It is Fed Day (again) and the central bankers have to decide how on Earth to deal with a US economy that not only has gone on a glide path to a soft landing but for the longest time looked like it would not slow down at all.
It always baffles me why the UK and European banks don't simply issue 30-year fixed-rate mortgages. UK floating rate resets appear to be particularly disruptive events.
The energy thing is huge; we manage our household finances very tightly (especially now that I'm retired), but sharply higher gas and electricity prices in Germany have us economizing and forgoing discretionary expenses to an extent I never contemplated. Meanwhile, back in the States, it's business as usual for my retired parents, who just bought a new car.
I know. 30-year mortgages shouldn't be too hard. There is a swap market so banks can hedge their exposure and insurance companies and pension funds will gladly take the other side of the trade. But being here in the UK, banks seem to even be unable to get a 10-year mortgage on the books. It's ridiculous.
The title says 'did land' but the article isn't that sure - already. And indeed: aren't we still flying?
'But for now, it very much looks like the US will be able to avoid a recession'
The canaries: just like Randstad is seeing a major decline in demand, in the US the bulk of job losses in the most recent jobs report came at 'temp help'. In the summer...Unemplyed Americans are also staying unemployed for longer while wage growth has reached a 3 year low. Pt jobs are replacing ft jobs.
'Jay Powell knows that the jobs data is overstated (he said it) but until the revisions are made - 800k jobs that went missing, backing the income that was not created, by the jobs that did not exist...To take that data out of the GDP figures and backing the consumption that did not exist…This all takes quarters and quarters and years and years to show up in the data'.
Btw: She's happy that Powell is so 'creative' since she believes he does it to allow him to keep interest rates high with the goal of 'smoking out the massive shadow banking system until new regulation comes into effect'.
'university of Michigan consumer sentiment data has just shown the biggest decline since 1968, and it's an average number pulled up by the top ⅓'.
Chart: 'US ft employment took a nosedive in nov 2023 (though the definition of ft is a bit meager). The US lost 1.5 mln jobs, a record number of Americans is working ft AND pt jobs: there are a lot of first time Uber drivers…' https://www.youtube.com/watch?v=LSLHAI_RIeA&t=1812s
And what i would add to Dimartino Booth's numbers:
The Biden admin has caused a particularly significant growth in gov sector jobs:
(Cheers Dem voters...and goodbye immigrants-who-we-publicly-love-so-much-but-who-are-unfortunately-mostly-employed-in-non-gov-sectors-probably-part-time-and-without-benefits).
This is not a healthy business sector creating jobs, this is a gov deficit creating gov jobs.
Some of what is in the Klement-Substack study's numbers are what i would call 'sterilized' data. I.e. it looks better in theory than in the real world.
The Biden admin has been making a lot of noise about job- and business growth. But the majority of new US jobs are part time jobs - the IRS definition of a ft job is 'at least 30 hours p week' while the average US ft employee works 36.4 hours. (And more and more without benefits as pt jobs typically come without those. No wonder so many Americans work two jobs).
Can we really (already) untangle numbers? If you look at EU bankruptcies they're dominated by the transport & storage sector. The same sector that dominated business- and job growth during covid. Isn't that a return to (some form of) normalcy?
'There was hardly any demand-driven inflation in the UK and Eurozone in 2022 or 2023 because households didn’t see many wage increases and suffered under rapidly rising energy bills and mortgage rates'
On top of wage increases came gov covid- and energy bill support for citizens and companies in many EU nations (i don't remember what scruffy, sorry, plucky little Briton did - apart from buying electricity from the Belgians at 50 x the normal rate).
PS earlier this week you posted about the impact of high/low gov debt. This below chart (#3 figure) shows a funny little side effect:
EU public sector wage growth for high- and low gov debt countries
It always baffles me why the UK and European banks don't simply issue 30-year fixed-rate mortgages. UK floating rate resets appear to be particularly disruptive events.
The energy thing is huge; we manage our household finances very tightly (especially now that I'm retired), but sharply higher gas and electricity prices in Germany have us economizing and forgoing discretionary expenses to an extent I never contemplated. Meanwhile, back in the States, it's business as usual for my retired parents, who just bought a new car.
I know. 30-year mortgages shouldn't be too hard. There is a swap market so banks can hedge their exposure and insurance companies and pension funds will gladly take the other side of the trade. But being here in the UK, banks seem to even be unable to get a 10-year mortgage on the books. It's ridiculous.
The title says 'did land' but the article isn't that sure - already. And indeed: aren't we still flying?
