We predicted Apr/6 than any surprises for the US would be to the side of weakness, and that traders should prepare for that reality. The headline Payroll print of May/2 (+288M) seemed to make us out to be just another medicine show.
Granted, we are having a tougher time than usual understanding the US economic landscape just ahead. Our exercise with the UK has been much easier, past 12 months, and certainly much more satisfying.
Our theme all along for the US has been that a statist administration and an activist Fed are counter-productive, counter-productive because both cause corporate risk takers to quail, if not cower.
Recall the latest in the Fed mandate craze - preserve financial stability. This is absurd when sculpted as a directive to the Fed - giving the keys to the inmates. The Fed is the very agent of financial instability because it has eviscerated normal market-clearing mechanisms. The Fed is the architect of what now amounts to a house of cards.
Reflect then on our prediction or theme and then reflect on Q1 activity as released Apr/30. Total fixed investment fell 2.8%, the biggest drop since Q4 ’09. We don’t think this was the weather; it was attitude. Spending on equipment fell 5.5% and residential investment, down 5.8%. That’s not the weather either. Where was there vigor? Well, the stand out was spending on health care, climbing by $43.3 bln to a $1.85 trl annualized pace, the most since records began 65 years ago. Recall that in a recent sketch we highlighted this very trend - thank you Obama.
And now back to the Apr Payroll print. There was real improvement here to be sure. We saw that goods-producing industries added 53M and we saw manufacturing added 12M.
OK. But it is also true that both average hours and average earnings were flat. Unemployment was reported at 6.3% but that was because the labor participation rate fell back to 62.8%, a low last seen in 1978.
We’re not in the snake oil business at this shop.
Robert Craven
Granted, we are having a tougher time than usual understanding the US economic landscape just ahead. Our exercise with the UK has been much easier, past 12 months, and certainly much more satisfying.
Our theme all along for the US has been that a statist administration and an activist Fed are counter-productive, counter-productive because both cause corporate risk takers to quail, if not cower.
Recall the latest in the Fed mandate craze - preserve financial stability. This is absurd when sculpted as a directive to the Fed - giving the keys to the inmates. The Fed is the very agent of financial instability because it has eviscerated normal market-clearing mechanisms. The Fed is the architect of what now amounts to a house of cards.
Reflect then on our prediction or theme and then reflect on Q1 activity as released Apr/30. Total fixed investment fell 2.8%, the biggest drop since Q4 ’09. We don’t think this was the weather; it was attitude. Spending on equipment fell 5.5% and residential investment, down 5.8%. That’s not the weather either. Where was there vigor? Well, the stand out was spending on health care, climbing by $43.3 bln to a $1.85 trl annualized pace, the most since records began 65 years ago. Recall that in a recent sketch we highlighted this very trend - thank you Obama.
And now back to the Apr Payroll print. There was real improvement here to be sure. We saw that goods-producing industries added 53M and we saw manufacturing added 12M.
OK. But it is also true that both average hours and average earnings were flat. Unemployment was reported at 6.3% but that was because the labor participation rate fell back to 62.8%, a low last seen in 1978.
We’re not in the snake oil business at this shop.
Robert Craven
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