Posts Tagged ‘Gary Locke’

Notes From Underground: Unemployment was “less bad”

September 3, 2010

The unemployment rate moved higher but that is meaningless for the markets. However, talk radio will have something negative to discuss. The interesting data was that private sector jobs grew more than expected and, more importantly, average hourly earnings (AHE) rose much more than expected and that is a good thing for potential consumer spending.

The more important news is a story that the Washington Post broke about a new stimulus package coming from the Obama administration. The Obama camp have the cover of Nobel laureate Paul Krugman to bring forward a much more robust stimulus package heavily centered on tax cuts for small and medium business. What else is going to be forthcoming? We have no idea but this package will err on being bigger not smaller than previously projected.

Why do we believe a bigger program is coming? Because Secretary of Commerce Gary Locke opened his big mouth in a November 2009 interview and was forced to recant his words as being “impercise.”  It seems to us that Secretary Locke was so excited about the stimulus plan that he couldn’t contain his enthusiasm. A package of tax cuts aimed at small business is what the financial markets want to see.

A payroll tax moratorium would be a major move but we at NOTES doubt they will do that because if wage earners saw what came out of their weekly checks in real time there would be tax sticker shock. We still think that Geithner has plans for doing some type of massive mortgage refinance as the executive branch has control of Fannie and Freddie and does not need Congressional approval.

The bottom line is that something is up and coupled with a “less bad” employment, the Obama administration may be able to gain some positive momentum heading into the November elections so as to stem some of the negative political fallout. This election is not about wars. It is totally focused on the economy. The commerce secretary, through his premature excitement, has let the cat out of the bag. The question remains: How loud will it roar? If the plan includes the cut on dividend taxes, we could see the equity markets rally hard. We wait to see how aggressive they plan to be.