Jobs growth volatility in headline numbersYou Call This Anemic?!

“The US economy added 288,000 jobs in April as the unemployment rate dropped to 6.3 per cent (alt), sharply beating expectations and offering new hope that the US recovery is accelerating.”  Not only that but “there were hefty upward revisions for the months of February and March,” which makes it the third month in a row we’ve seen jobs creation above 200,000/month.  And while “the share of the long-term unemployed as a fraction of the overall jobless…dropped to 35.3 per cent as 287,000 more of them found jobs…the labour force participation rate dropped to 62.8 per cent, from 63.2 per cent in March.”  But here’s a grain of salt for how the participation rate is measured.  Another “cloud in today’s employment report is worker pay is stagnating.  Average hourly earnings held at $24.31 in April, and were up 1.9 percent over the past 12 months, the smallest gain this year.”  Meanwhile, government jobs are still missing from the recovery (although they weren’t really part of the jobs lost either).  Also, here’s something to consider as you read the headlines about jobs.

Eurozone Manufacturing Rebounds, BCG Stands By Their Guns: Manufacturing Is Coming To USA

“The recovery in euro zone manufacturing accelerated at the start of the second quarter with solid growth across most of the bloc although French factories struggled to maintain momentum, a business survey showed on Friday.  Growth was again led by Germany, Europe’s largest economy, and previously-lagging companies in Spain and Italy reported better business last month.  It was the first time since November 2007 that all PMIs in the region indicated growth — coming in above the 50 break-even level.”  This is all pretty great, but here’s one concern: “factories cut goods prices for a second straight month — and at a slightly steeper pace.”  Meanwhile, BCG is out with another report analyzing the current state of manufacturing cost competitiveness around the globe.  Using wages, productivity growth, energy costs, and exchange rates to form their index, the report ranks countries into four groups based on competitiveness: Rising Stars (United States and Mexico), Holding Steady (Netherlands, India, Indonesia and United Kingdom), Losing Ground (Mostly central European countries) and Under Pressure (Brazil, Russia, China, Poland and Czech Republic).  Once qualitative factors (corruption, infrastructure, overall “ease” of doing business) and exchange rates are considered, BCG sees China, The United States and South Korea standing apart from the rest of the world’s top 10 exporters.  All this being said, “higher costs have not yet impacted Chinese export competitiveness.”

Foreign Central Banks And Major US Banks Are Supporting Treasuries As Fed Tapers

“in the first two months of this year, foreigners purchased $92.2 billion of Treasuries, more than a third of last year’s total, lifting their holdings by 1.6 percent in the process.”  Furthermore, “the overall foreign buying has helped keep Treasury yields down this year, experts say.  ‘There has been a broad-based increase in demand for Treasuries…Foreign demand is part of that…I think there will be very steady demand from Japanese investors…And with low yields in the euro zone, [even in] Italy and Spain, U.S. interest rates will look more and more attractive to foreign investors.’”  Meanwhile, “with a lackluster job recovery (today’s data probably impacts this statement but roll with it) and higher mortgage rates damping loan growth, banks are tapping record deposits to plow more money into government debt as regulations designed to limit risk-taking take effect.  The demand helps explain why Treasuries are rising from the deepest losses since 2009, confounding forecasters who foresaw declines as a strengthening U.S. economy prompted the Fed to cut back its own bond buying.”  Furthermore, “the simmering conflict between Russia and Ukraine has also boosted demand for the safest assets.”

“Select All” Option Doesn’t Reduce The Amount Of Homework Required For China’s A Share Market

“Buying stocks in Hong Kong is easy for U.S. ETF investors:  There are a few dozen options.  But China’s ‘A Share’ market until recently has been off limits to most foreigners, leaving it by some estimates with just 1% foreign ownership.”  But that’s changing, thanks to Deutsche Bank’s new db X-Trackers Harvest MSCI All China (CN) fund.  While BlackRock’s popular iShares China funds only stick to Hong Kong and U.S. listed equities, CN “gives U.S. investors the opportunity to invest in mainland shares, known as A-shares,” and “provides investors with the most comprehensive exposure to China by investing across the spectrum of Chinese securities.”  Awesome quote: “You still have to do homework these days, but the new ETF is something close to a ‘select all’ option.”

SEA: Seattle Announces Plan For $15 Minimum Wage, Highest In Nation

“The proposal is least forgiving for large businesses with more than 500 workers, which will have to reach the new $15 minimum by 2017 if they don’t give workers tips or health coverage; if they do, they’ll be given another year to reach $15.  Businesses with fewer than 500 workers will have until either 2019 or 2021 to hit $15, depending on the benefits they offer.”  

USA: Wall Street’s Quiet Turnabout On Swaps

“Banks can make more money from derivatives trading by locating it in their insured subsidiaries.  These subsidiaries usually have higher credit ratings than other parts of the bank, in part because of their implied government support…Dodd Frank’s swaps push-out rule seeks to reduce those effective government subsidies on Wall Street trading…Though the banks have long had a strong aversion to the idea of pushing out derivatives, something appears to be changing…the banks have started to shift substantial amounts of derivatives trades into offshore affiliates that the parent banks do not guarantee…the banks want to lessen the impact of new rules, also part of Dodd Frank, that aim to improve pricing transparency in the derivatives markets.  Trades done through the banks’ offshore nonguaranteed affiliates are more likely to be beyond the reach of the American transparency overhaul.”


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