Wednesday, January 05, 2011
Some Very Good News On The Employment Front
The retail hiring survey earlier in 2010 showed very strong holiday hiring intentions. Even though we lost jobs in the November employment survey, the survey week was too early to pick up a lot of the seasonal hiring. I think we should be looking for a minimum of 250K plus in December on Friday's report. How many are temp? I don't know. There are always seasonal jobs in package shipping (driving, sorting, etc) and in retail around the holidays.
I believe the fall slump in overall employment during the fall was mostly related to the inventory cycle. That cycle should be mostly cleared now, so I am hoping that as some of the retail jobs slack off we get an uptick in production jobs.
There is nothing we can do about the government jobs. They will continue to drop for a while.
ADP only tracks private employment, and private employment is growing. According to the ADP report, 270K of the 297K jobs were in services, so there is hope that January and February should be strengthened by better production. Just because it is so very encouraging, I post this graph from the ADP employment report.
We've come a long way, baby.
When mixed in with government jobs, the real improvement in private employment is somewhat masked.
It will be a bit before we get the Medicare wage figure for December from Treasury.
Freight and rail figures did show a fall slackening, but that trend seems to have reversed somewhat in recent weeks. The first three weeks of January will be a lot more indicative.
The worst problem we have in the next six months is the Fed. There is clear upward movement in pricing in grocery stores on the basics, which means that at least a third of the population is going to have a very tough winter indeed. It depends on how we can find an equilibrium.
The other thing I am watching are other deposits at banks in the H.8 release. Loans and leases are still dropping, and probably at a slightly higher rate than earlier this year. That is not such a problem, because car loans outside of banks should be rising at a healthy clip. But the combination of the Fed's actions which will increase inflation on basics and Congress' actions (a very large tax cut for upper-middle class workers) are going to distort the entire pricing system and will hurt what so far appears to be a very healthy bottom-up recovery.
We do not need more houses. We do need more jobs. We must cut government jobs, so we need the private sector to gather its haunches and grow. Higher asset prices do not assist with this. If you get the income gains traveling down the ladder, asset prices will follow on their own. A healthy economy needs asset prices in line with incomes. What destroyed our economy was the huge inflation in asset prices in relation to incomes.
But the reality is that usually the economy weakens when the bottom third start losing real income, and the dual actions of the Fed and a deranged DC are likely to produce lower real incomes in 2011 for at least 50% of the population. That is not a happy outcome.
I'll have more later in the week. I'm terribly busy right now.
I expect housing values in many high property-tax areas to keep falling for quite some time, although more slowly.
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