U.S. Economic News Week Ending March 4, 2010

Investors and world leaders continued to closely watch escalating unrest and violence in the Middle East. In economic news this week, more workers were hired in the United States, fewer new claims were made for unemployment benefits, and global manufacturing activity picked up in Europe, Asia, and the United States.

In commodities, oil prices rose above $103 per barrel and gold futures hit record levels, reaching $1,438 per ounce at one point. Stocks were volatile, and major market indices closed 1% to 2% up or down each day as investors reacted to the latest economic news. Bond yields dipped before recovering late in the week as Middle East tensions eased somewhat. Among global currencies, the euro rose after the European Central Bank confirmed that interest rate hikes were imminent in the coming months.

Global economic news

U.S. economy adds jobs; unemployment rate falls
The U.S. economy added 192,000 jobs in February, according to the nonfarms payroll report issued Friday by the U.S. Department of Labor. The unemployment rate fell to 8.9% from 9.0% in January. This was the first time the rate has been below 9.0% since April 2009. Job growth was widespread, with gains in manufacturing, construction, services, wholesale trade, and transportation and warehousing. Earlier in the week, Automatic Data Processing (ADP), a payroll services provider, reported that the number of U.S. private sector jobs rose by 217,000 in February.

Initial jobless claims fall in U.S.
The Labor Department said that first-time jobless claims by American workers continued their trend downward in the week ended February 26. The number of new claims filed has dropped in four of the past five weeks. First-time claims for unemployment benefits dropped by 20,000 to a seasonally adjusted 368,000. The four-week average now stands at 388,500 — its lowest level since July 2008.

Global manufacturing expands
Global manufacturing activity grew in February, based on higher readings on a number of indices. The Institute for Supply Management’s monthly index of U.S. manufacturing rose to 61.4 for the month, from 60.8 in January. That was its highest level since May 2004. The eurozone purchasing managers’ index (PMI) reached 59 in February, up from 57.3 in January, its highest level in 11 years, according to Markit, an economic data provider. China’s PMI fell to 52.2 in February from 52.9 in January. A reading of 50 or greater indicates an expansion of manufacturing activity. China’s reading was said to reflect its week-long Lunar New Year holiday rather than a real slowdown.

German job market improves
Germany’s labor market improved in February, with 52,000 fewer unemployed workers, according to the country’s Federal Labor Office. The jobless rate fell to 7.3% from 7.4%, its lowest level since 1999 when records were first kept.

Oil prices spike on more supply uncertainty
The threat of a widespread oil supply interruption continued as a result of ongoing unrest and violence in leading Middle East oil-exporting nations, including Libya, Oman, Iran, and Iraq. Oil futures traded above $103 per barrel on Friday, their highest price in two-and-a-half years. U.S. gasoline prices reflected higher global oil prices, with the average price per gallon of regular unleaded gasoline hitting $3.47 by week's end, up from $3.29 a week ago.

ECB issues warning on inflation
The European Central Bank (ECB) announced that it would likely raise interest rates in April and possibly again in July. Eurozone inflation reached 2.4% in February, a 28-month high and above the ECB’s 2% target inflation rate. While the eurozone economy might warrant raising interest rates, a tightening of monetary policy risks choking the flow of capital within the region’s weaker economies.

Global corporate news
Standard Chartered’s earnings rise 29%
Standard Chartered, a U.K.-based global lender, registered a 29% gain in its annual profit in 2010, largely on increased wholesale income and a 56% reduction in loan impairment charges.

Petrobras posts strong profit
Petrobras, a giant Brazilian energy firm, reported that its fourth-quarter profit rose 38% from a year earlier on higher oil prices and an increase in crude oil production. The company’s revenue rose 14% for the same time period.

Canadian banks increase profits
Three of Canada’s biggest banks, Bank of Montreal, Royal Bank of Canada, and Toronto-Dominion Bank, reported solid increases in fiscal first-quarter profits on reduced loan-loss provisions as credit quality improved along with operating performance.

Strong U.S. retail sales
U.S. retail sales were healthy in February, with numerous large retailers reporting solid consumer spending growth. High-end stores Saks and Nordstrom had particularly strong sales. Same-stores sales at Saks grew 15%, while Nordstrom reported a 7.3% growth in comparable-store sales. Macy’s, Kohl’s, and JCPenney also reported strong sales growth for February.

Bombardier lands two orders worth more than $14 billion
Bombardier announced two landmark deals this week. First, the Canadian global transportation manufacturer received its largest-ever order — worth up to $6.7 billion — for business jets from NetJets, a subsidiary of Warren Buffett’s Berkshire Hathaway. Then, Bombardier Aerospace, a subsidiary, said it had signed an $8 billion aircraft-leasing deal with the Industrial and Commercial Bank of China (ICBC) and ICBC Financial Leasing Co.

U.S. car sales accelerate
General Motors, Toyota, and Nissan each reported major increases in U.S. sales of cars and light trucks for February. All three benefited from buyer incentives. However, with year-over-year sales increases of 46%, 42%, and 32%, respectively, GM, Toyota, and Nissan all had reason to celebrate. Overall, the three automakers sold more than 993,000 cars and trucks in February, a 27% increase over February 2010.