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Weekly Economic Update for the Week of March 10, 2008

Quote of the week. “There are two motives for reading a book: one, that you enjoy it; the other, that you can boast about it.” – Bertrand Russell
Payrolls shrink … again. Another recession signal flashed last week: the Labor Department reported 63,000 fewer jobs in February, marking the second straight month of contracting payrolls. (The U.S. economy lost 22,000 jobs in January.) “All the lights are flashing red,” expressed Global Insight Inc. chief economist Nariman Behravesh. “We’re in a recession. I don’t think there is any doubt about it at this point.” The median forecast of 76 economists polled in a Bloomberg News survey predicted a gain of 23,000 jobs for February.¹
Home equity levels below 50%. For the first time since 1945, homeowner mortgage debt exceeds homeowner equity. A new Federal Reserve report says homeowners’ percentage of equity fell to 49.6% in 2Q 2007 and 47.9% in 4Q 2007. More unnervingly, Moody’s Economy.com foresees roughly 10.3% of U.S. homeowners having 0% or negative equity at the end of March.²Rising foreclosure rates. Last week, the Mortgage Bankers Association announced new delinquency and foreclosure highs for the last quarter of 2007: 2.04% of U.S. mortgages in foreclosure, 5.82% of mortgages delinquent. MBA economist Doug Duncan noted that the national numbers were sent north by abnormally high foreclosure rates in Nevada, California, Florida and Arizona.³
Stocks struggle to advance. On Friday, the Dow Jones Industrial Average fell below 12,000 for the first time since January. The S&P 500 closed the week at 1,293.37, a low-water mark unseen since September 2006.⁴ Yet even with the current financial climate, stocks are still up spectacularly within the last few years. The Fed has lifted the limits on its scheduled March 10 and March 24 auctions to $50 billion from $30 billion to help banks with liquidity needs.⁵

% Change	Y-T-D	1-Year	5-Year
DJIA	-10.34	-2.51	+34.92
NASDAQ	-16.58	-7.33	+41.00
S&P 500	-11.92	-7.62	+35.91

(Source: CNNMoney.com, USAToday.com, 3/7/08)⁶

Riddle of the week. What can explode slowly, with no smoke or flame?

Contact my office or see next week’s Update for the answer.

Last week’s riddle: At the sound of me, people may dream or stamp their feet, laugh or sometimes weep. What am I?

Answer: Music.

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The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx^®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. These views should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards.

Citations. ¹ bloomberg.com/apps/news?pid=20601103&sid=aG6e0kEzgR5E&refer=news
² money.cnn.com/2008/03/06/real_estate/home_equity.ap/index.htm?cnn=yes
³ latimes.com/news/nationworld/washingtondc/la-fi-foreclose7mar07,1,2986355.story
⁴ bloomberg.com/apps/news?pid=20601103&sid=a8aHrJhAoMpE&refer=news
⁵ usatoday.com/money/economy/2008-03-07-jobs_N.htm?loc=interstitialskip

⁶S&P 500, 5-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F7%2F03&mode=add&symb=SPX
⁶S&P 500, 1-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F7%2F07&mode=add&symb=SPX
⁶NASDAQ, 5-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F7%2F03&mode=add&symb=COMP
⁶NASDAQ, 1-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F7%2F07&mode=add&symb=COMP
⁶DJIA, 5-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F7%2F03&mode=add&symb=INDU
⁶DJIA, 1-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F7%2F07&mode=add&symb=INDU