Category Archives: Uncategorized

October Housing Starts and Permits

KEY DATA: Starts: +13.7%; 1-Familly: 5.3%; Multi-Family: 36.8%; Permits: +5.9%; 1-Family: +1.9%; Multi-Family: +13.9%

IN A NUTSHELL: “With home construction back on track, one of the softer segments of the economy is picking up steam.”

WHAT IT MEANS: Home construction had been in a funk for a number of months, but that seems to be changing. Indeed, residential investment, as it is called in the GDP report, restrained growth in the second and third quarters. However, builders have suddenly found reasons to put shovels in the ground. Housing starts soared to the second highest pace in over a decade in October. Much of the increase came from the ever-volatile multi-family segment, which surged by 37%. While the single-family component didn’t rise nearly as much, the gain was still quite good. Geographically, there were some discrepancies and oddities.   In the Midwest and South, all segments were up solid. But in the Northeast, single-family starts tanked but multi-family construction more than tripled. And in the Midwest, total activity decline as single-family starts fell sharply.

Looking outward, the rise in permit requests indicate that home construction should remain firm, though it is doubtful that future gains will look anything close to what we saw in October. Even with the surge in construction, the number of permits requested by not yet used still rose. Indeed, permit requests were slightly higher in October than starts. It is likely that housing will add to growth in the fourth quarter.

MARKETS AND FED POLICY IMPLICATIONS: I keep hearing from our learned members of Congress that we desperately need a tax cut because growth is terrible and we people are desperate for jobs. Either I am living in a parallel universe or they are just blowing smoke, but that is just not the case. This isn’t 2009. The economy is moving ahead solidly and as I constantly point out, the issue isn’t available jobs it’s qualified workers. But, of course, in Washington, letting facts get in the way of a good political speech would be tantamount to treason, so we will have to keep listening to the babble. Interestingly, since the tax cuts go largely to upper income households, who will not spend nearly as much of the after-tax income gains as lower and middle-income families, that could wind up being a benefit. The increase in consumer demand will be muted. And from reports coming out of meetings that administration officials have had with business leaders, not a whole lot of the tax cuts cuts will go to new investment. Paying down debt seems to be the usage of choice. I suspect that a lot of the increased profits will, as usual, be used to raise dividends, buy back stock and expand merger and acquisition efforts. So maybe my concerns about the economy picking up too much steam given the lack of workers is overblown. But think about this: The deficit will rise even more than expected if the retained taxes don’t go to new economic activity while at the same time, the Fed is shrinking its balance sheet. That seems to argue for rising supply, falling prices and increasing interest rates. That cannot be great for the economy or equities. Just a thought.

October Industrial Production and Import/Export Prices, November Philadelphia Fed Survey and Home Builders Index and Weekly Jobless Claims

KEY DATA: IP: +0.9%; Manufacturing” +1.3%/ Import Prices: +0.2%; Export Prices: 0%/ Philadelphia Fed (Manufacturing): -5.2 points/ NAHB: +2 points/ Claims: +10,000

IN A NUTSHELL: “With manufacturing surging, housing solid and inflation near target levels, it is clear the economy can withstand additional rate hikes.”

WHAT IT MEANS: While everyone seems to be focusing on the tax bill as it relates to business spending, I am more concerned that a major tax cut could create enough of a sugar high to cause inflation to accelerate. That could cause the Fed to move next year more often than expected. My worry is based on the already tight labor market and what looks like continued solid economic growth. Industrial production jumped in October led by surges in the vehicle, petroleum, chemicals, computers, apparel and furniture sectors. Put simply, most of manufacturing, whether it was durables or nondurables, was up sharply. This was a broad based increase that really does grab your attention.

Reinforcing the industrial production report was the Philadelphia Fed’s survey of manufacturers. Yes, the index did recede, but it is still high. More importantly, the components were strong as orders rose faster and hiring remained solid, though not as strong as it had been. Looking forward, confidence about not just future activity, but hiring and just about everything else, was up.

On the housing front, the National Association of Home Builders’ index increased to its second highest level in over twelve years. Only this year’s March index was higher. Builders seem to have regained their confidence, though I hope it is not irrational. I don’t think that will be the case. CoreLogic reported that home equity wealth reached its highest level in history. Homeowners have the ability to move, if they want to.

As for inflation, pressures ebbed a bit in October. Import prices rose but not significantly. There is pressure on in the petroleum and related sectors as well as metals. On the export side, farmers got a big gain in prices but that was just about it.

 Jobless claims were up last week, but the level remains extraordinarily low.

MARKETS AND FED POLICY IMPLICATIONS: The economy is in good shape. The issue is neither growth nor jobs. Growth is solid and firms cannot find workers. So you need to ask what will happen if the economy surges as a result of tax cuts being implemented. Where will the added production come from if firms cannot get the workers already and productivity is in the tank? Maybe inflation doesn’t accelerate, but being an economist, I still think that markets actually work. So remember the old saying: “Be careful what you wish for, you just may get it”. The Fed needs to normalize its balance sheet and interest rates and faster growth and inflation are just the tickets they need to do so as rapidly as they want to.

October Retail Sales, Consumer Prices and Real Income

KEY DATA: Sales: +0.2%; Less Vehicles: +0.1%/ CPI: +0.1%; Less Food and energy: +0.2%/ Real Earnings: -0.1%

IN A NUTSHELL: “Prices may not be rising sharply, but they are increasing enough to restrain purchasing power and household spending.”

WHAT IT MEANS: We are starting to get the first set of fourth quarter numbers and right now they are not anything to write home about. Retail sales rose modestly in October and much of the gain came from sales of vehicles. Until we know about the extent of the flood replacement purchases, the vehicle component has to be viewed with caution. Once the replacement process is over, demand could tumble. The spending report was a bit misleading. For some strange reason, sales on the Internet were actually down. Also, falling gasoline prices reduced sales in that component. Meanwhile, in addition to the strong vehicle demand, people spent a lot of money on clothing, sporting goods, health care and furniture. And, they ate like crazy as spending at restaurants and supermarkets jumped.

On the inflation front, consumer costs didn’t increase a whole lot in October. Declines in gasoline prices, clothing and new vehicles offset increases in shelter, medical and used vehicles prices. Food costs were down in almost every category, including cupcakes. The breadth of the decline was odd and needs to be watched. It could mean they will be up next month. Excluding food and energy, the so-called core index, household prices increase a little faster. Since October 2016, the overall Consumer Price Index is up 2.0% while the core rose 1.8%, both pretty much at the Fed’s target.

Despite the modest rise in prices, household spending power declined in October. Real earnings, which adjusts for inflation, fell as wages were flat. Over-the-year, they are up only 0.4%. Need I say it again? Yes. It is hard to sustain strong economic growth if households don’t have the money to spend and right now, they don’t. They are maintaining their consumption levels by reducing their savings pace and that is not good news for future growth.

MARKETS AND FED POLICY IMPLICATIONS: There simply is not enough information to determine if we will once again se a growth rate near or even above 3% in the fourth quarter. The consumer is going to have to do a lot better if growth is going to be strong in the final quarter of the year and there is little reason to be confident that will be the case. Wage gains are moribund, energy pressures continue to build and labor shortages point to modest job increases. The one good thing we have going is that there is now a worldwide expansion. Almost all regions of the global economy are actually in phase and growing. That should help exports. Businesses are likely to wait and see what the tax bill actually contains, especially since some of the tax breaks may be put off for a year. Investors are becoming more cautious about the tax plans as they keep changing. As for the Fed, there is every reason to think that another rate hike will occur at the December 12-13 meeting. The economy has enough strength that there is no reason to slow the normalization process.

September Industrial Production and Import and Export Prices

KEY DATA: IP: +0.3%; Manufacturing: +0.1%/ Import Prices: +0.7%; Fuel: +3.9%; Export Prices: +0.8%; Farm: -0.7%

IN A NUTSHELL: “Some say manufacturing is rebounding, but output is still lagging.”

WHAT IT MEANS: If you look at the surveys from the regional Federal Reserve banks and the national and local associations, you would think that manufacturing is booming. But according the Federal Reserve Board, output really is going nowhere. Industrial production rose solidly in September, led by a rebound in utilities and mining. But manufacturing production hardly budged. For the quarter, manufacturing output fell, not a sign of a strong sector, hurricanes notwithstanding. There were some really wide variations in activity. For example, the vehicle sector responded to the need to replace all those hurricane-soaked vehicles and assembly rates improved. But the rise wasn’t huge as a number of makers had excess inventory that they managed to unload. There were some really good increases in a variety of other durable goods industries, including machinery, electrical equipment and appliances, metals, computers and wood products. On the other hand, most categories in the nondurable segment slowed production. This included petroleum, chemicals, apparel and printing. That weakness almost totally offset the strength in durables and it cannot be blamed strictly on hurricanes.

On the inflation front, import prices surged in September led by a jump in energy costs. Let’s hear it for hurricanes that didn’t touch the rest of the world but led to price increases anyway. But the increase in the cost of foreign products was not just due to the spike in petroleum. Food prices soared and vehicle and capital goods costs moved upward, though modestly. On the export side, petroleum led the way but the wild swings in agricultural export prices continued. In September, they were in the down side of the yo-yo.

MARKETS AND FED POLICY IMPLICATIONS: The debate continues over whether the Fed will raise rates one more time this year, likely in December. I say think will and I hope to earn my second cheesesteak in two years. Different person, but hopefully same outcome. The economy is in decent shape and it looks like third quarter growth could come in somewhere around 2.5%. If it is less than that it was likely due to a swing in vehicle inventories as hurricane replacements were pretty high in September. It will be interesting to see what happens with wages in the two reports we will get before the December meeting. While Fed members, and most everyone else, are baffled by the modest rise in wages and tame inflation, it is beginning to look like there may be a bit of a wage break out starting. The GDP report, when coupled with what is likely to be seen as some modest acceleration in inflation should provide ample support for Janet Yellen to go out with a bang – or a rate hike. The increase would happen even if she is not reappointed, which looks doubtful. Fed Chairs usually only consider not participating at their very last meeting. That is probably January 30-31, 2018.

September Producer Prices, Weekly Jobless Claims and Fed Minutes

KEY DATA: PPI: +0.4%; Energy: +3.4%; Goods less Energy: +0.2%; Services: +0.4%/ Claims: -15,000

IN A NUTSHELL: “While the hurricane-driven energy price increase may fade, there still are some cost pressures building in a variety sectors of the economy.”

WHAT IT MEANS: If the Fed is to raise interest rates this year, it will have to defend the move by saying that inflation is on the path toward its target of 2%. Well, the members got some ammunition from the September Producer Price Index. Wholesale costs jumped, led by a surge in gasoline prices. Hurricane Harvey disrupted supply and that led to a rapid rise in prices. About half the increase has already been unwound. But there were other pressures outside energy. In particular, services prices were up in just about every major category except construction. Trade services, transportation and wholesaling all posted significant increases. On the goods side, the situation was mixed. Food prices were largely flat but a surge in crude food prices points to an increase in the future. Consumer durable goods prices, including vehicles, were up. Cleaning and polishing products were up while electronic components and accessories fell. Overall, though, finished goods costs rose moderately, enough to create an acceleration in the year-over-year gain, which is what the Fed watches.

The effects of the hurricanes are beginning to fade from the jobless claims data and the total fell sharply last week. It is now back down to where it was pre-hurricanes. The hurricanes hurt some professions but helped others. But going forward, it is clear that if you have building trades skills and you can move, the hurricane devastated areas have jobs.

The Fed released the “minutes”, actually a sanitized summary, of its September 19-20 FOMC meeting. The important takeaway for many was the intense debate over why inflation remains muted despite the low unemployment rate. There is uncertainty over what is driving inflation and therefore what level of unemployment can be sustained without triggering a sharp rise in prices. Nevertheless, there was a clear hint that the Committee was leaning toward another rate hike in December. The statement read: “…many participants thought that another increase in the target range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged.” While not everyone agreed, it appears that enough are behind moving in December that there is a decent probability it will happen.

MARKETS AND FED POLICY IMPLICATIONS: Inflation is not surging but it is also not fading. The report today shows enough broad based price increases that if the FOMC does want to move in December, it has a basis for doing so. Still, we have to see what comes of prices now that the temporary gasoline supply problems have dissipated. And as I always say, the path from wholesale to retail prices is not straight and often dead-ends.   So don’t assume that non-energy consumer prices will rise significantly faster anytime soon. As for investors, it’s the start of earnings season. While future inflation and potential rate hikes may sometime become important, I suspect that for now, it’s all about profits.

