Job Markets

The national labor markets in August were horrible. Employers shed a grand total of 316,000 jobs. Furthermore net private-sector W-2 job growth was very weak (24,000) and overall W-2 employment declined. The only real bright spots in August were (1) a big decline in government payroll employment, (2) continued strength in the healthcare sector, and (3) unabated wage growth.

Economic Growth

According to the Institute for Supply Management the country's services sector grew in August for the 53rd consecutive month. Services account for roughly 80 percent of all economic activity. The services sector growth rate in August was identical to the growth rate postd in July. The manufacturing sector also grew in August.

According to the U.S. Federal Reserve the economy grew in August in 10 of 12 Districts. Real GDP growth this quarter is on pace to be solid albeit lower than last quarter's 4.0% inflation-adjusted growth rate.

Miscellaneous

-- The U.S. Senate confirmed former 8-term GOP Representative Jim Nussle to the post of OMB Director. Nussle's lifetime conservative rating from ACU is 86.

-- Mattel announced another large recall of Chinese-made toys.

BTW, Mattel's trailing P/E ratio is around 15 and its dividend yield is around 3%. If the market were to sell off that company with sufficient ferocity such that its P/E multiple dropped to around 12, well, I might consider buying shares. Hell, with any luck the stock will crater to a P/E of around 10. That would be a very nice buying opportunity, wouldn't it?

-- The percentage of mortgage loans throughout the country for which notices of default/foreclosure were given last quarter was 0.65. That is to say 99.35% of mortgage loans were not in a state of default/foreclosure. The percentage of mortgage borrowers who fell behind on their payments last quarter, but who've not yet defaulted, was 5.1. In other words 94.9% of mortgage borrowers were as of last quarter not behind on their payments. For obvious reasons, however, the headlines and first grafs by the national liberal Democrat media were couched in the most negative terms practicable.

-- Workers were far more productive in Q2 than they were in Q1. Unit labor costs were much lower too.

-- Major chain stores posted strong sales in August. The best performers were Target, Nordstrom and Saks.

-- The New Jersey Supreme Court threw out a putative nationwide Vioxx class action. That decision is a huge victory for Merck and correspondingly a major defeat not only for plaintiffs' lawyers but also for labor unions, the latter of which advanced the failed lawsuit on behalf of a union health plan.

BTW, three years ago, shortly after Vioxx become verboten and while the Lithium brigades on CNBC were frothing at the mouth, you could have purchased Merck for around $26 a share. Yesterday the stock closed at $50.50. All the while Merck has been paying dividends too.

$26 - late-2004
$50 - late-2007
plus three years of dividends to boot

Buy low. Sell high. Not vice-versa.