Bill’s Weekly Economic Update for Jan. 10, 2011

HOW DO WE INTERPRET THIS JOBS REPORT?
America’s unemployment rate fell four-tenths of a point in December to 9.4%. On the surface, that sounds great – after all, that is the biggest one-month drop in the jobless rate in 12 years. Beneath the surface, it wasn’t so great. Labor Department figures show that 453,000 people dropped off the unemployment rolls last month, yet only 103,000 people found new non-farm jobs. So perhaps the dip in the jobless rate mostly reflects job seekers giving up the hunt. In contrast to federal data, ADP’s new payrolls report indicates 297,000 new private sector jobs for December.

ISM FINDS CONTINUING EXPANSION
The Institute for Supply Management’s twin purchasing manager index surveys came out last week. Its manufacturing PMI came in at 57.0 for December, while its service sector PMI came in at 57.1. New orders were up 5.3% in the service sector survey with business activity/production increasing 6.5%.

OIL & GOLD PULL BACK TO OPEN THE YEAR
Oil had its poorest week in two months last week, as prices fell $3.35 per barrel across five trading days to $88.03. Gold slipped $52.60 last week; futures settled at $1368.50 an ounce Friday. Was this because of a stronger dollar, investors locking in profits at the start of a new year, a shift in sentiment, or all of the above? Was it just a selloff or an omen of correction? Bulls are watching and waiting.

BIG 7 AUTOMAKERS SEE NICE 2010 SALES GAINS
The world’s seven major automobile manufacturers enjoyed a collective 9.7% year-over-year increase in sales for 2010, according to figures compiled by MarketWatch. Toyota was the only one of the seven to see a 2010 sales drop, while Hyundai’s 2010 U.S. sales improved by more than 30%. Sales across the big seven (Ford, Nissan, Hyundai, Honda, GM, Toyota and Chrysler) were up 33.3% in December.

STOCKS ADVANCE TO START 2011
The Dow rose 0.84% last week to close at 11,674.76 Friday. The S&P 500 (+1.10%) and NASDAQ (+1.90%) opened 2011 with even better weeks. The NASDAQ settled Friday at 2703.17 while the S&P settled at 1271.50.