Nice-looking Numbers from the Labor Department
Economy reportedly adds 94,000 jobs in November
By blackhedd Posted in Economy | unemployment — Comments (13) / Email this page » / Leave a comment »
The Bureau of Labor Statistics have released their monthly snapshot of employment conditions for November, and it surprised on the upside. Expectations were for the economy to have added 70,000 new jobs last month, but the number came in at 94,000.
The bond market is selling off on this news, with the short end of the yield curve down slightly and the middle and long-end up considerably. The 10-year note has now fallen to yield nearly 4.10%, as opposed to an incredibly strong 3.92% several days ago.
More analysis below the fold...
What the bond markets are saying is that unexpectedly strong performance in the economy during the financial and housing crises is reducing expectations for further interest-rate cuts from the Federal Reserve.
This sentiment is echoed in the recent rally in the dollar against the euro. (The greenback has rallied above-parity against the loonie after Canadian officials cut interest rates the other day. The dollar's recent strength against the yen reflects increased risk-tolerance in carry trades, which is positive but volatile from day-to-day.)
As we have come to expect, the BLS statistics show that jobs continue to be lost at very high rates in the goods-producing, manufacturing and construction sectors. The job growth in services, retail, education and government more than made up for these losses.
To an ever-increasing degree, Americans no longer make or build things. Instead, they perform services for each other and work for the government.
There is one element in the Labor report that may be taken with a wary eye: wages growth was strong in November. The Federal Reserve spends a great deal of its time worrying about inflation. Any significant amount of inflation in the economy basically eliminates lower interest rates as a policy tool.
This matters because a great deal of the recent optimism in the stock markets is predicated on further cuts in rates by the Fed. In the Fed's view of the world, food and energy-price inflation don't really matter all that much.
What they care a very great deal about, however, (in addition to "core" consumer prices) is wages. Because if wages grow, businesses may find that they are able to pass higher labor costs along to consumers in the form of higher prices. That's the kind of inflation that can get out of control.
Other recent reports show that consumer confidence is at cyclical lows. This measurement is important because it's theoretically a leading indicator of future spending, even though it probably measures news-bias more than anything else. And obviously the news bias has been overwhelmingly negative for the economy.
If consumers are facing distress from the strong drop in the value of their homes which continues uninterrupted, they're not showing any signs of it. As mbecker and others have pointed out (and as my own private conversations indicate), a lot more shoes will drop as adjustable Alt-A mortgages start to reset over the next year and beyond.
I'm not inclined to the prevailing view that housing weakness will badly hurt consumer spending. We have yet to see any evidence of that. It may just be too early to tell, and perhaps the holiday retail season is masking the effect.
I continue to see daily evidence of exceptionally strong growth in the global economy outside of the US and Europe. To repeat what I've said in prior posts, I strongly expect that export growth will lead the US economy for years to come.
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Nice-looking Numbers from the Labor Department 13 Comments (0 topical, 13 editorial, 0 hidden) Post a comment »
It's hard to handicap from here whether a President Clinton with reinforced Congressional majorities actually would follow through on her protectionist rhetoric.
Let's assume she does. My guess is that like a lot of people, she's most concerned about manufacturing. If so, she's obviously not reading the BLS numbers which show that the few manufacturing jobs left in this country are disappearing fast.
So that suggests she'll try to protect industries that don't matter anyway.
The other thought I have is that the rest of the world is growing so incredibly fast that they won't have the ability to retaliate against our exports. And that's because demand is such that they need every bit they can get.
Bottom line: in a Hillary Presidency, the smart people will migrate to commodity and services export businesses. Those who choose to stick it out in growing but low value-added domestic industries like healthcare, retail and government may be very, very sorry a decade or two from now.
Or maybe an oleander.
Bottom line: in a Hillary Presidency, the smart people will migrate to commodity and services export businesses. Those who choose to stick it out in growing but low value-added domestic industries like healthcare, retail and government may be very, very sorry a decade or two from now.
Just how is healthcare low value added ?
______________________________
"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
...for a lot of reasons. It's overwhelmingly service oriented so it doesn't benefit from globalization. It's already one of the most heavily-regulated industries, and if we get socialized medicine it will be far more regulated than it is now.
Healthcare is also a severely fragmented industry, and it steadfastly resists transforming itself via information technology (with the exception of the medical-devices business). Not being a healthcare expert, it's not clear to me whether this pair of effects is fundamental to the industry or simply results from the attenuation of market forces caused by regulation.
I apologize for saying something you've already heard a million times, with a dozen different political spins, but: healthcare now accounts for about twice the share of GDP as it did a generation or two ago.
The charitable spin on this is that we're getting a lot more healthcare and health outcomes are far better. The latter is indisputably true. The former? I'm not as sure. I still see an industry that is insulated from proper competition and just plain refuses to make itself more efficient.
