Jobless Claims Fall to 287,000

Fed Wary on Weak Global Growth, Strong Dollar Fed officials have become more concerned that weak overseas growth and a strengthening U.S. dollar will crimp the domestic economy and hold down inflation, making them more inclined to stick to low interest rates.

(…) Angst about global growth and the economic impacts of a strong dollar represent a meaningful development in the Fed’s running debate about when to raise short-term interest rates from near zero.

“Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector,” according to the minutes. “Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk.” (…)

There are plenty of benefits from a strong currency. It goes hand-in-hand with capital inflows, which could spur domestic investment and are a signal of a stronger domestic economy. It also tamps down inflation and takes pressure off the central bank to push up interest rates.

But Fed officials have been trying to push inflation up, not down, of late. Consumer-price measures have run below their 2% goal for more than two years, which is why officials could become concerned about a strong dollar’s effects. By pushing up the cost of exports, a strong dollar also hurts the U.S. trade position and growth outlook.

Jon Faust, director of the Center for Financial Economics at Johns Hopkins University and a former Fed adviser, said the stronger dollar has in effect already made U.S. financial conditions more restrictive without the Fed’s doing anything to interest rates. (…)

• U.S. Stocks Rally After Fed Minutes

I respectfully beg your pardon. The Fed release was in mid afternoon while the equity rally started at 11:05 a.m. Maybe just a coincidence but iIt so happened that Bearnobull’s New$ & View$ was published shortly before 11:00 and reached subscribers’ mailbox at exactly 11:05. Must have been a relief rally as the post suggested that this was not a 1987 redux.

THE U.S. DOLLAR IN THE PROPER PERSPECTIVE

For some investors, a stronger greenback combined with Fed rate hikes is synonymous with a double whammy for the U.S. economy and global growth. At this juncture we think these fears are overblown. As today’s Hot Charts show, the broad USD index is still hovering near a generation low in real terms. As for competitiveness, we doubt very much that a 10%-20% appreciation of the currency would jeopardize the U.S. expansion – exports as a percentage of GDP is the lowest among G7 countries at 14% (compared to 31% on average) – especially if offsetting factors are at work. For one, commodity-consuming countries will most likely welcome the recent declines of food and energy prices, which have coincided not only with a stronger greenback but with a record crop year in the U.S. and an easing of geopolitical tensions. For another, the decline of global bond yields resulting from unconventional monetary policy in the euro zone will help reduce the burden of consumer and government debt and improve the transmission of monetary policy on the real economy. (NBF)

Manufacturing Wages Rise Fast in Some States Manufacturing wages are rising rapidly in some big industrial areas as skills shortages and falling jobless rates force firms to pay up to attract workers.

(…) In Texas, wages for all types of production workers in factories grew an average of 6.3% from a year earlier, compared with nationwide overall private-sector wage growth of 2.3%, according to U.S. government data for the three months ended Aug. 31. Factory-wage growth was 4.4% in Washington State, 4% in Oregon and 3.1% in Indiana in that period. (…)

The wage growth applies to a wide range of manufacturing jobs—from machine operators and repair people to electricians and engineers—and not just to specialties such as welding, where shortages are acute. It also comes in spite of two-tiered wage scales in some industries in which new hires start at much lower pay, a practice that has long restrained wage growth. In auto-dominant Michigan, where two-tier wage systems are common, wage growth for manufacturing workers was 2.5% in the three-month period, compared with the national average of 1.6% for manufacturing wages.

Around the country, some manufacturing companies are looking at apprentice programs and offering cash incentives to workers who refer good job candidates. In markets where labor is particularly tight, workers are job hopping for higher pay.

“What we mainly need is welders,” said Terry McIver, chief executive and owner of Loadcraft Industries Ltd., a maker of parts for oil rigs in Brady, Texas. Loadcraft, with more than 400 employees and annual sales of around $80 million, has had to use welders from temporary-help agencies at a cost of around $37 an hour, or nearly double the wage cost for staff welders. Mr. McIver said he is looking at the possibility of buying robotic welding equipment and bringing in workers from Mexico. (…)

Steve Van Loan, president of Sullivan Palatek Inc. in Michigan City, said job hopping is becoming more of a problem. “They get an offer for more money across town, and they’re gone,” he said. Wages on average at his firm, which makes compressors that power drills and other tools, are rising 4% to 5% this year, compared with 2% to 3% in recent years, Mr. Van Loan said. (…)

Job hoppers tend to have much higher wage growth than workers who stay in the same post. Data from the payroll-services firm ADP LLC, released Wednesday, show that hourly wages for manufacturing workers who recently switched to a new employer rose an average of 4.2% in the third quarter. The year-earlier average was 3.6% for such job switchers. (…)

Chart for the FOMC from the NFIB:

BTW:

• Gasoline futures currently suggest gas prices of $3.00 by end of November, a level last seen at the end of 2010.

• Meanwhile, mortgage rates are close to breaking below 4.0% (4.01% on the 30yrs yesterday).

German recession fears mount as exports plunge  German exports plunged in August by their largest amount since the height of the financial crisis and leading institutes slashed their forecasts for growth, fuelling a debate on whether Berlin is doing enough to prop up Europe’s economy and its own.

Exports slumped by 5.8 percent, the biggest drop since January 2009, in the latest sign that Europe’s largest economy is faltering amid broader euro zone weakness and crises abroad that have battered confidence and led German firms to postpone investment plans. (…)

The Federal Statistics Office said late-falling summer vacations in some German states had contributed to a fall in both exports and imports, but the figures still painted a gloomy picture for an economy that until recently was hailed in Berlin as Europe’s “growth locomotive”.

Earlier this week, industrial orders and output data suffered their steepest drops in more than five years.(…)

Is Japan’s Economy on the Verge of a Recession? The “r” word is on the lips of economists again in Japan: Did an April sales tax increase send the world’s third-largest economy into recession?

Rising Dollar Could Hit Tech, Industrials, Says S&P Capital IQ The rising dollar could dent sales results this earnings season, as we wrote today. While analysts say it won’t push results into the red, it could take shareholders of large technology and industrials firms off-guard.

While effect of a rising greenback on company sales is tough to pinpoint, it will probably be small for the S&P 500 on whole, according to analysts at S&P Capital IQ. They found that 2% of third-quarter sales could be lost in translation, when companies report sales made in foreign currencies back into U.S. dollars. That would cut into yearly growth in sales by just 0.1%.

But plenty of large individual firms do a significant chunk of business abroad. Intel, for example, got 56% of its sales from Asia in the last fiscal year, according to S&P Dow Jones Indices.

So the surprisingly strong dollar could lead some firms to miss analysts’ estimates, which sometimes leads to selling. The sectors that are most at risk for surprisingly weak sales are technology and industrials, S&P Capital IQ found. (…)

From to    Wish us well: flying to Japan, along with this guy: Typhoon Vongfong