The world economy is slowing down and the authorities are fretting.
The ink isn't dry yet on the amazing midterm drubbing of the democrats over what most Americans said were deteriorating economic issues and a recovery that continues to only be there on BLS goalseeked paper, and lo and behold, here is Obama, about to boast about today's whopper of a jobs number, in which the BLS proudly reported the US hired some 321K workers in November, mostly temps, secretaries, retail and leisure workers and teachers. That, and the president is also expected to announce the choice of Ash Carter as the new Secretary of Defense.
Curious just what the "quality" of jobs that comprised the best jobs report in nearly 3 years? Here is the answer: Retail Trade, Education and Health, and Leisure and Hospitality, as well as Administrative Assistants, cumulatively made up more than half of the jobs gains in the month. All minimum-wage or just above paying jobs. Which is why anyone who believes that wages rose at the rate the BLS would like you to believe, may want to wait until the inevitable downward revision.
While the seasonally-adjusted headline Establishment Survey payroll print reported by the BLS moments ago may be indicative of an economy which the Fed will soon have to temper in an attempt to cool down, a closer read of the November payrolls report shows several other things that were not quite as rosy. First, the Household Survey was nowhere close to confirming the Establishment Survey data, suggesting jobs rose only by 4K from 147,283K to 147,287K, and furthermore, the breakdown was skewed fully in favor of Part-Time jobs, which rose by 77K while Full-Time jobs declined by 150K.
If the Fed needed a flashing red light that the time for a first rate hike is overdue, it just got it moments ago when the BLS reported that in November some 321K jobs were added, a 4 sigma beat to the 230K expected, and well above the revised 243K in October. In fact, this was the biggest monthly jobs addition since January 2012!
B-Dud Explains The Fed’s Economic Coup (Or Why Every Asset Price Influencing Monetary Policy Transmission Is Now Manipulated)Submitted by Tyler Durden on 12/03/2014 20:30 -0400
The Fed can do only do two concrete things to influence these income and credit sources of spending - both of which are unsustainable, dangerous and an assault on free market capitalism’s capacity to generate growth and wealth. It can induce households to consume a higher fraction of current income by radically suppressing interest rates on liquid savings. And it can inject reserves into the financial system to induce higher levels of credit creation. But the passage of time soon catches up with both of these parlor tricks.
But all the clever talking heads (the same ones that to-a-man saw rising rates this year) keep telling us that wage inflation is coming any minute, it has to right, and will create escape velocity and nirvana on American soil. Sorry, nope. Unit labor costs dropped 1.0% in Q3 against a 0.3% preliminary print and expectations of a mere 0.2% drop (the 4th missing quarter of th elast 5 and lowest growth since Q4 2013. What is more problematic is real hourly compensation was revised drastically lower - quite a plunge.
Following 2 months of improving growth and beats after a mid-year slump, ADP Employment in November dropped to 208k (from a revised 233k in Oct) missing expectations of 222k by the most since August. November has historically seen a significant bump higher in employment but 2014 saw a drop (the first since 2008) with the lowest November print since 2010.
The executive actions on immigration announced last week look likely to have only a modest economic effect, because, as Goldman Sachs explains, most of the individuals eligible for the programs are already in the US and, in most cases, are likely already working. That said, Goldman estimates that the changes should increase the labor force by about 300k over the next couple of years and that possible wage gains among those gaining work authorization would increase average wages by less than 0.1%.
Who says there is no wage growth in real (or nominal terms)? After real wages failed to rise in real terms on 6 of the past 7 months, here courtesy of the BLS is the unprecedented surge to real average hourly earnings that took place in October.
For the fourth month in a row, the shale-revolution crushing plunge in crude prices managed to push energy costs down, with the BLS reporting that "the gasoline index fell for the fourth month in a row, declining 3.0 percent, and the indexes for natural gas and fuel oil also decreased." As a result, October CPI was unchanged from a month earlier, and up 1.7% from a year ago, below the Fed's 2.0% target. However, stripping away plunging energy prices, things were a little different, with CPI ex food and energy up 0.2%, slightly above the 0.1% expected, and up from 0.1% before. But before everyone screams deflation, here is what also happened: the shelter index, airline fares, household furnishings and operations, medical care, recreation, personal care, tobacco, and new vehicles were among the indexes that increased. And for those few who have to eat, "The index for food at home has risen 3.3 percent over the last 12 months, the largest 12-month increase since April 2012." and "The index for nonalcoholic beverages rose 0.6 percent, its largest increase since September 2012."
The bad news in today's PPI inflation report: por prices soared by 7% in the past month, while beef prices hit a new record high, rising 2% in the month, and up nearly 30% from a year ago. The good news: for the first time in years, booze prices declined from a year ago. So, with compliments of the hoapy president: don't be moapy and start drinking cheap booze, preferably early and often, as you try to remember - in an alcoholic daze - what beef tastes like.
Janet Yellen will be pleased... or not. Producer Price Inflation printed hotter than expected across all its various incarnations (good news, no deflation; bad news, no deflation excuse for The Fed). Ex Food-and-Energy prices rose 1.8% YoY (4-month highs), considerably more than the 1.5% expectations but surged 0.4% MoM - the most in 16 months. PPI Final Demand rose 1.5% YoY (1.3% exp). The rise in PPI appears driven by Food prices which are up 1.0% (the most since April) and Trade PPI (+1.5%) thanks to a 26.1% jump in margins for fuels and lubricants retailing (under new calculation methods) accounted for nearly 40% of the rise in final demand.
While it was already leaked in the past week that oil service giant Halliburton would seek to purchase Baker Hughes, or, if the smaller oilservice company did not accept the proposed terms, make a hostile run at its board of directors, it was unclear how the Houston company would respond. As the Houston Chronicle summarized, BHI had "to make a tough choice: surrender control on a rival's terms or face months of sunken oil prices and cost pressures alone....Halliburton's demands come as crude prices have fallen dramatically and as the U.S. oil industry looks to an uncertain future. Much is unclear: how much oil producers will rein in equipment and service spending, whether oil prices will sink or swim, and how much Baker Hughes would be worth in six months after what would likely be a bruising battle for control of its board." Moments ago we got the answer and Baker Hughes shareholders decided they have had enough of the volatile oil price and are happy to cash out at this point, in a $34.6 billion deal that values BHI shares at $78.62/share.
"You might think legions of retiring Baby Boomers are to blame, or perhaps the swelling ranks of laid-off workers who’ve grown discouraged about their re-employment prospects. While both of those groups doubtless are important (though just how important is debated by labor economists), our analysis of Bureau of Labor Statistics data suggests another key factor: Teens and young adults aren’t as interested in entering the work force as they used to be, a trend that predates the Great Recession." - Pew