The mainstream press and their liberal Keynesian allies in academia (that means you Princeton & Berkeley) have made a sport out of roasting the Republican led Congress for reining in government spending. Lower government spending, we are told, kills growth at best and crashes the economy at worst. It is a remarkable feat to argue that bigger government leads to stronger growth when centuries of evidence prove otherwise. Those economies where the share of government is smallest most often are the fastest growing. Viewed through the lens of Washington insiders, the gridlock and … [Read more...]
Higher Pay Coming down the Pike
The Labor Department’s JOLTs survey came out yesterday and it showed continued improvement in the outlook for the labor market. The ratio of job openings to the number of unemployed workers rose to a post recovery high. When the number of job openings to the number of unemployed workers rises, it signals that labor demand is outpacing labor supply. When demand outpaces supply, higher prices are often the result. The historical lead time for the ratio of job openings to the number of unemployed is about six months. It looks like higher wages are coming down the pike. … [Read more...]
Payrolls Surge
The monthly jobs report was released this morning and payroll employment soared past expectations. Total job growth was 321,000 with private payrolls up 314,000. Economists were looking for total job growth of 230,000. More meaningfully, the six month moving average of private payroll employment reached the highest point of the recovery. The Fed needs to explain why it is still running and promising to run emergency monetary policy that inflicts undue pain on retired investors and savers while the economic growth is humming along just fine. … [Read more...]
Auto Sales Booming
Auto sales are booming. For November auto sales came in at an annual rate of over 17 million units. That is the best November since 2001. That’s the good news. The bad news is that with car sales already at 17 million units, much of the juice has been squeezed out of the lemon. Auto sales have provided a nice boost to GDP since the recovery began, but at this stage of the business cycle autos are going to contribute less and less to growth. … [Read more...]
The Monday Melee: Taxes, Japan, and Princess Football
Abenomics Fails In the third quarter GDP sank for the second time in a row in Japan. It turns out printing money and raising taxes is just as bad for the economy as it ever was. Princess Football We're avid football fans here at Youngresearch.com, and this past week's SNL featured this skit with Woody Harrelson that perfectly explained what we think of the new rules in the league. What We're Reading: A perplexing rally (Gavekal Capital Blog) How to Distort Income Inequality (The Wall Street Journal) "Tax Fact of the Day" (Greg Mankiw's Blog) Sterling Hits 14-Month Low Against … [Read more...]
Robbing Peter to Employ Paul
The October jobs report was released today. The headline payroll employment number came in at 214,000, slightly below economist expectations, but a good number nonetheless. The prior two months of non-farm payrolls were revised up by a total of 31,000. Over the last six months payroll employment growth in the U.S. has averaged a healthy 235,000. The unemployment rate also came down. Using the Bureau of Labor Statistics (BLS) headline number, the unemployment rate ticked down a tenth of a point, but when you take the data out another decimal point, you find that the unemployment rate fell … [Read more...]
The Bullard Bottom
My Favorite chart for the month of October comes courtesy of Zerohedge. Zerohedge points out the schizophrenic policy views of St. Louis Fed President James Bullard. Bullard is sometimes a policy hawk and other times a dove, but mostly he is just consistently inconsistent. Just days before the market corrected, Bullard was out boasting about a strengthening economy and the need to remove monetary accommodation (read end QE and hike rates). Days later he had a change of heart. His change of heart didn’t come from the economic data that the Fed regularly assures us its policy is dependent … [Read more...]
Pop Quiz: Who Said It?
1.) “I will be the first to say that it is always difficult to get monetary policy just right. But the Fed’s analytical prowess is top-notch and our forecasting record is second to none” 2.) “Q: Can you act quickly enough to prevent inflation from getting out of control?A: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now. Q: You have what degree of confidence in your ability to control this [inflation]? A: … [Read more...]
Does this Look Like Austerity to You?
The machinations and hand wringing from Euro-area politicians and bankers over austerity imposed by Germany in return for bailouts has masked the reality that Euro-area countries are quickly piling on government debt. Since the end of 2008 Euro-area debt as a percentage of GDP has risen from 70.8% to 96.4% with no end in sight. Does this look like austerity to you? … [Read more...]
The Heroin Connection
Heroin is a highly addictive drug. It is an opioid like morphine, codeine, and methadone. One of the reasons heroin is so addictive is that our brains have receptors for opiates that our body naturally produces—the endorphins produced during or after exercise for example. When an addict starts using heroin daily, his brain stops producing natural opiates because it is getting all the opiates it needs and more from the heroin. If the heroin addict continues using for years and years, he slowly trains his own body to cease all natural dopamine production. A dependency is created where the … [Read more...]
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