Yes, National Review had a good mini-piece with an interesting graph in the last issue. I can't seem to locate it on the free part of their website so sorry, no link. The upshot of the graph is that demographics, which are also frequently blamed for the increasing cost of health care as a percentage of GDP don't cover even a quarter of the expected increase in the cost of healthcare over the next 10 years. The author attributes it to the third party payment structure for healthcare. Since neither the doctor nor the patient has a direct concern about the payment for services, there is no brake on increasing costs.
As we have come to expect, the BLS statistics show that jobs continue to be lost at very high rates in the goods-producing, manufacturing and construction sectors. The job growth in services, retail, education and government more than made up for these losses.
To an ever-increasing degree, Americans no longer make or build things. Instead, they perform services for each other and work for the government.
and
I continue to see daily evidence of exceptionally strong growth in the global economy outside of the US and Europe. To repeat what I've said in prior posts, I strongly expect that export growth will lead the US economy for years to come.
Just what do you see us exporting ?
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
Airliners and earth-moving equipment you already know about.
Services like logistics and finance you probably know about too.
How about building materials like cement and clinker? I'm not kidding. I just talked to a guy who's making big deals selling this stuff to clients in the Persian Gulf.
That's just wild. China, India, the Middle East, and parts of Latam are hot as firecrackers, with no end in sight.
So yes I would.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
Are you seeing evidence that foreign enterprises are eager to buy American companies during these cheap dollar days? If so, any predictions for our economy?
It seems to me that this would be a good kickstart for American manufacturing with new foreign ownership opening export markets into their own home countries. And as industry brings industry, we might expect a renewed entrepreneurship from Americans ready to participate.
I'm feeling more optimistic that the dollar's weakness might actually spur growth here. Am I wrong? What am I ignoring?
I think the biggest problem might be that of ownership, and the fact that while we might see a lot of growth most of the benefits of said growth will go to those who own the capital, not those who work for it.
"A rising tide raises all ships" in some paradigms, but last time I checked income inequality is increasing in the USA (and Warren Buffet has been saying some rather bizarre things of late). I would feel much better about the economy if either America or Americans were saving something. Our government is borrowing hundreds of billions of dollars a year; that money is getting pumped directly into the economy. This feels like a family that is running up credit debt while claiming to be in great financial shape. At some point the bill comes due.
That said you are right that a weak dollar helps exports and so there is some self-correcting mechanism involved in trade balances, but the converse is that we'll be forced to wean ourselves off of cheap foreign imports. Things could get messy.
At least we're back above the Canadian dollar.
as long as China keeps their currency pegged to the dollar. Much of those cheep goods are made in China. Imports from Europe and other places will see price increases. China, not so much.
And don't get so concerned about foreign ownership. We went through that with the Japanese in the 80's and suffered no ill effects. I'd argue that it's best they return the capital to our shores rather than putting the money elsewhere....
Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.
I'm with Fred!
...by the mid-Nineties, when their banking system was under severe distress from the end of their asset bubble and they had to repatriate capital.
There's a decent case that the same will happen in China since they just popped a really ugly equity-price bubble.
But the funny thing about China is that they never seem to feel the financial stresses that knock everyone else over. They're that good at isolating their banking system from real markets. It's the darnedest thing.
Don't expect that the Chinese will need to repatriate any of the capital they're spreading all around the world.
I don't have reliable information to judge whether foreign acquisitions of American businesses on the whole is increasing. I expect that, given the political sensitivity of the subject, that deals will be confined to small minority stakes.
A very interesting class of foreign investor that is getting active in acquisitions globally (not just in the US) is the so-called "sovereign wealth fund." Those are funds controlled by governments of countries that earn too much money from exports, so they have to keep it out of their domestic economies to control inflation. Some of the biggest SWFs are in Dubai, Norway and China, but there are others.
These funds will definitely change the balance of power in the global economy through their acquisitions. Their managers are also generally much sharper than the people who manage central-bank reserves in the same countries, and they know how important it is to keep their activities out of the news.
Another thing that is continuing unabated is direct foreign investment by Americans in other countries. This is probably a more important mode of economic development on the whole than foreigners investing here. The latter still happens, but primarily to generate production for North American consumption.
I don't expect American manufacturing to start growing unless the world gets so strapped for manufactured goods that cost stops being a factor. (That may not be as unlikely as it sounds.)
The outlook for the dollar is totally uncertain, but I would be less surprised to see the dollar strengthen, and more surprised if it weakens further.
"I continue to see daily evidence of exceptionally strong growth in the global economy outside of the US and Europe. To repeat what I've said in prior posts, I strongly expect that export growth will lead the US economy for years to come."
But the economic know-nothings in the other parties are going to do their best to stifle free trade before we get a chance to do that.
And they make fun of our candidates for not believing in evolution . . .
http://www.myelectionanalysis.com