Retail sales jumped 1% on a seasonally adjusted basis last month, the Census Bureau reports. That’s the best monthly gain since last October’s 1.6% surge. It’s also the eighth straight monthly increase. Consumption, in other words, is doing fine. But quite a bit has changed on the global stage in recent weeks, namely, the Mideast turmoil and resulting jump in oil prices. The question is whether February data is dated?

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Brokerage Commissions: The Hidden Costs of Owning Mutual Funds
Xiaohui Gao (University of Hong Kong) and Miles Livingston (University of Florida) | Mar 4, 2011
Brokerage commissions represent hidden costs to investors because commissions are not included, nor reported, in the fund expense ratio. This paper analyzes unique fund level data on brokerage commissions paid by U.S. diversified equity mutual funds from 2000 to 2007. There are three main conclusions. First, an average fund pays 25.72 basis points (bp) per dollar of assets, in addition to an average expense ratio of 131.96 bp, resulting in a total out-of-pocket cost of 157.68 bp. Second, a one bp increase in annual commissions per dollar of assets is associated with a decline of about 5.8 bp in a fund’s annual return. Third, our analysis yields a number of substantive policy implications, such as commissions being included in the fund expense ratio, and mutual funds detailing their soft dollar arrangements. These disclosures would enable investors and regulators to make more informed decisions.

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This morning’s latest on weekly jobless claims is a bit of a setback, but it’s too early to panic. For one thing, last week’s seasonally adjusted 26,000 jump in new filings for jobless benefits is small for this series, given how much it bounces around from week to week. That argument won’t wash with the thousands of newly unemployed, of course, but as a macro matter there’s nothing particularly worrisome in today’s report. That is, until you start looking beyond the data.

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There are more green shoots in the economy these days, but there are more risks as well. The question is whether the risks have enough momentum to overwhelm the positives? No one really knows the answer, of course, but it’s clear that the stakes are higher than just a month or two ago.

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CR Index: At last, consumers’ financial lives improve
Consumer Reports | March 8, 2011
Despite international unrest and escalating energy prices, the March Consumer Reports Index reveals its most positive results in two years. A major decline in consumer financial troubles and positive sentiment provide some encouraging news for the American consumer. The Consumer Sentiment Index has broken into positive territory at 50.3, which is up from 48.7 a month ago. The Consumer Reports Sentiment Index captures respondents’ attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. This is the first time sentiment has been in positive territory since it was first measured in October, 2008.

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The president of the European Central Bank is worried about inflation. “We’re in an environment where we have a spike in the price of oil, commodities – it’s more acute in the present circumstances,” he says. Is the market also worried? Yes, at least on the margins.

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A number of pundits warn that the U.S. is suffering from an era of jobless recoveries. It’s a popular complaint and it’s surely grounded in legitimate concerns about the labor market’s strength. But taken at face value, the claim that we’re in a jobless recovery is false. The economy’s recovering and new jobs are being created. Since the private-sector labor market started growing in the latest cycle in March 2010, total nonfarm private payrolls are higher by 1.5 million through February 2011, based on seasonally adjusted figures, which are used in the analysis below as well. That’s a fraction of the jobs lost in the Great Recession, but modest job growth isn’t the same thing as a jobless recovery.

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● Endgame: The End of the Debt SuperCycle and How It Changes Everything
Excerpt via publisher, John Wiley
The bankruptcy of Lehman Brothers in the fall of 2008 drew the curtain on a very long 60-year Act I in the debt supercycle. You could feel in the air the end of a golden period, when everincreasing quantities of debt could lead to ever more consumption and “wealth.” As stock markets crashed globally and the lines of unemployed lengthened, the end of the era was something we could observe in real time.

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Today’s employment report for February suggests that the stock market rally that began last September correctly anticipated rebound 2.0 in the post-recession period. Private sector employment rose by a net 222,000 last month, the most since last April and a sharp rise from January’s feeble 68,000 advance. Even better, job growth was widespread across the economy. Only retail trade suffered a setback in the private sector. In short, today’s employment news is good—the best, in fact, in nearly a year.

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The theory of “crowding out” predicts that higher government borrowing may force interest rates higher than they otherwise would if the private sector prevailed in the money markets. How does this theory jibe with recent history? Read on for some perspective…
Crowding Out Watch, Updated
Menzie Chinn, Econobrowser | Mar 1
I’m teaching the concept of portfolio crowding out in my intermediate macro course (handout with algebra here) now, and as I was going through the notes, I observed that last I had checked, there was (still!) little evidence of crowding out… Relative to my September post, the ten year TIPS is slightly up, but the five year remains at zero (well, actually negative). This means that whatever upward pressure there is on government interest rates due to the large supply of government debt, it is being offset by low demand from the private sector (or by demand from offshore sources).
A Federal Shutdown Could Derail the Recovery
Mark Zandi, Moody’s Analytics | Feb 28
While the government spending cuts proposed by House Republicans for this fiscal year mean only modest fiscal restraint, this restraint is meaningful. If fully adopted, the cuts would shave almost 0.5% from real GDP growth in 2011 and another 0.2% in 2012. This wouldn’t be true if the current budget deficits were crowding out private investment, but they aren’t. Business demand for credit has recovered modestly, and households continue to lower their debt obligations. Interest rates also remain extraordinarily low. Some of this is due to the Fed’s credit easing, but global investors also remain willing buyers of U.S. debt even at low interest rates.

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