Headlines and data appearing in The Punch Line came from widely available publications including national and international newspapers, trade journals, economic and industrial bulletins and news websites.

After Popping the Champagne Corks, Let’s Get Sober…

Despite growing evidence of acceleration in the recovery, the latest employment reports offered some sobering reality checks. Non-farm payrolls increased 103,000 in December, but the ranks of the long-term unemployed rose by 113,000. True, the U.S. economic recovery has thrown off several other strong signals of recovery. But the expanding layer of near-permanently jobless people or clearly underemployed remains bad news for long-term fiscal and social health. There will be ongoing repercussions from the recent historic bust, and one can’t help but worry about the likely contours of the recovery path. And let’s not forget that it’s clearly an international affair… The U.S. economy is not only adding fewer new jobs than would be needed for sustainable growth, but equally cemented expectations that the Federal Reserve is not likely to step off its aggressive stimulus programs. Woes in the EU have also not dissipated. Instead markets in Portugal, for example, tumbled late last week and the ECB needed to intervene in order to steady the markets. The cost of borrowing for select EU members with huge public debt continues to plague the markets, and substantial refinancings are coming over the months ahead. On the other side of the globe, China is tightening as it faces serious inflation risks. But instead of its currency rising, the currency has given back some of its rise since midyear. Other major emerging economies are seeing more pressures for their currencies to appreciate and make their economies less competitive. Many struggle also with massive capital inflows. With inadequate growth in the developed world – in the U.S., the EU and in Japan – hot money has rushed into emerging economies – a distortion that has created a policy conundrum. The dislocations in currency markets, the run up in commodity markets, and the policy challenges are likely to add to market uncertainty over 2011 and beyond.

From the section entitled: Engine Drivers…

China Skyscraper Boom Signals ‘Misallocation’

China is home to almost half of all skyscrapers being erected around the world, underscoring concerns that excessive investment will lead to a sharp economic slowdown, according to Barclays Plc. China accounts for 44 percent of the 50 skyscrapers scheduled for completion worldwide in the next six years, Barclays analysts led by Andrew Lawrence said in a report this week.

Author Comment: Misallocation is not exactly the word that comes to  mind; more like vacancy or declining rents or the like.

From the section entitled: U.S. Job Growth

Two Measures of U.S. Unemployment

Dec.

2009

May

2010

June

2010

July

2010

Aug.

2010

Sept.

2010

Oct.

2010

Nov.

2010

Dec.

2010

Normal

9.9%

9.7%

9.5%

9.5%

9.6%

9.6%

9.7%

9.8%

9.4%

Broad Measure (U6)

17.2%

16.6%

16.5%

16.5%

17.7%

17.1%

17.0%

17.0%

16.7%

U-3 The popular measure… Total unemployed, as a percent of the civilian labor force (official unemployment rate).

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part    time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. 

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed over the month at 9.0 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. 

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) declined slightly to 8.972 million in November. This has been around 9 million since August 2009 – a very high level. 

Author Comment: I admit to having never seen unemployment measured in this way; it clearly provides a dynamic and perspective on the true number unemployed or under-employed.

From the section entitled: Dimensions of Risk

WHAT ME WORRY ?? 

Investors are accepting the lowest premium to own high-yield, high-risk debt relative to

U.S. Treasuries since November 2007, as default rates decline and the economic recovery in the U.S. shows signs of picking up. The 527 basis-point spread, or 5.27 percentage points, on corporate bonds rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s is the tightest level since it reached 525 basis points on Nov. 15, 2007, according to Bank of America Merrill Lynch U.S. High Yield Master II index data.

Author Comment: Investors (individual and institutional) appear to be throwing caution to the wind when they are willing to accept premiums similar to those available at the height of the recent euphoria. What happened to the concept of risk-adjusted rate of retrun?

From the section entitled: Real Estate and Construction Outlook

Nonresidential construction spending in the U.S. slipped 0.1% in November, following a 0.7% drop in October. The decline was driven primarily by further weakness in spending on office buildings, lodging and general commercial real estate.

According to Reis data, the national apartment vacancy rate was 6.6% in the fourth quarter, down from 7.1% in the third quarter and 8% in the fourth quarter a year ago.

Numerous reports that US malls and shopping centers are showing some signs of improvement. In the fourth quarter, vacancies and lease rates for these types of properties held relatively steady. Looking back at 2010, the second half of the year ended the slide in lease rates and rising vacancy rates of the past few years. This past quarter marks the second straight quarter of a decline in the vacancy rate at malls. Lease rates at malls improved to $38.79 per square foot per year. On the other hand, shopping center vacancy rates held steady at 10.9% in the fourth quarter – unchanged for the third consecutive quarter and the highest level since the data series began in 1991

Hotel Acquisitions in Americas to Increase 25 Percent in 2011

Hotel sales and acquisitions in the Americas will jump as much as 25 percent this year, buoyed by real estate investment trusts and foreign investors seeking to deploy cash, according to Jones Lang LaSalle Hotels. Transactions may total $13 billion this year, the London-based company said in a statement. Volume was about $10.5 billion in 2010, almost five times the previous year’s levels