U.S. Economy Added 250,000 Jobs in October… The unemployment rate remained steady at 3.7%.
What it means – The jobs numbers handily beat the 190,000 expected, and the growth more than compensated for the modest reduction of 16,000 jobs from the September numbers. But the headline wasn’t the most positive part of the report. In addition to more jobs, we also got higher pay, as average hourly earnings inched up 0.2% for the month and 3.1% over this time last year. The annual gain is this highest recorded during this long economic expansion.
Even though it looks like all sunshine and roses, there is a bit of a cloud. Through its birth/death model, where the Bureau of Labor Statistics estimates jobs added or lost by companies not included in its survey, the agency guessed that an additional 246,000 jobs were added on a non-seasonally adjusted basis. That number accounts for almost all the net jobs gains for the month.
S&P/CoreLogic Case-Shiller Home Price Index Growth Slows from 5.9% to 5.5%… Confirming what sellers already knew, home prices are flattening around the country.
What it means – Las Vegas is the outlier, with home prices up 13.9% over last year, while growth in Washington, D.C., and New York eased to 2.8%. Growth in Chicago was slightly better at 2.9%. Annual growth rates remain positive across the country, but the trend in recent months turned decidedly lower. Buyers are scarce as prices remain high and interest rates move up.
If prices don’t gather momentum in the next few months, by early 2019 this index will be close to zero as the comparisons become much harder.
Eurozone GDP Inched Up 0.8% in the Third Quarter… The economic bloc’s economy expanded by 1.7% over last year, down from 2.2% in the second quarter.
What it means – With inflation dropping and now economic growth sliding, the ECB finds itself in a pickle. If the central bank ends its bond-buying program in December as promised, then interest rates should melt up. That’s bad for growth but changing course at this point would create a bit of chaos. Besides, the euro has fallen as the Fed raised rates and the ECB stood still. To stop the slide in the common currency, the ECB must tighten monetary policy at least a little.
The European central bankers must choose the lesser of two bad options, risk impeding growth or encourage capital to leave the economic bloc.
U.S. Treasury to Issue More than $1 Trillion in Debt in 2018… That will be the highest debt issuance since 2010, when the economy was struggling to recover from the financial crisis.
What it means – What happens when you give one class of taxpayers a 60% tax break? You collect less in taxes. That, in a nutshell, is the situation in the U.S.
While we almost always run deficits, the current debt explosion will almost double the amount of debt sold in 2017 and will lead to a fiscal year deficit (October through September) of $1 trillion. This will be the first of many. And it comes during a time of strong economic growth. When the economic pendulum eventually swings to contraction, the deficit and debt will expand dramatically.
With more debt in the markets and the Fed shrinking its balance sheet, interest rates are inching higher. The 30-year treasury bond touched 3.40%, the highest rate in the recent cycle. Higher rates will bleed into home and auto financing, causing more ripples in the economy.
Chinese Yuan Falls Close to 7 Per U.S. Dollar… The Chinese currency weakened dramatically in the past several months and now sits very close to 7 per dollar, a level last reached during the financial crisis in 2008.
What it means – The Chinese would love to manipulate their currency. They want it stronger. But investors both domestic and foreign see things differently. The Middle Kingdom is slowing down economically, and the trade war with the U.S. hurts.
Investors that minted fortunes during the Chinese Miracle would like to get their assets out of the country, which drives down the value of the Yuan. To fight the economic slowdown, the Chinese government keeps a lid on interest rates and eases credit, but that encourages capital to flee faster.
Eventually, the Yuan will break 7 and the Chinese economy will suffer an ugly setback. The move will send shockwaves through nearby trading partners like South Korea. 2019 is setting up to be a volatile year!
GM Beats Estimates, Stock Up 9%… The car company sold 14.7% fewer cars but raised the average price by $800. Sales were focused on profitable pickup trucks.
What it means – General Motors should hold a special place in taxpayers’ hearts. The company stiffed creditors, gave gifts to unions, and then demanded a bailout from the U.S. government that included backstopping the gold-plated retirement programs of the UAW. Then the company went public again in November 2010. At $33. After the earnings-driven stock price pop, the stock is trading at $36, a whopping 10% gain from the IPO price 10 years ago.
And the kicker? The company announced it will offer voluntary buyouts to cut costs and expects to implement layoffs. You’d think a company that received billions in taxpayer bailout funds and had its debt wiped away could do a little better.
Reese’s Installs Candy Converter for Unwanted Halloween Candy in New York’s Washington Square Park… The peanut butter and chocolate candy company set up the machine to allow those with unwanted Halloween candy to exchange for Reese’s.
What it means – The candy company commissioned a survey and found that 90% of respondents wished they could trade unwanted Halloween candy for something else. As the number one choice of candy for Halloween, Reese’s obliged by creating a candy converter. The company set up the box in Washington Square and, from 4 p.m. to 9 p.m. on Wednesday, exchanged unwanted candy for 10,000 Reese’s. Marketing genius, pure and simple.
Data supplied by Dent Research/Delray Beach Publishing
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