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Friday, January 05, 2007

What A Beautiful Morning!

It's dark, wet, and contains very good economic news. Crude oil is way down. (Ethanol isn't going to do it - we need to capitalize on this breathing room with domestic energy production.) Excellent employment report.

If this big drop in oil prices is sustained, it means lower gas prices (see Oraculations on gas/crude), which means contained inflation, which gives absolutely everyone more room to maneuver while dealing with the housing/bad mortgage shakeout.

Some points about the employment report (table B-1, which has the breakdown, is here):
Over the year, health care employment increased by 324,000, with gains spread throughout the component industries.
In the past 12 months, food services added 304,000 jobs, accounting for most of the over-the-year increase in leisure and hospitality employment.
Employment in financial activities was up by 153,000 over the year; job gains occurred in insurance (46,000) and in credit intermediation (62,000), which includes commercial banking.
Employment in transportation and warehousing continued to trend up in December. Over the year, the industry added 106,000 jobs.
After increasing by 295,000 in 2005, construction employment was little changed in 2006. Over the year, gains in non-residential speciality trades and in heavy construction were largely offset by a decline in residential specialty trades.
Over the year, manufacturing employment fell by 72,000 with declines widespread throughout the component industries.
Retail employment showed a net loss for the year, but hotels, restaurants and catering was up big. Workforce participation is up to 66.5%:
About 1.3 million persons (not seasonally adjusted) were marginally attached to the labor force in December, 337,000 fewer than a year earlier.
That's a very important statistic that shows a real gain in economic strength over the year.

There are clear negative trends - manufacturing, retail and construction are all trending down - but this report still shows that we are starting to deal with the housing employment recession from a relatively healthy starting point. The bottom line is that we are seeing a slow down in consumption, but hopefully also a pickup in hard investment. That is, if we can refrain from overbuilding ethanol plants.

If you look at the manufacturing section of table B-1, you clearly see the effect of the housing recession. SA manufacturing lost 12,000 jobs Nov-Dec (NSA was 18,000). Segments:
Seasonally adjusted retail lost 9,200 jobs. Professional and business services was very, very strong (50,000 net jobs in December).

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