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Wells Fargo Economics FINANCIAL MARKET STRATEGIES Scott Anderson WELLS Senior Economist FARGO www.wellsfargo.comb/com/research/economics/index 612-667-9281 February 6, 2009 Date Indicator For Estimate Consensus* Previous Period 10 Feb 2009 Wholesale Inventories DEC 1 0% e I 11 Feb-2009 Trade:Goods&Services DEC $37.0B -$35.0B -$40.4B 12-Feb-2009 Retail Sales JAN 1.6% -1.0% -2.7% 12-Feb-2009 Retail Sales ex-Auto JAN -1.4% -1.2% -3.1% 12 Feb-2009 Initial Claims 02/07 610K 1 626K 12 Feb 2009 Business Inventories DEC -1.2% -0.6% _0 7% • 13-Feb-2009 Michigan Sentiment Prelim FEB 61.0 60.8 61.2 *Consensus from Action Economics January Payrolls Stink! What's that smell? Oh yeah,it's the January payrolls report,and what a stinker it was. My one- 000s Change in Total Nonfarm Payroll year-old son's dirty diapers didn't have anything 300 Estimated Level,, Monthly Job Gains on this morning's payroll report. Job losses are 200 Needed to Absorb Labor Force Growth rising sing at an alarming pace,and we can expect 100 f-1- Len of additional labor market weakness ahead. _ is, A th Our forecast of 4.3 million net job losses between I 111 Q4 2008 and Q4 2009 is probably right on target. I (100) - ',''''' was anticipating a worse-than-consensus report for (200) - January with an unemployment rate that soared to (300) - 7 5 percent,but it turns out even I underestimated (40) - ',he"true"underlying weakness in the labor market.According to the U.S. Labor Department, (500) - the U.S.economy lost 598 thousand jobs in (600) J January,well above the consensus view of 524 1-07 7-07 1-08 7-08 1-09 thousand jobs lost,The largest one-month decline so°rce:Bureau or Labot Statistics since December 1974. If that weren't enough,November and December payroll declines were revised higher by a net 66 thousand jobs. Similar downward revisions occurred when the December payrolls were released. Notice a pattern here? The labor market continues to surprise on the downside. The Labor Department almost always initially underestimates labor market declines when the U.S. economy is in recession. Today's release also included the annual benchmark revisions,revising the employment data with corporate tax records from the period April 2007 and March 2008, subtracting 89,000 jobs,exceeding the 21,000 jobs the Labor department estimated in October. Over the last three months,the average monthly job Percentage Overall Unemployment Rate loss is now at 591 thousand a month. Job losses are 15.5 _ pretty evenly split between goods-producing and 13.9 service-producing industries. Goods producers 13.5 - Augmented' shed 319 thousand jobs in January,with 111 thousand lost in construction and 207 thousand lost 11.5 - in manufacturing. Service-providing businesses 9.5 - shed 279 thousand jobs in January,with notable 7.6 losses in trade and transportation(-118 thousand) 7.5 - and business services(-121 thousand). Leisure and Headline hospitality shed 28 thousand jobs,and our own 5.5 - financial services industry contributed a net loss of 42 thousand jobs. I expect the financial services I 3.5 industry to shed far more jobs in the months to 1-99 1-00 1-01 1-0 2 1-03 1-04 1-05 1-06 1-07 1-08 1-09 •ToW...weaved.pie Y tn.raineay eterh.d worker.,plus total emplo,ed pentthy=f----nikteLren., come. The only job gains came from education,r e percent of the civilian Leber torte pus mil nie tlnally attached*ors Source:Brea"of Labor Statistics health care and government,which in total added a INFORMATION IN THIS REPORT IS THE PERSONAL VIEW OF THE WRITER,NOT NECESSARILY REFLECTING WELLS FARGO&CO. IT IS FOR YOUR PERSONAL USE. THE WRITER DOES NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE. NOTHING IS GUARANTEED.©2009 Wells Fargo Bank,N.A.All rights reserved.