Today’s ADP employment report came out with a figure of 139,000 jobs added to the US economy in February. This number is low and comes with downward revisions to past numbers. The ADP data are the last big numbers we will see except weekly initial claims before the jobs report come out. I think the numbers point to a tepid pace of underlying growth in the 2% range, not yet susceptible to recession due to exogenous shocks, but weaker than generally perceived.
Themes for today:
Commodities: soybean prices could fall due to increased supply. This would be troublesome for Argentina.
Emerging markets: Of the fragile five, India is looking better, Brazil is still a big concern.
Developed Markets: House price inflation makes France, the UK, Australia and Canada vulnerable to real economy shocks.
US: Consumers are only supporting 1-2% growth. Q1 will be weak. Inventory builds are still the big story.
Former Morgan Stanley Chief Economist Stephen Roach isn’t buying the US recovery. The economist, now a Senior Fellow at Yale University, talked to Bloomberg Television’s “Surveillance” earlier today to discuss the US economy, as well as emerging markets, Apple’s stock repurchase and his new book “Unbalanced: The Codependency of America and China.”. Roach told Tom Keene: “the American consumer remains […]
This post is about three different topics, Bitcoin and e-Payments, the Minimum Wage, and consumer spending and Walmart. There has been a lot of discussion about all three and I believe I have an innovative way to attack all three issues that will satisfy most reasonable people. The idea is simply to for Walmart to conduct a de facto minimum wage increase of all of its minimum wage workers’ salary by giving them extra salary in e-payments usable only at Walmart and transferable securely via a payment algorithm similar to Bitcoin’s.
The danger of Japan’s current policy (Abenomics) is that the outcome could turn out to be the exact opposite of what was originally intended. With wages stagnant, these import-driven price increases are hitting the Japanese consumer quite hard. As a result, spending on domestically produced goods and services could end up falling, constraining domestic prices instead of increasing them.
Consumer spending in the US accelerated in November, boosting projections for the GDP growth in the fourth quarter. While incomes grew as well, the rate of increases from the same period last year has slowed. With confidence improving, consumers have increased spending while wages have not kept up.
I am not a bull, largely because I have concerns about the long-term sustainability of today’s policy mix in Europe and the United States and the rise in equity multiples. But it is undeniable that we are seeing a more bullish outlook for the global economy at present. Below are some thoughts about the outlook in the context of today’s upward revision in US GDP figures.
A number of indicators seem to point to a relatively weak holiday shopping season in the US. In particular, the Gallup survey index that estimates holiday spending has turned lower. And consumer sentiment peaked this summer and has been declining since.
debt matters, even if it is possible to pretend for many years that it doesn’t (and this pretense was made possible by the implicit capitalization of debt-servicing costs). Japan never really wrote down all or even most of its investment misallocation of the 1980s and simply rolled it forward in the form of rising government debt. For a long time it was able to service this growing debt burden by keeping interest rates very low as a response to very slow growth and by effectively capitalizing interest payments, but if Abenomics is “successful”, ironically, it will no longer be able to play this game.
The U.S. Treasury’s semi-annual currency report had surprisingly strong criticism for Germany. The U.S. claims that Germany’s macroeconomic policies are inherently deflationary, creating risk for further crisis. I agree with this criticism and I will explain why it is valid here.
WTI crude oil has undergone a substantial correction in the last few days. What’s going on?
The recent downturns in consumer confidence and spending are likely being exacerbated by the controversy in Washington; but it is clear that the consumer was already feeling the pressure of the surge in interest rates, higher energy and food costs and stagnant wages.