Don’t Ignore The Anecdotes, Says John Mauldin

6 percent) and retail (minus 0.6 percent) were among the two largest employers with 21.3 million and 15.2 million respectively.â€©

Average hourly earnings slipped to $24.30 an hour in the last month, and increased a lowly 2.1 percent during the last year. Once adjusted for inflation of about 1.1 percent, the level of real average hourly earnings was about 1 percent. â€©

Minimum wage legislation and the Affordable Care Act (ACA) are at the forefront of business concerns. Some of these issues surfaced in this latest jobs report. The use of workers at temporary staffing places as a percent of total nonfarm payrolls climbed to 2.09 percent, the highest level since 1990. â€©

Buffalo Wild Wings Vice President Emily Decker spoke at an Analyst Day event last week and noted, “Minimum wage increases are being proposed at the federal level and at the state level, with 11 states significantly increasing their minimum wage in 2014. For issues like this, we are actively working with legislators to explain how changes in the laws affect our business specifically, and the restaurant industry in general.”

Similar concerns regarding minimum wage and the healthcare mandate were mentioned by Panera Bread, Wendy’s, and Jack in the Box. These government regulations are weighing on business decisions to invest and hire. Don’t expect any meaningful improvement in economic conditions until they are altered.

Even with the incessant complaints regarding the crippling effects of the weather on production, sales, confidence, employment and general economic conditions, the comments made during the quarterly earnings conference call season appear to be mostly positive, with the outlooks equally upbeat. Whether the lost business traditionally registered during the first quarter returns is yet to be determined. Issues remain with respect to poor currency translations, deflationary fears throughout Europe, and an uncertain situation in in Russia, Ukraine, and China.

The Bloomberg Orange Book of CEO Comments Sentiment Index has returned to a sub-50 posting in recent weeks, implying a continued sluggish economic recovery. Investors should expect more of the same since this indicator has been mired in a contractionary territory for more than a year-and-a-half.

Some of the comments from the current earnings season include:

Levi Strauss & Co (8089Z) Earnings Call 4/8/14: “We knew the first quarter would be challenging, but it turned out to be even more difficult than we expected. Our focus on our key strategies enabled us to maintain stable constant dollar net revenues, despite unfavorable weather conditions, continuing retail traffic declines, a competitive promotional environment, and ongoing softness in our U.S. women’s wholesale business…”

Alcoa (AA) Earnings Call 4/8/14: “Overall volume is slightly higher versus the previous quarter. Improved industrial volumes in Europe were offset by weaker demand in North America. We continue to be impacted by the continued market pressure and unfavorable pricing impacts in packaging. Auto sheet volumes were strong, resulting in record automotive revenues. Improved productivity and cost containment combined with the favorable fixed costs absorption significantly benefited the result.”

WD-40 (WDFC) Earnings Call 4/8/14: “Looking forward, we remain cautiously optimistic about several macroeconomic factors. As per our second quarter and year-to-date results, we expect that growth in EMEA and the Americas will continue to more than offset any lower industrial activity and sales in Asia-Pacific.”

Family Dollar Stores (FDO) Earnings Call 4/10/14: “Our second quarter was particularly challenging, especially considering the significant impact that the severe weather had on our results. There were 18 named storms in the quarter, which resulted in more than 60 days being negatively impacted by winter weather. In addition, winter conditions disrupted merchandise deliveries, and snow accumulation and very cold temperatures resulted in higher than expected store maintenance and utility expenses.”

JPMorgan (JPM) Earnings Call 4/11/14: “Despite a relatively favorable rate environment, the market got off to a slow start in 2014. We’re seeing tight housing inventory in some markets, and the purchase market was affected adversely by the severe weather. This led to a challenging quarter for the mortgage business with production of $17 billion, down 27% quarter-over-quarter and 68% over last year.”

Fastenal (FAST) Earnings Call 4/11/14: “The extreme weather that we had caused expenses to go up in more areas than you can imagine, simple things like snow plowing, the fuel, all of those things, heating expenses, but overall it’s very challenging with the hard weather.”

Wells Fargo (WFC) Earnings Call 4/11/14: “The housing recovery remained on track, and should benefit from the spring buying season. I’m optimistic about future economic growth, because consumers and businesses have continued to improve their financial conditions. Households have reduced their leverage to the lowest level since 2001 and the burden of their financial obligation is lower than at any time since the mid-1980s.”

