men who have curtailed spending, will begin to replenish their wardrobes.  <wwd.com>


China to Lift Luxury Growth - China should help the luxury goods sector bounce back to growth in 2010 after its annus horribilis, but a return to the glory days of the last decade is unlikely, according to a new HSBC report on the sector. “Our analysis is that despite China’s boom and the non-recurrence of the 2009 de-stocking impacts, 2010 will show only decent mid to high single-digit organic growth for the sector – in line with the long term average of 7 percent – and not the mid-teens hyper-growth experienced from 2004 to mid 2008,” HSBC analysts Erwan Rambourg and Antoine Belge wrote. Women, and lower-priced brands and product categories, are likely to become key drivers of the luxury goods market in China, which until now has been sustained mainly by business gift purchasing by men, they said.  <wwd.com>


Gallup Economic Weekly: Self-Reported Spending Declines - Consumer spending down last week more than 20% from the prior week and from a year ago - As the Dow Jones average plunged more than 400 points last week, consumers pulled back, with self-reported spending falling 24% from the prior week and 27% from the same week a year ago. This breaks the positive early January trend that saw spending running slightly higher than last year's comparables. At the same time, economic confidence was about the same as the prior week and Gallup's Job Creation Index showed that hiring remained essentially unchanged.

R3: Aerobics Revisited - G1

What Happened (Week Ending Jan. 24)

  • Consumer Spending plummeted last week to the lowest weekly average Gallup has found since it began measuring consumer spending in January 2008. Self-reported daily spending in stores, restaurants, gas stations, and online averaged $52 -- down 24% from the prior week and down 27% from the same week a year ago. This marks the first time in 2010 that a full week's spending has failed to match its year-ago comparable. It now seems likely that January 2010 spending may simply match the January 2009 average of $64 per day -- reflecting a continuation of what turned out to be something of a "new normal" in spending for most of last year.
  • Economic Confidence was essentially unchanged last week, as Gallup's Economic Confidence Index was at -28 -- virtually the same as the -29 of the prior week. Thirty-six percent of Americans said the economy is "getting better" while 58% said it is "getting worse." At the same time, 45% rated the economy "poor" and 11% rated it "excellent" or "good." Economic confidence is currently slightly worse than it was on average during December 2009 and much more positive than it was a year ago.
  • Job Creation as reflected by U.S. workers' reports of their own employers' hiring/firing activities improved slightly last week, as Gallup's Job Creation Index was at 0, compared to -2 the prior week. Still, hiring remains weak, with 24% of employees reporting their companies are hiring -- essentially the same as the prior week (23%) and a year ago (24%). As has been the case during recent months, the slight improvement from last week as well as the more pronounced improvement from a year ago is the result of fewer workers (24%) saying their companies are letting people go. Right now, job-market conditions are no different than they were on average during December 2009 (24% hiring and 24% letting go).

R3: Aerobics Revisited - G2

Gallup's economic data provide little positive news as the president prepares for his State of the Union address and the FOMC meets this week. Last week's self-reported consumer spending results are somewhat troubling. A modest decline was to be expected because last week was a non-paycheck week, but the extent of the drop fully offset the slight spending gains recorded earlier this month, relative to last year's comparables. While this could be a one-week event related to the plunge in the stock market or something else, it merits careful monitoring in the days ahead. Regardless, right now consumers don't seem to be in the mood to spend more than last year's reduced -- new normal -- levels. <gallup.com>

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