Bank of New Zealand raises interest rates

Earlier today, the Bank of New Zealand raised its short-term interest rate a quarter-point to an all-time high of 8 percent in an attempt to combat rising prices for both consumer goods and housing.

The currency rose to a multi-decade high, breaching the US$0.75 level against the U.S. dollar - it's been a wild ride for many foreign currencies over the last year and the Kiwi's has been one of the wildest.


Bloomberg reports:

"A sustained period of slower growth in domestic activity will be required to alleviate inflation pressures,'' Reserve Bank Governor Alan Bollard said in Wellington today. A 60 percent surge in world prices of dairy products the past six months has boosted farmers' incomes and will stoke inflation next year, he said.

Bollard's third rate increase since March is buoying New Zealand's dollar as investors are attracted to a benchmark rate second only to Iceland's among countries with the highest credit rating. The yield gap with Japan widened to 7.5 percentage points, boosting returns for investors who borrow yen to invest in New Zealand dollars, known as a carry trade.
...
Bollard isn't alone in raising rates to combat inflation. The European Central Bank yesterday raised its benchmark to a six-year high of 4 percent. The Bank of England's benchmark rate is at a six-year high of 5.5 percent after four increases in the past year, most recently on May 10.

The Reserve Bank of Australia yesterday left its benchmark at a six-year-high 6.25 percent. Futures traders have priced in another Australian increase by the end of this year, which would take the rate to a 10-year high.

With a booming economy, the Australian Dollar has also headed higher in recent months and, with today's stellar jobs report, both the exchange rate and interest rates will likely go even higher in Australia.

For both New Zealand and Australia, higher interest rates will create even more demand for the currencies from hedge funds employing the carry trade where firms borrow at low interest rates (e.g., Japan at 0.5 percent) and exchange these funds for higher yielding currencies (e.g., New Zealand at 8 percent and Australia at just over 6 percent).

A stronger currency makes exports more expensive and imports less expensive, slowing the economy and dampening domestic prices - at least that's the way it's supposed to work.

The Loonie looks pretty good too as the Bank of Canada gets ready for rate increases.


So far in 2007, foreign currencies have been a very good investment as the combination of higher overseas interest rates and currencies that are strengthening against the dollar provide returns far in excess of domestic savings accounts.

The foreign currency certificate of deposit held in the model portfolio at Iacono Research has gained ten percent since it was recommended to subscribers in January.

Read more...

It's all about the refineries ... for now

If you've been wondering why gasoline prices have been so high lately with crude oil trading at only $66 per barrel, the answer can be found at the refineries.

This week's TWIP (This Week in Petroleum) from the Energy Information Administration has some interesting commentary and, as always, abundant charts to tell the story of how retail gasoline prices have fallen for the second consecutive week, down five cents to $3.16 per gallon.

First, it should be clear that this is not an oil problem. U.S. oil inventories, the biggest raw material cost for gasoline (duh!) have been at or above the range considered normal for this time of year. There is no oil problem - that will occur sometime in the future, maybe soon, we'll see.

Yet, prices at the pump remain near record highs, particularly here on the West Coast where special formulation requirements and higher taxes almost always result in higher prices.

Lucky us - at least there's no big brown cloud hanging over the Western U.S. (except sometimes in Phoenix) like the one hanging over parts of developing Asia .


Gasoline stocks are way down, though they've been recovering dramatically in recent weeks as indicated by the current slope of the red-dotted line below. It turned ultra-steep last week in an attempt to make up for lost time and keep up with demand from the summer driving season that just started.


Have the refineries suddenly finished all their yearly maintenance work and flipped all the right switches to boost production?

Production has improved in recent weeks but it remains below levels from December of last year - refinery utilization for this time of the year is still below the levels of the last three years.


The downward price pressure (if you can call retail prices falling from $3.30 per gallon to $3.16 per gallon price pressure) comes largely from an increase in gasoline imports which have reached new multi-year highs.

And of course demand continues to increase, current levels of consumption for this time of year again at all time highs despite the higher prices.


Remember what a big deal it was a couple years ago when when gasoline stations couldn't find enough number 3s to put up on their signs out at the curb?

With the precarious balance between the supply and demand for crude oil combined with aging refineries, it seems only a matter of time before there is a new crisis - finding enough number 4s.

Read more...

More fun than a concert

About 10,000 protesters clashed with police earlier today as anti-capitalist demonstrators attempted to block roads leading to the G8 (Group of Eight) summit in Germany.

Water cannons were used after protesters hurled rocks and stones at police vehicles - eight officers were injured and 15 demonstrators were arrested.