September Employment Report

KEY DATA: Payrolls: -33,000; Private Sector: -40,000; Revisions: -38,000; Restaurants: -105,000; Unemployment Rate: 4.2% (down 0.2 percentage point); Wages: +0.5%

IN A NUTSHELL: “The hurricanes  messed up an awful lot, including the economic data.”

WHAT IT MEANS: Yesterday I warned that the jobs number could be worse than expected and it was. Indeed, a decline was a surprise though not a shock. But the economy is not backpedaling. Really, did the restaurant sector collapse? Yes, they closed because of the hurricanes and some of them may never reopen, but most will be back up and running. Otherwise, the report was fairly normal. There were job increases in health care, transportation, construction, finance, insurance, professional services and government. Manufacturing employment eased, but this sector does bounce around a lot. And retail continued to shrink, but that was not a surprise. In other words, most of the data in the report point to nothing amiss in the labor market other than the hurricanes.

The unemployment rate declined sharply, but even here we have to sit back and wonder what happened. There were outside changes in most of the components of the unemployment number and that raises questions about whether the drop was overstated. The government indicated the hurricanes didn’t affect the rate, but I am not so sure.

Finally, there was a significant rise in the average hourly wage rate. I would like to say that we are finally seeing the tight labor market show up in wages, but I am not so sure. There was a large decline in low wage employment and that might have affected the average to the upside.

MARKETS AND FED POLICY IMPLICATIONS: Sometimes you have to just sit back and relax and this is one of those times. The decline in the number of jobs was a direct result of the hurricanes and next month we are likely to see things turn around, probably with a vengeance. Actually, this was a decent report. If you back out the weather-related issues, you probably get a number that is about trend. That implies the October increase could be above 300,000. As for the unemployment rate decline, that too needs to be viewed with some caution. The government indicated the number was not affected by the storms but the details of the report were way out of the ordinary. Basically, this report should be filed away as a wait and see what happens with the October numbers. And then you average them out. Will the market react to the worse than expected jobs number or better than expected unemployment rate? It shouldn’t. But what it should be concerned about is the wage gain, though that too may have been a creation of the temporary shut down of all those restaurants that forced a lot of lower paid workers off the payrolls. Otherwise, the best thing to say about this report is: Have a great weekend!

August Spending and Income and September Consumer Confidence

KEY DATA: Consumption: +0.1%; Disposable Income: +0.1%; Prices: +0.2%/ Confidence: -1.7 points

IN A NUTSHELL: “Sluggish consumer spending points to a weak third quarter growth number.”

WHAT IT MEANS: This week we received the final (for now) revision to third quarter GDP growth and the slight rise came from improved household consumption. It looks like the economy slowed sharply this quarter, in no small part because of a softening in consumer demand. Consumption ticked up in August, but when it was adjusted for inflation, it was actually down. Weakness in durable goods sales, basically motor vehicles, offset some increases in nondurables and services demand. The hurricanes were no helpful. But the uncertainty about consumers is not limited to the wrath of Mother Nature. Disposable personal income, while rising modestly, was also off when inflation was taken into account. It is hard to spend more when your purchasing power declines. Wage and salary growth pretty much disappeared and that does not bode well for future retail sales. Another warning sign is the savings rate, which edged downward again. Savings have declined five out of the last six months. On the inflation front, prices rose moderately overall but minimally when food and energy were excluded. The year-over-year increases in both the headline and core numbers are below 1.5%. Given the Fed’s target is 2%, there is a lot of room for prices to rise before the Fed has to worry about inflation.

Despite the chaos in Washington, the failure to reform the ACA and horrible hurricanes, consumer confidence remained pretty high in September. The University of Michigan’s Consumer Sentiment index did decline, but the level is strong. For most people, the hurricanes hit somewhere else and while there was concern for those who were hit by the storms, the impacts were not felt directly by most Americans. Thus, confidence did not tank.

