Karim writes:

  • Better than expected overall; private payrolls up 67k, consistent with recent trend.
  • Net revisions up 123k (July private payrolls revised from +71k to +107k)
  • UE rate up from 9.51% to 9.64%
  • Hours flat but July revised up from 0.3% to 0.4%
  • Avg hourly earnings up 0.3%
  • Private payroll strength even more impressive considering -61k swing in mfg employment (totally out of synch w/ism employment indicator)
  • Median duration of unemployment down to 19.9 weeks, from 22.2 last mth and high of 25.5 in June
  • U6 UE measure up to 16.7% from 16.5%

Conclusion: Beneath the surface, solid gains this quarter in the components that drive personal income: jobs+wages+hours. Politically, the headline UE rate and the U6 measure are a problem and will make the various fiscal stimulus measures more likely. So really may be best of both worlds for economy.

Agreed!

UE up as people reenter the labor force, which happens as jobs open up in this part of the cycle.

And low/negative productivity last quarter could be telling us businesses critically understaffed due to uncertainty are finally being forced to get to where they need to be to service current sales/client bases. So hiring rises faster than output for a while. This is also a good sign as that supports personal income and consumption.

There never was a double dip in the cards. It would have had to come from an outside shock. The federal deficit now seems more than large enough to continue to support modest top line growth, and any further increase will offer further support.

The ongoing federal deficits have also largely repaired household balance sheets, adding income and savings of financial assets to the non govt sectors, and continue to do so.

This sets us up for the ‘hand off’ to private sector deficit spending (credit expansion) taking over from govt sector deficit spending, usually via cars and houses. Car sales seem to already be improving, and housing has nowhere to go than up as well. Starts could double and still be at historically low levels.

So the outlook remains very good for equities, not so good for rates, and not so good for large share of the population that needs to work for a living, as most of the incremental wealth flows to the top.

7 Responses

    1. No kidding.

      ==============
      “Politically, the headline UE rate and the U6 measure are a problem and will make the various fiscal stimulus measures more likely. So really may be best of both worlds for economy.”
      ===============

      What planet is this person from? Fiscal stimulus more likely??

      We’re headed for a government shut down, not more fiscal stimulus.

      Looking at the total payrolls so far, and the low probability that the labor market will start giving us a net 200k per month for the rest of the year, you can expect the unemployment rate in Dec to be just about where it was in Jan (not to mention, the very same as in August 2009 ) at 9.7%.

      We’re well into a jobless “recovery” – just like the “recovery” from the 2001 recession.

      This is an absolute fucking nightmare.

  1. Now if only we had the intelligence and the courage to eliminate FICA, and cut some other taxes, we could help that “large share of the population that needs to work for a living.” Being unemployed and broke is not trivial.

    Rodger Malcolm Mitchell

  2. “The ongoing federal deficits have also largely repaired household balance sheets…”

    On what data do you base this assertion? Consumer debt is only off 6.5% from peak. What decrease there has been is mostly writeoffs by CC companies. Household debt took decades to accumulate. We’re nowhere near the end of household deleveraging.

    20% of homeowners are underwater. Many people expect housing prices to decrease another 10%. That’s hardly good for household balance sheets.

    There’s no driver for jobs. Where do you see aggregate demand increasing? Absent taxcuts or stimulus that target consumers, not just business, it won’t happen.

    1. the Fed’s June numbers for financial obligations ratios should be out any day now and I suspect the further drops they’ll show due to ongoing deficit spending will indicate the extent of repair

  3. Thought this was interesting…..

    Citigroup Proclaims `Cult of Equity’ Has Died

    During the past decade, pension funds and individual investors alike moved away from stocks as volatility rose and returns suffered, Buckland wrote. Bonds were the beneficiaries of this shift.

    “There could still be considerable institutional selling to come,” the report said. U.S. corporate pension plans would have to unload $1.9 trillion of shares to cut their equity holdings to 20 percent of assets, a prevailing allocation in the 1950s and earlier, he estimated.

    http://www.bloomberg.com/news/2010-09-03/-cult-of-equity-is-dead-citigroup-s-buckland-proclaims-chart-of-the-day.html

  4. From end of August Treasury Statement:

    Total Withdrawals: 987,829
    Treasury Sec. Redemp: 645,620
    Net Withdrawals: 342,209

    Total Deposits: 1,060,167
    Treasury Issuance: 867,796
    Net Deposits: 192,371

    Net Withdrawals – Net Deposits = 149,838 for the month…pretty big.
    Resp,

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