Credit Report

One not-so-hidden factor in the sluggishness of the recovery continues to be the lack of consumer credit. The Fed estimates that revolving debt, which consists primarily of credit card, declined by $4.4 billion in July. That's $4.4 billion in consumer spending that was basically taken out of the economy in one month.

Paradoxically, this is mostly good news for individual consumers. Delinquencies are way down, with write-offs falling below 10 percent for the first time in a year. People are being much more responsible about the availability of easy credit.

But the lack of credit card use harms the economy as a whole, since credit can multiply money. On the other hand, non-revolving debt, which includes things such as loans for cars and mobile homes (but not for real estate), was up very slightly in July, rising by $758 million. That was the third straight monthly gain for that category.

The Caution of the Young

We've talked recently about the outflows of assets from mutual funds, and a recent study from Merrill Lynch shows one reason for this: Younger investors, who have traditionally taken on the most risk in their portfolios, have become spooked by this market and this economy. Among the affluent, 52 percent of those aged 18 to 34 describe their risk tolerance as low. That's a higher figure than either the 35- to 50-year-olds (45 percent of whom have low risk tolerance) or 51- to 64-year-olds (46 percent). Only those over age 65 are more cautious than the young.

And this risk-aversion is growing. Among that younger group, 56 percent describe themselves as more conservative than they were a year ago, as opposed to only 46 percent of all affluent individuals.

One wonders what the long-term effects of this risk aversion will be. If people are wary of putting their money in the market at the age of 25, when they have 40 years to save before retirement, what will their investment decisions be like when they're 55?

The Official Jobs Report

In some ways, Friday's official unemployment report wasn't as dire as the ADP report on Wednesday, which had the economy shedding private-sector 10,000 jobs in August. The Labor Department report had private employers adding 67,000 jobs in August, although that was offset by a loss of over 100,000 public-sector jobs, most of them Census-related.

At the same time, there were two other numbers buried underneath the overall employment report that don't bode well for the recovery:

* The number of involuntary part-time workers - people who want full-time work but can only find part-time jobs - increased by 331,000 in August. The number of workers in this category is now 8.9 million.

* The number of discouraged workers - those who have given up looking for a job - is now at 1.1 million, or 352,000 more than it had been a year earlier.

Thoughts for Labor Day

Labor was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labor, that all wealth of the world was originally purchased. - Adam Smith

Talent is cheaper than table salt. What separates the talented individual from the successful one is a lot of hard work. - John Wooden

If all the cars in the United States were placed end to end, it would probably be Labor Day Weekend. - Doug Larson

September: The Cruelest Month?

September has historically been the weakest month for the stock market, with the S&P 500 losing an average of 0.6 percent per year in September since they started tracking this back in 1950. Only two other months have losing records over that time, February and June. Four times in the past decade, the S&P 500 has lost at least 5 percent of its value in September.

There are various theories put forth as to why this should be so. People roll up their sleeves and get back to work after Labor Day, whether that's fund managers taking profits on their winners or individual investors paying attention to their portfolios once again and trying to get them in order. More recently, bad news has tended to fall in September for no real reason: September 11 ruined the month in 2001 for a lot of reasons, and the crux of the banking meltdown happened in September 2008.

But it's a tendency, not a hard-and-fast-rule. Last September, for example, the S&P 500 gained 4 percent. As they say, past performance is no guarantee of future results. So here's hoping we have a September 2010 that bucks the trend.

The Manufacturing Surge

The headlines out of Wall Street yesterday mostly focused on some variation of "Stocks surge on manufacturing growth." There's some truth to that, but it doesn't tell the whole story. Wall Street analysts expected yesterday's manufacturing report to be solid, but it ended up outperforming the estimates.

Economists surveyed by Bloomberg News forecast that the Institute for Supply Management's factory index would fall from July's figure of 55.5 to 52.8 in August. That's still in positive territory, considering that any number above 50 is supposed to signal growth in manufacturing. Instead, the August number came in at 56.3, an unexpected increase. That's probably why, on an unusually strong day where the Dow posted its biggest gains in almost two months, the strongest sector was the manufacturing group.

Remember, it's not so much good news that boosts stocks as news that exceeds what the Street is already expecting. With manufacturing leading the way, all ten of the S&P 500's sectors were up by at least 1.6 percent, making the first of September a very good day for the market.

Discouraging Jobs News

There's a report out this morning that private-sector jobs declined by 10,000 in August, the first monthly drop since January, which would be a very bad signal for this struggling recovery. Those numbers come from ADP, which is the largest payroll-processing firm in the U.S., and precede the official Labor Department figures, which are due out Friday.

But are those numbers accurate? The ADP figure generally but not always comes fairly close to predicting the more official unemployment number. In February, for instance, the ADP number came within 2,000 jobs of the Labor Department figure. It can also be way off, though: In April, ADP's estimate undershot the official number by a whopping 199,000 jobs.

Bloomberg News' monthly survey of economists shows that they expect the Labor Department to report on Friday that there were 42,000 jobs added in August. Even if we end up with that increase, though, it won't be enough to really move the needle on unemployment; the economists also expect the unemployment rate to tick up from 9.5 percent to 9.6 percent.