'But for now, it very much looks like the US will be able to avoid a recession'
The canaries: just like Randstad is seeing a major decline in demand, in the US the bulk of job losses in the most recent jobs report came at 'temp help'. In the summer...Unemplyed Americans are also staying unemployed for longer while wage growth has reached a 3 year low. Pt jobs are replacing ft jobs.
Danielle Dimartino Booth a few days ago:
https://www.youtube.com/watch?v=LSLHAI_RIeA&t=1442s
'Jay Powell knows that the jobs data is overstated (he said it) but until the revisions are made - 800k jobs that went missing, backing the income that was not created, by the jobs that did not exist...To take that data out of the GDP figures and backing the consumption that did not exist…This all takes quarters and quarters and years and years to show up in the data'.
Btw: She's happy that Powell is so 'creative' since she believes he does it to allow him to keep interest rates high with the goal of 'smoking out the massive shadow banking system until new regulation comes into effect'.
'university of Michigan consumer sentiment data has just shown the biggest decline since 1968, and it's an average number pulled up by the top ⅓'.
Chart: 'US ft employment took a nosedive in nov 2023 (though the definition of ft is a bit meager). The US lost 1.5 mln jobs, a record number of Americans is working ft AND pt jobs: there are a lot of first time Uber drivers…' https://www.youtube.com/watch?v=LSLHAI_RIeA&t=1812s
And what i would add to Dimartino Booth's numbers:
The Biden admin has caused a particularly significant growth in gov sector jobs:
https://edition.cnn.com/business/live-news/us-jobs-report-june-final/index.html#:~:text=July%205%2C%202024-,Where%20the%20jobs%20are,-From%20CNN%27s%20Matt
(Cheers Dem voters...and goodbye immigrants-who-we-publicly-love-so-much-but-who-are-unfortunately-mostly-employed-in-non-gov-sectors-probably-part-time-and-without-benefits).
This is not a healthy business sector creating jobs, this is a gov deficit creating gov jobs.
Some of what is in the Klement-Substack study's numbers are what i would call 'sterilized' data. I.e. it looks better in theory than in the real world.
The Biden admin has been making a lot of noise about job- and business growth. But the majority of new US jobs are part time jobs - the IRS definition of a ft job is 'at least 30 hours p week' while the average US ft employee works 36.4 hours. (And more and more without benefits as pt jobs typically come without those. No wonder so many Americans work two jobs).
Many new ‘companies’ were started by laid off workers who then tried to go at it alone. Just like EU new business registration happens the most in sectors where i expect (and know for the NL's numbers) to find a lot of new one-employee-only 'businesses': https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20240215-2#:~:text=quarter%20of%202023%2C-,registrations,-saw%20the%20highest
Can we really (already) untangle numbers? If you look at EU bankruptcies they're dominated by the transport & storage sector. The same sector that dominated business- and job growth during covid. Isn't that a return to (some form of) normalcy?
'There was hardly any demand-driven inflation in the UK and Eurozone in 2022 or 2023 because households didn’t see many wage increases and suffered under rapidly rising energy bills and mortgage rates'
Didn’t see many wage increases?
Talk to the hand.
Of my hairdresser.
So i beg to differ: the Eurozone saw wage increases: https://www.ecb.europa.eu/press/economic-bulletin/focus/2023/html/ecb.ebbox202305_08~37403a54da.en.html#:~:text=COVID%2D19%20crisis).-,Chart,-A
Some individual memberstates:
NL wage increases https://www.cbs.nl/nl-nl/visualisaties/dashboard-arbeidsmarkt/ontwikkeling-cao-lonen
(NL) ‘The development of the last quarter in 2023 saw the largest collective labor agreement wage increase in more than forty years, at 6.8 percent’
French wages https://tradingeconomics.com/france/wage-growth
UK wage growth https://tradingeconomics.com/united-kingdom/wage-growth
On top of wage increases came gov covid- and energy bill support for citizens and companies in many EU nations (i don't remember what scruffy, sorry, plucky little Briton did - apart from buying electricity from the Belgians at 50 x the normal rate).
PS earlier this week you posted about the impact of high/low gov debt. This below chart (#3 figure) shows a funny little side effect:
EU public sector wage growth for high- and low gov debt countries
https://www.ecb.europa.eu/press/economic-bulletin/focus/2023/html/ecb.ebbox202305_08~37403a54da.en.html#:~:text=Average%20growth%20rates
Now let's remember who typically are the advocates of high(er) public debt and where left leaning people prefer to work…