Save for the stone throwing, water cannons, riot gear, and general confrontational mood, it looked much like a 1960s era mid-summer gathering of concert-goers - as if they were about to join hands and sing about Coca-Cola.

The German news weekly der Spiegel provided these photos:








In the Speigel Online report as well as in this account from Reuters, there was no word on what the demonstrators were protesting - "anti-capitalism" seems have been sufficient explanation in the Reuters report.

Poor Akie Abe, wife of Japanese Prime Minister Shinzo Abe - as a result of the demonstrations, she was forced to cancel a planned sightseeing tour of the nearby resort town of Kuehlungsborn.

Read more...

The ECB and their interest rates

As widely expected, the European Central Bank (ECB) raised their key short-term interest rate a quarter-point earlier today, from 3.75 percent to 4 percent. The move comes amid stronger euro-zone growth and growing dissent regarding the relationship between monetary policy and money supply growth.

With annualized first quarter economic growth registering 2.4 percent, as compared to just 0.6 percent in the U.S., recent estimates for both euro-zone economic activity and consumer prices continue to be revised upward as forecasts for labor markets show lower unemployment and wage pressures in the months ahead.

Though many analysts see more rate hikes ahead, some placing the short-term rate at 4.5 percent by year-end, the timing of future increases is uncertain.

Keeping the "money" in monetary policy

Unlike their U.S. counterparts at the Federal Reserve, the ECB monitors both consumer price inflation and money supply growth. One look at the relationship between these two (courtesy of Econoday) shows why euro-zone interest rates are rising while the officially reported inflation measure remains comfortably below the 2 percent target threshold.


The U.S. Federal Reserve has long dismissed the importance of money supply growth and went so far as discontinuing the reporting of the M3 monetary aggregate last spring citing the cost savings that would be achieved.

It has been dutifully reconstructed at nowandfutures.com and shows no let up in growth, the green-to-black transition in the chart below indicating where the government reporting stopped and the independent reporting began.

In Europe, the election of conservative president Nicoloas Sarkozy in France has added to an already growing rift between those who apparently agree with Milton Friedman that "inflation is always and everywhere a monetary phenomenon" and those who would prefer to just "let 'er rip" while monitoring increasingly suspect and controversial government measures of consumer price inflation.

Bloomberg reported on these developments yesterday:

European Central Bank head Jean-Claude Trichet has parried criticism from Nicolas Sarkozy, the new president of his native France. Fresh doubts from Trichet's protege at the French central bank may be harder to ignore.

As the ECB prepares to raise its key interest rate to a six-year high of 4 percent tomorrow, Trichet's faith in the importance of money supply is being questioned by Christian Noyer, 56, who succeeded him as governor of the Bank of France and sits with him on the ECB's governing council.

With Mario Draghi's Bank of Italy lining up with Noyer against Trichet and Bundesbank President Axel Weber, the Frankfurt-based ECB is debating how to interpret money-supply data for the first time since its 1999 birth. The split may make it tougher for Trichet, 64, to forge a consensus over how much further to increase rates.

"The hawks at the ECB give a lot of weight to headline money supply, and that proved useful when they wanted to tighten,'' said James Nixon, an economist at Societe Generale SA and a former forecaster at the ECB. "The Bank of France and others now want to make it slightly harder for the ECB to raise rates.''

Money supply, as measured by M3, has expanded more than the 4.5 percent rate viewed by the ECB as non-inflationary in every month since May 2001. It increased 10.4 percent in April from a year earlier, close to the fastest pace in 24 years. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings.

As the French and Italian central bankers question how much all that new cash has contributed to rising consumer prices while marveling at the economic growth and prosperity that low interest rates have augured in, the memory of hyperinflation in 1923 Weimar Germany is hard for many Europeans to shake, notably Bundesbank President Axel Weber.

That point was reinforced by a May report from the Bank of Italy stressing that money-supply growth may pose "smaller upside risks to price stability'' than thought. It argued that liquidity has been swelled by holdings of assets at financial- services companies such as pension funds. That fans inflation less than money growth, which feeds into household spending and consumer prices, the report said.
...
For Trichet and Weber, those are fighting words. A May 23 Bundesbank report called money supply an "indispensable element'' in gauging inflation pressures. Weber said in a June 3 speech that monetary statistics still contain "valuable information'' that "help predict future inflation.''

"It would be unwise to discard monetary analysis -- especially now that we find ourselves in a period in which asset prices and liquidity are at a high level,'' Weber said.

As for the Federal Reserve in the U.S., according to the Bloomberg report, Ben Bernanke said last year that "heavy reliance'' on monetary aggregates was "unwise'' and that the Fed has "basically rejected a role for money for the Fed".