MARKETS AND FED POLICY IMPLICATIONS: It looks like the economy fell back to its normal growth rate, or even lower, in the third quarter. We don’t have the September numbers, but given the hurricanes, it is likely that consumer spending will come in at half the 3.3% pace posted in the spring. But eyes are now turning to tax reform/tax cuts and the administration’s proposal has already come under intense fire since there are lots of winners and losers. That is always the case with any changes in policy. But the major issue is the impact on the deficit. Working backwards, the supporters have come up with a growth rate that implies the plan will pay for itself. If you believe that, I have both a Broadway show that I am producing and a bridge I am selling and you can have as much of each as you like. But it is not just bogus growth estimates that create risks to the plan. It provides significant tax breaks for upper income households, something the administration pledged not to do. By eliminating the state and local tax break, it creates the likelihood that upper-middle-income households will see their taxes rise not fall. And if the past is any example of how the money will be spent, don’t expect the repatriation of foreign earnings to lead to a lot of new capital spending. You can argue for or against all of the changes in the plan but they will create major disagreements. The one good thing is that the battle for tax reform/tax cuts has begun, though I suspect we will wind up with some cuts and not a lot of reform.

July Job Openings and August Small Business Index

KEY DATA: Openings: +54,000; Hiring: +69,000/ NFIB: +0.1 point

IN A NUTSHELL: “Small businesses remain optimistic and are hiring, even as the labor market tightens.”

WHAT IT MEANS: The August below-expectations jobs report was a disappointment to some but a reality check to others. The simple fact is that firms are hiring but are having massive problems finding workers in an ever-expanding economy. The Job Openings and Labor Turnover report, commonly called JOLTS, is one of the more closely watched releases that the government produces, especially by Fed Chair Yellen. The July report highlighted all the issues in the labor market. Hiring was solid, as we saw with the July jobs report. But more importantly, job openings reached their highest level on record. Firms cannot add workers fast enough to close the needs gap. The job openings rate, which is the number of openings as a percent of employment and openings, was up sharply over the year in a wide variety of industries. One of the problems facing firms is that workers are still pretty much locked into their current positions. The quit rate, which you would expect to rise in a tight labor market, ticked up but remained in the range it has been for the entire year. With companies unwilling to bid for workers from other firms, there is little reason to leave and that is limiting the availability of qualified workers.

Job gains should remain decent going forward as small business optimism is still quite high. The National Federation of Independent Business’ index edged up in August, led by a jump in the percentage of those that felt now is a good time to expand. To do that, firms are looking to invest more, which for small businesses is a strong sign of confidence. Firms would like to hire but labor quality remains a huge problem. Interestingly, while businesses are raising wages, expectations of future increases are falling. Maybe they think they have done enough. I suspect they will be disappointed.

MARKETS AND FED POLICY IMPLICATIONS: Until we start getting September numbers, the data will basically be good only for knowing how the condition of the economy going into the hurricanes. But the numbers tell us nothing about what we will see in the next six months. Indeed, it really makes no sense to react to these data. Keep in mind, Texas and Florida have the second and fourth highest state GDPs. Together, they account for about 14% of total U.S. GDP and employment. In other words, when they have problems, it has an impact on national economic activity. And their economies have taken a lickin’, though they will start tickin’ again soon. All we know right now is that going into the hurricanes, the economy was growing at a moderate pace and the labor markets were tight. After the initial downdraft in growth, the rebuilding process will hype spending. Think of all the houses, appliances, furniture, household products, motor vehicles, commercial and industrial buildings and so on have to be replaced. But at the same time, many businesses will never come back and many jobs will be lost permanently. But that would also free up a lot of workers to take other jobs, possibly easing the labor shortage in some areas. So as you can see, how this all shakes out is unclear, but it is likely to add to growth by the end of this year and well into the first half of next.

August Employment Report, Manufacturing Activity, Consumer Sentiment and July Construction

KEY DATA: Payrolls: +156,000, Revisions: -41,000; Unemployment Rate: 4.4% (up from 4.3%); wages: +0.1%/ ISM (Manufacturing): +2.5 points; Orders: -0.1 points/ Confidence: up 3.4 points/ Construction: -0.6%

IN A NUTSHELL: “The jobs report was not disappointing as the increases are now closer to the moderate growth we are seeing in the economy.”

WHAT IT MEANS: Since the July employment numbers were released, I have been saying I cannot figure out where all those workers are coming from if businesses are complaining that they cannot find qualified employees and job openings are at record highs. Well, it turns out that the government got a little carried away when estimating payroll increases for June and July and revised those numbers downward. BLS may have gotten it right in August. Yes, the number of new positions added was well below expectations, but it is right in line where it should be given the labor shortage and moderate growth pace. Indeed, the August increase may have been a little high the second biggest increase was in manufacturing, the vehicle sector in particular. Given the slowdown in sales, don’t be surprised if vehicle companies cut back on hiring in September. There weren’t any other sectors that added above-average jobs. As for the rise in the unemployment rate, it was minor, though minimal labor force growth is not a good sign. The participation rate was stable. Finally, wage growth remains minimal and troubling.