Goldman Sachs (GS) Earnings Call 4/17/14: “The first quarter reinforced two consistent themes that we have seen over the past few years: first, the continued uncertainty around the strength of the global economic recovery; and second, the dominant role that central banks play in driving broad economic activity and capital markets sentiment.”

Sonoco Products Co. (SON) Earnings Call 4/17/14: “We’re seeing improvement in certain domestic markets as well. For instance, we’ve experienced growth in dough, coffee, and nuts, which was partially offset by weather impacted categories like fiber, caulk, and snacks. However, both of these sectors are now rebounding. In addition, flexible volume continues to grow and we believe we’ve turned the corner in our thermoforming and blow-molding operations.”

Chipotle Mexican Grill (CMG) Earnings Call 4/17/14: “While sales were understandably down during days of extreme winter weather. When the weather improved, our sales recovered to a higher level than before the extreme weather for a few days before settling back into a normal sales trend. The comp also benefited from an increase in the average check of about 2% and we benefited by about 1% from an extra trading day as Easter was in the first quarter of last year.”

Sherwin-Williams (SHW) Earnings Call 4/17/14: “Consumer Group got off to a respectable start from a revenue perspective with organic sales up 1.6% in the quarter, but the harsh winter weather over the first two months of the year disrupted raw material deliveries that made it difficult to move finished goods across the northern half of the country and occasionally the southern half for that matter. This drove supply chain costs up, resulting in negative flow-through for the group in the quarter.”

AutoNation (AN) Earnings Call 4/17/14: “Certainly, in the last 10 days of March with the thaw, business was exceptionally strong. We see the same intensity continuing into the month of April, which gives us optimism that in the second quarter we can recoup some of the disruption that occurred in the first quarter because of weather, which gives us the confidence to confirm our forecast for the full year of industry growth between 3% and 5% breaking through 16 million units.”

Kimberly-Clark (KMB) Earnings Call 4/21/14: “I hate blaming weather for anything, and so – because you like to think that our products are more essential. So…people who have – didn’t come to work didn’t use hand towels, people that weren’t able to get to the welding job site didn’t use our safety products. And so we really lost hours of work in the first quarter.”

A.O. Smith (AOS) Earnings Call 4/22/14: “We are cautiously optimistic about the developing recovery in U.S. housing. After a very strong water heater industry growth in 2015, helped by improved levels of home completion and significant expansion of the replacement market, we expect residential water heater volumes in the U.S. to be up to approximately 9 million units including tankless, primarily due to an increase in new home construction this year.”

Deltic Timber (DEL) Earnings Call 4/22/14: “…the winter weather conditions that existed for much of the US during the first quarter had a chilling effect on markets for these companies’ wood products. These conditions prevented builders from starting new homes, which resulted in decreased demand and lower prices for the dimension lumber used to construct these new homes. With these market conditions, we were forced to reduce our lumber production to meet the market demand…”

Genuine Parts Co (GPC) Earnings Call 4/22/14: “The extreme weather we encountered during the month of January, and even into February in some southern states as well as up and down the Eastern Seaboard, forced numerous store and customer closures and had a negative impact on our business.”

P&G (PG) Earnings Call 4/23/14: “We continue to operate in a volatile environment with uncertainty in foreign exchange, deceleration in market growth rates, and a rapidly developing policy environment.”

Manpowergroup Inc (MAN) Earnings Call 4/23/14: “As I look at the U.S. markets, we could see continued good, stable demand for almost all our service offerings. After some rough weather at the beginning of the year, we have seen demand and volume stabilize and improve across most of our brands.”

Norfolk Southern (NSC) Earnings Call 4/23/14: “The impact of severe winter weather was concentrated in January and February, with March showing a fairly strong recovery. Clearly severe weather in the quarter depressed certain economic activity and shipments in the first two months of the year in particular.”

Six Flags Entertainment (SIX) Earnings Call 4/23/14: “Attendance for the quarter declined by 434,000. As we discussed on our last earnings call, we anticipated a 300,000 decline in attendance in the quarter as a result of the shift of the Easter holiday and related school Spring Breaks at some of our parks into the second quarter this year. Unfortunately, in addition, we saw some very unfavorable weather at our two Texas parks during their Spring Breaks in early March, which accounted for the remainder of the decline.”