It remains to be seen whether the key inflation measure of the Federal Reserve, "core" inflation excluding food and energy with a 40 percent weighting of housing rental costs, will be an adequate guide for charting U.S. monetary policy.

Read more...

Teenagers in the labor force

There's been a fair amount of discussion in the last year or two about whether the declining labor force participation rate is painting a misleading picture of the U.S. employment situation.

David Altig of Macroblog and Barry Ritholtz of The Big Picture went toe-to-toe on this issue the other day with no clear winner and, as always, a complex topic such as this is easily shaped and molded to conform to the beliefs that each reader already holds as evidenced by the comments in each of these posts.

As a result of perusing these recent discussions, a perhaps more important item was touched on very briefly, but escaped the attention of both the authors and most of those leaving comments - the rapidly declining labor force participation rate by teenagers.

After recalling numerous anecdotal accounts of the quandaries facing 16 to 19 year olds as they reach working age, a closer look is warranted.

First, a definition of the labor force participation rate from Wikipedia:

In the United States, the labor force is defined as people 16 years old or older who are employed or looking for work.
...
Normally, the labor force consists of everyone of working age (typically above a certain age (around 14 to 16) and below retirement (around 65) who are participating workers, that is people actively employed or seeking employment. People not counted include students, retired people, stay-at-home parents, people in prisons or similar institutions, as well as discouraged workers who simply do not want work.

The ratio between the labor force and the overall size of their cohort (national population of the same age range) is known as the labor force participation rate (total labour force/cohort).

So, when looking at the entire population of 16 and over, there was a clear decline in the participation rate beginning in 2001 that reversed a bit in 2005 as shown in the chart below.

Many now make the case that, due to a smaller labor force participation rate, an increasing number of unemployed workers can actually result in a lower unemployment rate.

The accuracy and relevance of the unemployment rate will continue to be a topic of debate and the data going back to just after World War II above reminds us all of how women in the workforce have prompted many and varied cultural changes (perhaps a topic for another day).

However, the more important cultural changes related to employment may be occurring today in the participation rate of teenagers as shown in the chart below.

After rising steadily since the mid-1960s and peaking at almost 60 percent in 1978, the percent of 16 to 19 year olds either working or looking for work has declined to a new all-time low of just over 40 percent.

The decline from 50 percent in just the last five years - the steepest change on record - occurred at about the same time of the late, great American housing boom.

Having no offspring of any age with whom to consult and not having searched for any studies on this topic, any and all conclusions made here rely on anecdotal accounts which may or may not represent the reality on the ground.

To wit:

1. Since many homeowners are now wealthy beyond their wildest dreams and have been tapping their home equity in recent years and spending freely, teenagers feel less of a need to go out and earn money when Mom and Dad will buy them what they want.
2. Working at minimum wage to fund the purchase of the latest electronic gadgets or a car of their own is wholly impractical today.
3. Items 1 and 2 above are not good developments for the long-term health of both the economy and the workforce.

As many others who came of age in the 1970s will surely agree, there was a very different consumption pattern and work ethic for teenagers at that time - of course their parents weren't gorging on plasma TVs and BMWs either.

Your thoughts?

Read more...

An eye for growth

Stocks plunged in China earlier today as the rest of the world watched and yawned. The Shanghai Composite Index dropped 8.3 percent to 3670, its steepest decline since February, putting shares 15 percent lower over the last four trading sessions.

While more than half of the market's main class of shares finished Monday down by 10 percent, the maximum daily limit, other Asian markets were firm, as if watching their gigantic baby brother struggle with training wheels, once again falling face first into the pavement.


Editorials on the front pages of three state-controlled financial newspapers called for "rationality" in the market, an attempt to reassure investors after a tax hike last week that resulted in a paltry $2 increase on every $1,000 stock purchase (there are no capital gains taxes on the sale of stock in China.)

Government officials are in the unenviable position of trying to control a speculative mania that has caused a huge run-up in share prices over the last two years.

Perhaps they should hire Alan Greenspan as a consultant - surely he would advise that it is impossible to know with any certainty that Chinese stocks are now in a bubble and that the best course of action is to do nothing, standing at-the-ready to mop up the aftermath, rather than to risk being blamed for causing the mess.


Even with the recent declines, the Shanghai index is still up almost 40 percent on the year after soaring 130 percent during 2006. The increase has been driven by massive participation by ordinary citizens, now clearly hearing the siren call of Western capitalism where even shoeshine boys can get rich overnight, just by joining a speculative frenzy.

Chinese investors have opened brokerage accounts in unprecedented numbers and are now using their savings and mortgaging their homes to purchase shares - kind of like buying condos in the U.S. circa 2004.

