I like reading Ambrose Evans-Pritchard most of the time. When he is writing about the EU, he brings a sober analysis to the topic, without getting too hysterical. Sure, bad policy will lead to catastrophe eventually, but it takes a long time and you have plenty of chance to change course.
Too often, policy debates are caste as dire emergencies that are about to doom us to a new dark ages if we don’t act now. It is too late for debate when the meteor is in the sky so if we are having a debate it usually means we have plenty of time to sort through our options.
Anyway, when he starts talking about his pals in the financial elite, he turns into the typical CNBC jabber-mouth.
The US Federal Reserve has begun to pivot. Monetary tightening is coming sooner than the world expected, with sober implications for overheated bourses, and for those in Asia, eastern Europe and Latin America that drank deepest from the draught of dollar liquidity.
We can expect a blistering dollar rally, perhaps akin to the early 1980s or the mid-1990s. It is fortuitous that the BRICS quintet of Brazil, Russia, India, China and South Africa have just launched their $100bn monetary fund to defend each other’s currencies. Some of them may need it.
America’s unemployment rate has fallen from 7.5pc to 6.1pc in 12 months. The country has been adding 230,000 jobs a month in the first half of this year.
No serious person takes the published unemployment rate at face value. No serious person thinks adding 230,000 jobs a month is great news. Half of those jobs are part-time anyway. American has added 7 million foreign workers since 2008. That’s over 100,000 jobs per month just to account for immigration. Normal population growth picks up the rest. At best, 230,000 new jobs per month is treading water.
Since Fed chief Janet Yellen targets jobs above all else, this was bound to force capitulation by the Fed before long. It happened this week in her testimony to Congress. “If the labour market continues to improve more quickly than anticipated, then increases in the federal funds rate likely would occur sooner and be more rapid than currently envisioned,” she said.
She could have said, “If leprechauns from Mars come down and start crapping gold bars we’ll be rich.” That would be as true and accurate as what she did say. In other words, she said nothing. Yet, the financial guys run around acting like the oracle just made a prophesy.
This is the part where the urge to strangle this pencil necked twit is overwhelming:
Her argument until now is that most of the jobless surge since the Great Recession is “cyclical and not structural” and therefore treatable by monetary stimulus. This is wearing thin. Skill shortages are cropping up everywhere. A Manpower survey of US firms found that 40pc are having trouble filling jobs. Total job openings have rocketed from 3.5m to 4.2m since January, the steepest rise in modern times.
Quantitative easing has done its job, keeping growth alive as Congress and the White House pushed through the most draconian fiscal squeeze since the end of the Korean War. The economy did not fall back into recession, though it came close. It has achieved “escape velocity”, of sorts.
Exactly none of this is true. The economy contracted in the first quarter. The preliminary numbers for Q2 are not encouraging, but maybe not recessionary. Wages have not budged, putting the lie to the skills shortage nonsense. The job openings nonsense is just cant. It is not a reliable metric. Like the silly men and women on CNBC, the writer so desperately wants Santa to be real, he will happily confuse reality with fantasy.
Meanwhile, Amazon has a P/E of $555 and these financial gurus think that’s just peachy.
Update: Microsoft laying of 18,000 workers. Yeah, Satya Nadella, the new CEO of Microsoft, is just doing the work Americans will not do, I guess.
Good work – the monthly job numbers are not great when you look at the emploment to population ratio – which everyone ignores. And the reason there are so “many” job openings is because the candidates are expected to be perfect and meet a laundry list of thirty requirements. The Chamber of Commerce myth that there is a skills gap needs to be debunked as often as possible.
PS – you’re always bashing the cult but it’s the right that has frozen wages for forty years and it’s Wall Street that brainwashed everyone to worship offshoring and the almighty EPS.
There’s no such thing as “the right” in any meaningful sense. It is merely the label the cult uses for the undifferentiated other outside the walls. America has been run by Progressives since FDR. Blaming the bogeyman for the current mess is no longer tenable.
I am going to comment on economics and population growth from England, so early warning: those of you who despise the English can skip this comment. However, for the rest of you it may approximate to what is happening in parts of the States. I live in a town with a significant muslim population. As the UK government provides healthy weekly payouts for producing offspring, the ‘new’ Brits are hard at work having kids and reaping the generous benefits. Incidentally on the back of this a lot of local UK stores offer ‘easy ways’ to transfer money out of the… Read more »
Small Beer – I bet you our illegals can beat your illegals.