The U.S. Economy Created 304,000 Jobs in January… The unemployment rate ticked up 0.1% to 4% as workers rejoined the workforce.
What it means – You might ask, how is it possible that we shut down the government, keep almost one million workers from their jobs, and yet it doesn’t affect the employment situation? Good question. The answer – the Bureau of Labor Statistics (BLS) counted them anyway. The BLS reasoned that the workers were only furloughed, and would receive back pay once the shutdown ended, so it doesn’t really count. That sounds reasonable, but it makes you wonder what else the BLS fudges.
Deeper in the January jobs report, the BLS revised the previous reports down by 70,000, but overall the report showed strength across the U.S. economy. Our old friend, the birth/death adjustment, isn’t useful in January because this is when the BLS reconciles its data to the national income reports.
The Shutdown Is Over, For the Moment… President Trump agreed to fund the government for three weeks as long as Congress works toward a deal on border control.
What it means – Federal workers were back on the job, and by today they were supposed to have collected all back pay. Congressional leaders began negotiating a compromise over border wall funding and immigration, but they don’t have much time. President Trump agreed to fund the government only through February 15. However, there might be a way out. The Congressional Research Service reported that Trump could bypass Congress and fund the wall without declaring an emergency. If Congress doesn’t come up with a deal he likes, chances are he will build the wall without them.
The good news is that if the president goes down this road at least the government will remain open.
It will take agencies from the Bureau of Economic Analysis to the Census Bureau some time before they have crunched all the numbers and can release overdue economic reports.
Federal Reserve Sounds a Dovish Note… Fed Chair Powell stated that the case for raising rates had weakened, and the Fed allowed that it could tweak its balance sheet reduction program.
What it means – Investors wanted the Fed to show them the love, and they weren’t disappointed. The central bank didn’t raise rates, but that was widely expected. The Fed went further, noting that the headwinds facing the economy, from the government shutdown to the trade war, have shaken things up enough to where we don’t need higher rates at the moment. In addition, the Fed noted that it can change its stance on shrinking its balance sheet, meaning they can stop shedding bonds, at any time.
This fits right in line with Powell’s repeated statement that the Fed is “data driven,” which is the way that central bankers give themselves room to change their minds anytime.
Investors took this to mean that the Fed will move to a neutral stance, neither expanding nor contracting money supply. Based on the Fed announcements, investors bought Treasury bonds, driving 10-year interest rates below 2.7%, and the equity markets shot higher.
S&P/CoreLogic Case-Shiller 20-City Home Price Index Up 4.7% in November Over Last Year… Home prices marched higher, but at a slower pace, falling from the 5% growth rate in October.
What it means – There’s nothing new in this report. Home prices have been flattening or falling in several markets, pulling down the overall growth rate for months. We started the year with prices up 6% over last year, and the gains have steadily eroded since mid-summer. By summer of this year, we should see the home price index gains close to zero.
New Home Sales Jumped 16.9% in November… Following weak sales in October, new home sales rebounded strongly in November, but the annual sales rate remains 7.7% below 2017.
What it means – The data is two months old, and it’s from that long-ago period before the December 2018 meltdown and the longest government shutdown in U.S. history, so we have to take it with a grain of salt. But there is some useful information tucked into the belated release.
Along with rising sales, we also had falling prices. The median new home went out the door at $302,400, which is 7% lower than the median price in October and 11.9% less than the median price in November of 2017.
It looks like homebuilders were discounting like crazy to get inventory out the door. In a weird turn of statistics, more homes were put on the market, but months’ supply fell because homes were sold at a faster pace.
Japanese Senior Citizens Committing Crimes, Hoping For Prison… They’re not crazy. With limited funds, few friends, and little family, older Japanese citizens are making the calculation that going to prison isn’t such a bad deal. As the old saying goes, it can’t be all bad because you get “three hots and a cot” for free!
One elderly convict noted that he’d stolen a bicycle and ridden it to the police station to report his crime. He was sentenced to a year behind bars. After that, he took a knife to a park and threatened women until one of them called police, which was his goal. That got him sent back up the river.
The man explained that the process works out well because the government pays his pension even as he languishes behind bars, so when he gets out, he’s actually saved a little cash.
A female inmate points out that, in addition to free room and board, inmates also benefit from forced socialization.
Data supplied by Dent Research/Delray Beach Publishing
“When the facts change, I change my mind.
What do you do, sir?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.
WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Investor Resources, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient.
This message is intended only for the use of the person(s) (“intended recipient”) to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Investor Resources, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message.
Investor Resources, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion.