Neil Irwin says “the single biggest question about the economy in 2015 is whether pay raises will become more commonplace. Three pieces of news on Tuesday point to yes.” (1) “Employers are saying they have a lot more openings, but seem to be having trouble filling those jobs as quickly as historical patterns would suggest. As we have argued before, that suggests they will have to make those jobs more attractive to fill those openings more rapidly, either with higher pay, improved benefits, better working conditions or a combination of these,” (2) “The proportion of small businesses planning to increase compensation in the next three months [is] 17 percentage points higher than those [planning] decreases, the widest margin since 2007,” and (3) Aetna. Also, Business Insider can barely contain their excitement.
Stocks are down this morning. The media is offering two explanations as to why: (1) Retail sales dropped 0.9% in December, which is roughly “twice as large as the most pessimistic estimate of 87 economists surveyed by Bloomberg.” Furthermore, November was revised from a 0.7% gain to a 0.4% gain, and October was taken down a couple notches as well. “For all of 2014, purchases increased 4 percent after a 4.1 gain the previous year.” And (2) “JPMorgan Chase on Wednesday reported an unexpected drop in profit during a sluggish fourth quarter.” (Note to self: “country and humanity” is Jamie Dimon’s tell) “Earnings fell 7 percent…$1.19 a share…short of the $1.31 a share expected by analysts.” Apparently we are going to ignore this: Wells Fargo’s Profit Rises On Loan Growth (alt). Either way, the 10-year is now at 1.79% (alt) as global investors are stocking up on safe assets amid a deflation scare.
And The Ugly
The European Court of Justice advocate general has “blessed the principle” of QE in Europe, and “if the [ECB] follows the [ECJ] advocate general’s line, the German constitutional court would find itself in an odd situation. In its February 2014 ruling, the Karlsruhe judges made clear they thought the ECB was acting outside its remit. If they don’t agree with the ECJ’s legal reasoning, they could in theory instruct the German Bundesbank not to cooperate” — Can you spot the problem with QE in Europe? Meanwhile, the euro is now trading below its value back in 1999 when the currency was launched ($1.17).