We’re not booming but we learned this week that we’re clipping along at a far better pace than expected, that is, than was priced in, even a few weeks ago, let alone early Q4 when we highlighted this reality.
We’ve seen this week that manufacturing activity growth accelerated in December to its best pace since June. It’s not booming, but improving. And it will continue to improve.
We’ve seen this week that business activity in the services, construction and government sectors accelerated modestly in December. It’s not booming either but pretty good given the headwinds.
Finally, we saw today that jobs-related activity is accelerating. (Cynics accuse the administration of cooking the books. A fairy tale.)
The Dec unemployment rate dropped but joblessness is still relatively high, with 13.1MM people officially unemployed, and 8.1MM working part time, but only because they can’t find full time. That will come.
Next, although improving, hourly earnings are still not beating consumer inflation. This did not stop the consumer however, Q4, and now, we expect hourly and weekly earnings to improve, and at an accelerating rate, into H2.
Next, we saw today that job creation in December was improved; nothing spectacular but better. There is little evidence that overall hiring is accelerating (gov’t job declines) but it is clear that private sector employment is accelerating, a very good thing. That’s certainly better than was expected early Q4.
Finally, some suspect a whiff of seasonality to today’s report, suggesting that strength may not carry into 2012. Doubt it.
In summary then, we can repeat guidelines set out earlier for our clients. First, continue to rely on our anchors - Spending, Jobs activity and Manufacturing. That means, when there is a relevant release, go into that release expecting a broach. Know that even now, any major surprises to the US real sector to be to the side of relative vigor, not weakness. And finally, know that the US (and Canada) will continue to distance - at an accelerating rate - other developed credits.
These dynamics will continue to support our insight from early November to sell the Euro vs US$. For more on that topic, see the sketch below.
Robert Craven
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