The manufacturing sector picked up steam in August. The Institute for Supply Management’s index rose solidly, led by strong hiring. That confirms the jobs increase reported in the August employment report. However, while production is booming, orders grew less rapidly and inventories soared, so we could see a softening in this sector going forward.

The University of Michigan’s Consumer Sentiment Index rose in August, confirming the increase reported by the Conference Board. Interestingly, respondents indicated that current conditions are softening, even if they are still raising their hopes about the future.

Construction slowed in July. Weakness in nonresidential activity more than offset a solid rise in housing. This is important because business investment in structures added to growth in the spring. That could turn around this quarter.

MARKETS AND FED POLICY IMPLICATIONS: Today’s employment data gets us closer to economic reality. The job numbers didn’t fit with other data, so the downward revisions were not surprising. The August growth rate is what we should be seeing and closer to what I expect going forward. That doesn’t mean the economy is slowing: It isn’t. It’s just that job gains now better reflect economic growth and the tightness in the labor market. This report is also more in line where the Fed expected, so it shouldn’t change any views. The FOMC members are more worried about wages than jobs and right now, compensation remain moribund. The next meeting September 19-20 and I don’t expect any rate hike, though we might get some indication when balance sheet reductions will start.

July Spending, Income and Pending Home Sales, August Layoffs and Weekly Jobless Claims

KEY DATA: Consumption: +0.3%; Disposable Income: +0.3%; Prices: +0.1%/ Pending Sales: -0.8%/ Layoffs: 33,825/ Claims: +1,000

IN A NUTSHELL: “It looks like the economy is sustaining the momentum created in the spring as consumers are still spending decently.”

WHAT IT MEANS: Can the economy keep it up? GDP expanded quite solidly in the second quarter, led by strong consumer spending and robust business investment. While the investment numbers are not yet out, it looks like the consumer is still hitting the stores and websites, though not at the pace we saw in the spring. Consumption rose moderately in July. When adjusted for price gains it was good but not that great even though inflation remains contained. Still, spending on both durable and nondurable goods was robust. It was just that demand for services was mediocre. Consumers, though, can maintain that decent pace. Disposable income continues to grow as wage and salary gains were strong for the third time in four months. The concern, though, is that the savings rate continues to decline, so how long people will keep up the spending pace is uncertain.

The roller coaster that is the housing market continues its up and down ride. The National Association of Realtors reported that pending home sales fell slightly in July. Declines were in three of the four regions, with only a small gain in the West. Over the year, there was an increase only in the Northeast. It looks like home sales will not pick up much, if at all, in the next couple of months.

Businesses continue to hold on to their workers tightly. Challenger, Gray and Christmas reported that layoff announcement did rise in August, both over the month and the year. But so far this year, planned payroll reductions are down over 26% compared to the first eight months of 2016. Retailers have announced the largest number of layoffs this year, but that is slowing. The services sector is also running well ahead of 2016 numbers. In contrast, the energy sector has cut its layoff announcements by 87%.

Weekly jobless claims rose minimally last week and remain near record lows.

MARKETS AND FED POLICY IMPLICATIONS: The expansion continues unabated, but it is beginning to look like we may not see growth at or above the 3% pace posted in the second quarter. Houston is going to create some noise in the data for quite a while. The metro area is so large that reductions in some sectors or increases in others can affect the monthly, seasonably adjusted data. The numbers don’t account for major natural catastrophes. So, it is really hard to know what third and fourth quarter growth will come in at. That said, the overall impact might not be large, as much of the rebuilding will occur over many months if not years. I had flood insurance but it still took many weeks to get just the first check after Sandy flooded the first floor. Some homes took years to be rebuilt. Imagine the situation in Houston where most people don’t have insurance. It could take a long time to get things done, even if Congress acts quickly. Thus, investors will have to parse the data over the next few months really carefully to separate out the temporary factors from the underlying trend. As for tomorrow’s jobs report, the expectations are that it will be a good one with about 175,000 new positions added and the unemployment rate remaining at 4.3%. I think that forecast is high and it will be closer to 150,000.