The
release of the official US Non-Farm payrolls report for November later today
will, as usual, be closely watched by the markets. Figures released two days
ago by the ADP group, a private company, were less than stellar for the same
period, but ADP has proven not to be a good indicator of the government survey
outcome in the past. Any result that does not show new jobs amounting to a
figure that is comfortably above 200k will be interpreted by the market as
pushing back the time when interest rates stateside will begin to rise, and
will be bad for the value of the US dollar.
As
we have pointed out before, however, the US Federal Reserve is not looking at individual
monthly figures. Its members are, as they should be, taking into account the
overall trend in employment. The chart above shows total US Non-farm employment
on a monthly basis, going back to the start of last year. As can be seen, the
trend is resolutely upward.
There
are two factors included in the rise. These are the effects of the larger
number of people who are opting out of the workforce, either through retirement
or disillusion brought about by the economic crisis, and an increase in the
number of immigrants, both legal and otherwise, who must be accommodated in the
workforce. President Obama’s recent initiatives with regard to the
regularization of undocumented immigrants are bound to increase this figure.
But
the absolute and sustained rise in jobs is still a big positive for the
economy. Over in Germany, a study by the well-respected ZEW organization has
determined that immigration has added an additional net €22 billion for the use
of the German government last year, after taxes paid and benefits drawn by them
have been balanced out. Germany, along with many other nations, notably Japan,
has an aging indigenous population that must be supported by the welfare
system. The new moves to welcome immigrants by the administration in the US are
undoubtedly driven by the consideration that something similar is possible
there.
Senor Draghi wins
the jawboning prize
The ECB montary policy statement and press conference
yesterday was something of an anti-climax. Far from announcing what the market
expected to hear, that plunging inflation and rising unemployment in the
Eurozone had made full-blown Quantitative Easing (QE), to include the purchase
of sovereign bonds, a necessity, all that was delivered was a further round of
what the Australians call “jawboning”, a series of contingent half promises,
that might or might not come to pass in the New Year. In this regard Mr. Draghi has not
only joined but exceeded many other central bankers in the developed world.
In fairness to the ECB president and his colleagues, they have, to
some extent, been blindsided by the recent and drastic fall in commodities,
most notably oil. While the energy factor is the one that is driving down the
headline inflation figure, it is also the element that has the potential to
increase the confidence of consumers and lead to more spending, provided always
that it can be translated into lower costs for those same consumers. In time,
this should be a positive for the inflation rate.
The Euro took wings on the strength of the non-story coming
out of the ECB (which has moved to very nice new offices in Frankfurt – you can
see an interesting time-lapse video of their construction here). This
was simply a reversal of the fall that took place the previous day in
anticipation of different news from the ECB - whether or not yesterday’s rise
in the Single Currency will continue is debatable.
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