Following last week's surge back over the 300k Maginot Line, the Labor Department print this week is 298k (sigh of relief heard around the world). This is also the week that BLS surveys for the Augsut NFP print. Continuing claims fell once again to 2.500 million - the lowest print since June 2007. So great news... that explains why stocks are fading modestly off the highs in reaction.
At this point, one has to wonder, just what is the point of all the Central Banks’ activities? The QE efforts in the US and Japan (two of the biggest in history) haven’t really generated jobs or GDP growth… so just what ARE they doing?
The first half of this week has been very interesting from an economic, financial and geopolitical viewpoint. Despite what appears to be globally increasing risks, the financial markets have seemed relatively unfazed. Historically, such calm has always existed prior to the eventual storm. This week’s “3 Things” takes a look at some of the “rising risks” that we believe are being ignored which could potentially be harmful to individual's portfolios.
According to a new analysis from CareerCast jobs, seven of the top 10 careers are in the healthcare industry and, as expected, require an advanced degree. As CBS reports, while these jobs are all pegged to show strong earnings growth through 2022, there is a downside: Becoming a surgeon or physician requires years of graduate school and training, which requires an investment of time and money. "There is a tradeoff for every job," Oh well, at least it doesn't require stealing from widows and orphans, and one can even sleep at night without the help of industiral amounts of horse tranquilizer. So without further ado, here are the ten top paying jobs for 2014...
Now that even the Fed has admitted the BLS' nonfarm payroll and unemployment rate are meaningless due to the "noise" from a record number of workers dropping out of the labor force, Janet Yellen is left with one fallback "favorite" indicator, the JOLTS survey (Job Openings and Labor Turnover). It is here that something rather unexpected just happened, when moments ago the BLS reported that US employers reported a whopping 4671K job openings in the month of June, beating expectations of a 4.6MM print and well above the downward revised 4,577K in May. This was the highest openings print since February 2001, and one which suddenly puts the "hawkish" Janet Yellen back in play as it suggests that slack in the labor market, at least based on the number of job openings, has not only filled the gap, but it is now overflowing!
In the first seven months of 2014, Goldman notes that equity, fixed income, and FX markets were most intently focused on the labor market with a number of the largest moves occurring due to employment reports and jobless claims. The equity market responded to a mix of economic, monetary policy, and geopolitical news. The fixed income market focused on employment reports, although other factors also resulted in large one-day moves. The dollar, although less volatile than usual, did move on both US economic developments and news out of Europe.
Here is the bottom line: since Lehman, or starting in 2009, the Birth/Death adjustment alone has added over 3.5 million jobs. Or rather "jobs", because these are not actual jobs - these are BLS estimates for how many jobs newly-formed businesses have created based purely on statistical estimations and hypotheses that the US economy in 2014 is as it was in 1960. Which means that the traditional dynamics used behind the Birth and Death adjustment are now merely Dead, and US employment is overestimated by as much as three and a half million jobs!
While earlier today initial claims disappointed modestly to the upside, the economic print the market has been fascinated by is the otherwise C-grade economic indicator released by the BLS, the Employment Cost Index, which is quite a backward looking (today's release looked at Q2) at wages, salaries and benefits. The reason it is fascinated by it is that, supposedly, total employment costs rose the most in 6 years, with wages rising the most since Q3 2008 and benefits: the most since Q2 2011. And the reason why the risk switch has been pushed into the Off position is because this alleges that wages are finally rising, something which the Fed did not know yesterday, and which will make the hawkish case that much stronger.
"More of the same," should summarize today's FOMC statement. There will be no press conference or refresh of the 'dot plot' economic projections. The Fed is expected to continue to taper by $10 billion with confirmation that the "growth meme" is playing out just as they projected (especially after today's GDP print). Goldman believes the focus will be on the jobs 'dashboard' and recent inflation data enables the dovish Fed to argue recent moves were noise and stay easier for longer. The downside risk (for markets) may be that Fed hawks will likely have little luck in altering the way forward guidance is employed by the Fed (and chatter over a Fisher dissent is possible).
Despots, dictators, and power hungry presidents arise in an atmosphere of fear, scarce resources, hopelessness, and misery. As the power of the central government grows; the freedoms, liberties and rights of the people are diminished and ultimately relinquished.
For all the talk about "noisy inflation" this and "rising prices are good for the economy" that, what the Fed's cheerleading squad continues to ignore is the one most important inflation the US economy needs in order to actually have a sustainable recovery instead of centrally-planned stagflation: wage inflation. And while bullish pundits keep reffering to some mythical CEO survey promising wage will increase any day now, just not today, the BLS released its most recent real wage (adjusted for inflation) report today showing that not only did the average real hourly wage remain flat for the second month in a row at $10.29, the lowest level since September 2013, but posted the first annual decline since October 2012.
Consumer Price Inflation was 2.1% in June (as expected) remaining above the Fed's mandate levels and worryingly for all those who see the Fed as omniscient... refusing to go "noisily" down. Core CPI fell very modestly to 1.9% year-over-year but the jump in gasoline prices accounted for two-thirds of the overall rise in June CPI (seems like the Fed needs to print some more world peace to brings prices down). How many months of 'high' inflation does it take before Yellen admits it is not 'noise'?
The actual state of employment in the U.S. is likely far weaker than the economic statistics currently suggest. If this is indeed the case, it creates a potential for policy mistakes that could have negative consequences to both the economy and the financial markets.
World rankings of June manufacturing PMIs point to GDP accelerating in the U.K. and the risk of the French economy contracting last quarter, according to Bloomberg Briefs' Niraj Shah. The U.K. economy grew by 0.8% in the first three months of the year while French output failed to grow. The French and U.K. economies account for 3.59 percent and 3.4 percent of global output, respectively. Whether one should entrust any faith in forecasting future growth to these soft-survey data is questionable at best but the investing world appears happy to find more confirmation-bias confirming indicators.
Day in, day out, China 'bulls' (which implies 'everything' bulls as China is the ultimate fall-back save of growth in the world) will use the government-provided PMIs (at 2014 highs) as an indication that everything is tip-top and all those concerns about China's shadow-banking system, CCFD unwinds, guarantor bankruptcies, money-market rate surges on liquidity demand, and tumbling house prices are storms in a teacup to be ignored. Well in the interests of 'beating' a dead horse (and remembering just how bad soft-survey-based PMI data is at predicting future growth), we show below 11 examples that suggest China is anything but healthy.