Though the pace has slowed in recent weeks, from an average of over 300,000 new brokerage accounts per day to less than 100,000, last Thursday saw almost a half million new traders join the fray.

Oh, I don't see why not

Unrelated to the government's moves to cool the markets, a blind man with the surname Fan was rejected by a brokerage firm last week when he attempted to open an account. According to a report in ChinaDaily, Fan was anxious to join the ranks of investors through the brokerage firm Fangshan but was rebuffed after a clerk realized that the man could not read or sign all the forms now required by the Chinese government let alone watch the big board.

"You can't see the price movement, then how could you make the stock investment?" the clerk said to Fan.

Momentum trading at its best, apparently.

A kindly friend of Fan's pleaded with the clerk to allow Fan to hold her hand while signing the forms for him, but the clerk refused, mindful of potential legal disputes that may arise as a result of one or two poorly timed trades by the inexperienced and blind investor.


The deluge of novice investors has worried regulators and though unconfirmed, after comments made last week, this may indeed be a bubble that Alan Greenspan can detect in real time.

Whether he would advise doing anything about it is an entirely different question.

Read more...

The week's economic reports

Following is a summary of last week's economic reports. Anemic first quarter growth was confirmed and labor markets remained steady amid more signs of a nascent recovery in manufacturing and consumer confidence. Stocks and bonds ended the week with the S&P 500 Index up 1.4 percent to a new all-time high of 1536, now up 8.3 percent on the year, and the yield of the 10-year U.S. Treasury up 9 basis points to 4.96 percent.


Consumer Confidence: Consumer confidence as measured by the Conference Board bounced back from a two-month decline, rising from an upwardly revised 106.3 in April to 108.0 in May. Most of the gains were achieved in the present situation index as the expectations index rose only modestly. While the outlook on jobs was virtually unchanged, rising gas prices pushed the one-year inflation expectations index from 5.1 percent to 5.5 percent, almost three percentage points higher than the current year-over-year inflation rate of 2.6 percent as reported by the Bureau of Labor Statistics.

It appears as though consumers have once again become accustomed to higher gas prices which had affected this index during the early months of the year. Higher stock prices are likely contributing to the rebound in consumer outlook as equity markets around the world continue to make new highs.

Gross Domestic Product: Coming in below consensus estimates, the second of three readings on first quarter real GDP saw last month's advance estimate of 1.3 percent reduced by more than half. The downward revision was attributed to lower than expected inventories and a wider trade deficit due largely to higher oil prices. The final reading on first quarter GDP will be available at the end of June.

Consumer spending was revised upward from a 3.8 percent increase to a 4.4 percent increase. It contributed just over three percentage points to overall GDP growth, from which negatives like residential investment and the trade deficit were then subtracted to get to the 0.6 percent figure.


On a year-over-year basis, real GDP rose 1.9 percent, a sharp slowdown from the fourth quarter's year-over-year gain of 3.1 percent.

Many analysts are forecasting a rebound in the second quarter as a number of economic indicators have shown noticeable improvement in recent weeks, the thinking being that this will lead to higher capital investment and higher inventories.

What has not shown noticeable improvement in recent weeks are residential construction and consumer spending. Absent a huge turnaround in the weeks ahead, housing will be a net negative for second quarter GDP and, as always, personal consumption remains the most important wild card, now accounting for more than 70 percent of economic activity.

The inflation gauge used to adjust nominal economic growth to real economic growth, otherwise known as the PCE deflator, was unrevised from the initial estimate of 4.0 percent. Core PCE, excluding food and energy, was also unchanged at 2.2 percent.

Chicago PMI: A large jump in both manufacturing and non manufacturing activity in the Chicago area was reported last month as the purchasing managers index rose from 52.9 in April to 61.7 in May. This report is plagued by volatility due to small and changing sample sizes, however, the rebound is in line with other indicators showing a pick up in activity.

Construction Spending: Construction spending rose 0.1 percent in April after an upwardly revised increase of 0.6 percent in March. Private residential construction continued its long decline, falling 1.0 percent for the month, while private nonresidential construction gained 1.5 percent.

Labor Report: Employment strengthened in May, nonfarm payrolls posting an overall increase of 157,000 jobs after downwardly revised gains of 80,000 in April and 175, 000 in March. The downward revisions for March and April totaled 10,000. On a year-over-year basis, payrolls have increased 1.4 percent, unchanged from last month.


Strength was seen in services industries led by health care and social assistance (up 36,000), food service (up 34,000), and professional and business services (up 32,000). Manufacturing payrolls fell 19,000 and construction employment was flat.

