Moderate Economic Expansion
“Despite a virtual 100 mph headwind, payrolls still managed to get off the runway. That’s the theme for January’s employment report, for which the U.S. economy overcame not just falling energy prices, but a stronger dollar, and postholiday hiring liquidations to post yet another strong month of job gains.” “Non-farm payrolls rose by 257,000 in January (alt), above analyst forecasts for 230,000 jobs to be created. Data were revised for November and December to show 147,000 more jobs were created than previously reported.” Over the last three months, the US economy has averaged 333,000 new jobs per month. “Average hourly earnings increased by 12 cents after falling 5 cents the previous month, taking annual growth in wages to 2.2 per cent, the largest gain since August…The unemployment rate rose marginally to 5.7 per cent…[participation] rose two-tenths of a percentage point to 62.9 per cent.” As always: 10 charts, economists react. Here’s something to consider: “employment among 25- to 34-year-olds, the prime age group for housing demand, was at 76.6% in January — up from 75.8% one year ago, and the highest level since the end of 2008.” Along those lines, class of 2014 business undergrads are actually getting hired again. OK, so… Inflation has definitely taken over from employment as the number one most important thing to be watching right now (why do you think we’ve been so concerned with wages and oil prices for the last 12 months?). Here’s something else you might want to pay attention to: velocity of money. There’s been a pretty huge debate between economists since QE got started about whether or not increasing/manipulating the monetary base will result in runaway inflation (Keynesians say no, Monetarists say sprechen sie Wiemar?). We haven’t seen any wheelbarrows of cash (or really any inflation above 3%) so far, but that’s because V was stuffed under the mattress, ja? So if velocity of money ever shows its face again, well…Home Depot will probably get an upgrade. Do yourself a favor and brush up on your MV=PQ; you’re gonna need it.
In Memoriam: Beanie Bubble
“‘The goal of memory isn’t to keep the details. It’s to be able to generalize from what you know so that you are more confident in acting on it.’ You run away from the dog that looks like the one that bit you, rather than standing around questioning how accurate your recall is.” Meanwhile, I bet you don’t recall your love for beanie babies, do you?
“The rich now account for such a large share of the economy, and their wealth has become so large and volatile, that wealth effects on their consumption have started to have a significant impact on the macroeconomy. Indeed, the rich may have accounted for the bulk of the swings in aggregate consumption during the boom-bust [of the 2000s].”
“The current European crisis is boringly similar to nearly every currency and sovereign debt crisis in modern history, in that it pits the interest of workers and small producers against the interests of bankers. The former want higher wages and rapid economic growth. The latter want to protect the value of the currency and the sanctity of debt.”
USA: Reaping What You Sow
“To some outsiders the Fed appears to be some kind of combination of Hogwarts, the Death Star, and Ebenezer Scrooge — especially to those who don’t take the time to read the copious amounts of reports and speeches and explanations we emit.” PUT YOUR DUKES UP RAND PAUL CUZ YOU’RE MESSING WITH THE WRONG WIZARD/JEDI/BANKER. Related: “people hate Goldman Sachs more than oil spills and the Koch brothers.”