FOCUS ON THE 15: Jobs outlook nearly offsets the bad news

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By Jim Victor | Saturday, June 14, 2008 5:32 PM CDT | () comments

“Prosperous Job Market Expected for Iowa Q-C”

“Positive Job Market Expected for Illinois Q-C”

— Manpower Inc.,

June 10, 2008

With two uplifting headlines, Manpower’s quarterly employer survey lifted Quad-Citians’ spirits last week, even if just for a while. The emotional high ground was a welcome island of economic comfort in a week where area residents were immersed in continued rains and flooding, closures of interstate highways under swollen rivers, and water damaged or destroyed crops and homes.

For the week, our Quad-City Times Key 15 was off 39.68 to 1,321.37. For most of the week, Wall Street focused on gasoline prices that have now exceeded $4 a gallon. An hourly watch of crude oil prices which climbed to record levels in the prior week brought nearly hourly reaction and response by stock investors.

Still, there were economic developments that showed impressive U.S. economic growth well beyond our energy issues. Consider the Commerce Department’s release on international trade. The headlines detailed a sizable rise in imports caused by higher imported oil costs. No small issue. But overshadowing this news was a 19.2 percent rise in our export sales to nations abroad. If you follow U.S. manufacturing, exports of goods climbed even more, up 20.1 percent compared to last May. A whole nation enjoying such booming overseas demand for its U.S.-made goods is a powerful offset to the current slowness in housing and autos.

Consider, too, May core retail sales climbing an impressive 4.5 percent over one year ago, according to the same Commerce Department. “Core retail sales” exclude gasoline, autos and building materials, leaving mostly general merchandise. Surely tax rebate checks helped out, but gains have continued every month this year.

Closer to home, the Manpower survey results are better than its national picture. In the next quarter, its nationwide survey of 14,000 employers shows 26 percent will add employees while 10 percent will scale back. Here in the Illinois Q-C, 27 percent will hire while only 7 percent expect employee reductions. And giving rise to Manpower’s “prosperous” headline, Iowa Q-C employers indicate 37 percent will hire and none (you read that right) expect layoffs. For the Iowa Q-C, this is a second consecutive optimistic quarterly survey: The prior survey showed 40 percent plan hiring, zero planning layoffs. Areas doing most of the hiring? Durable goods manufacturing and non-durable goods manufacturing. It’s no wonder that such reports provided an emotional uplift against the high waters and high gasoline prices of last week.

Among area corporations, Alcoa (a) (b) shares rose and fell. The week began with a favorable mention in a featured Barron’s article, quoting analysts on earnings expectations and even buyout potential some day. Shares rallied to a Tuesday, June 10, high of $44.24, only to see Wednesday refutation of those opinions by other analysts and a share decline. For the full week, Alcoa shares were up .24 at 39.46, with Alcoa itself checking in to inform shareholders of a 2 cent to 3 cent per share hit to second-quarter profits. Alcoa says an explosion at natural gas supplier Apache Energy’s facility disrupted fueling Alcoa’s Western Australia alumina facility.

Quanex Building Products, parent of Nichols Aluminum here, posted a second-quarter loss of 14 cents per share, off from a profit of 86 cents per share last year. With construction slower nationwide, sales fell 13 percent from last year to $207.3 million. Headlines released by Quanex media told a story here too: “Company essentially debt free, with financial wherewithal to fund both organic (existing products) and acquisitive growth.” Quanex shares finished .29 lower at 16.46.

Tyson Foods’ Columbus Junction, Iowa, plant succumbed to the massive flooding. On Monday, Tyson officials said there would be no hog slaughter or processing on Thursday, Friday or Monday due to rising flood waters in the area. That plant has a daily slaughter capacity of 9,000 head. It’s located at the confluence of the Iowa and Cedar rivers. Further word is awaited following late week heavy rains. Tyson shares were off 1.22 at 14.96.

The new week brings a unique manufacturing sector insight. With export growth so powerful, how will May manufacturing levels for the nation be reported? Sadly, all this will be important only after we help friends and neighbors get their homes and businesses through this flooding.

Jim Victor is senior vice president-wealth management and financial advisor for Smith Barney, Davenport. Smith Barney is a division and service mark of Citigroup Global Markets Inc. and its affiliates and is used and registered throughout the world.

The information contained herein has been obtained by the writer from sources believed to be reliable, but he does not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. a) The firm is a market maker in the publicly traded equity securities of this company. b) Within the past 3 years, Citigroup or its affiliates has acted as manager or co-manager of a public offering of securities of this company.