There has been much controversy surrounding construction payrolls as reported by the BLS (Bureau of Labor Statistics) amid the sharp slowdown in housing.

It is important to note that for the month of May, before seasonal adjustments, a total of 215,000 new construction jobs were reported by state insurance agencies. To this total, 40,000 were added to account for the formation of new businesses via the birth/death model, and the seasonal adjustment of -255,000 brings the total new jobs for the month of May to zero, as reported by the BLS.

The BLS concedes that the birth/death model performs poorly during economic transitions and if the housing market continues its current swoon, current birth/death model additions will likely prove to be painting a rosier picture than the reality on the ground. Paul Kasriel at Northern Trust wrote an excellent piece (.pdf) on this subject on Friday that is well worth reading.

Hourly earnings rose 0.3 percent in May, following a 0.2 percent gain in April. On a year-over-year basis, hourly earnings climbed 3.8 percent, up slightly from the year-ago level in April. The average workweek was steady at 33.9 hours and the unemployment rate reported via the household survey was unchanged at 4.5 percent.

Overall, this was not a bad report but it does demonstrate the long-term changes that continue in the U.S. economy. Once again, after a multi-year respite due to the housing boom, job creation for all "goods-producing" categories (natural resources/mining, manufacturing, and construction) is again contracting while service categories expand. Also, annual wage gains of under four percent are ahead of "official" inflation, but many workers feel as though they are falling behind.

Personal Income and Spending: Personal income fell 0.1 percent in April largely a result of higher first quarter compensation due to bonuses and government raises. Consumption remained robust, gaining 0.5 percent and the personal savings rate remained negative.

ISM Manufacturing Index: The ISM manufacturing index rose slightly from an April level of 54.7 to 55.0 in May, providing more evidence of a nascent recovery in the production of goods despite continued job loss in manufacturing (readings above and below 50 indicate expansion and contraction, respectively). After falling below 50 for the first time in November of 2006 and then bottoming in January at 49.3, the broadest measure of manufacturing activity has now risen in three of the last four months.

Gains in April were seen in new export orders (from 57.0 to 59.0) and new orders (from 58.5 to 59.6) while prices paid declined (from 73.0 to 71.0) along with employment (from 53.1 to 51.9). The increase in new export orders to an all-time high is a good sign for U.S. exports that seem to be benefiting from a weaker dollar and strong economies overseas.

Consumer Sentiment: The University of Michigan consumer sentiment index fell from a mid-May level of 88.7 to a final-May reading of 88.3. This is, however, an improvement over the final-April reading of 87.1. American consumers have apparently gotten used to higher gasoline prices and, to some degree at least, their mood is now buoyed by rising equity markets.

Pending Home Sales: The National Association of Realtors reported that pending sales of existing homes fell 3.2 percent in April after an upwardly revised decline of 4.5 percent in March. On a year-over-year basis, pending home sales are down 10.2 percent, marking the lowest level since February 2003.

Last week's reports on new and existing home sales clearly showed that builders are now dramatically reducing prices to move inventory. Individual home owners have yet to make these same concessions in large numbers accounting for the plunge in home sales amid firmer prices. With the summer selling season now in full swing, motivated sellers will be increasingly compelled to lower prices as buyers seem willing to wait them out or consider newly constructed homes that offer better value due to price cuts by builders.

FOMC Minutes: The minutes of the FOMC meeting on May 9th confirmed the hawkish tone of the most recent policy statement, the Federal Reserve viewing the risk of higher inflation as the predominant concern. There are no changes to short-term interest rates on the horizon, though this could change quickly if consumer prices spike upward or if the housing slowdown accelerates and begins to materially impact consumer spending.

Summary: With the bad news of first quarter GDP out of the way, most analysts are now focusing on the improved outlook for second quarter GDP growth based on early signs of a recovery as indicated by a numbers of manufacturing and services indexes. The final report on first quarter economic growth will be reported at the end of June and the advance estimate of second quarter GDP will be published at the end of July.

With no indication of any sort of recovery in the housing market and with gas prices and equity markets still near record highs, employment has been stable and the consumer's outlook has rebounded slightly. It is as if we are all waiting for the next shoe to drop - either some sort of energy crisis or the American consumer finally ending their spendthrift ways.

The Week Ahead: Economic reports in the week ahead will be highlighted by the ISM non-manufacturing index on Tuesday and international trade on Friday. Also scheduled for release are factory orders on Monday, productivity and costs on Wednesday, and consumer credit on Thursday.

Read more...

Advertising on this blog

If you would like to place an ad for products or services in the upper right-hand corner of this blog, please send mail to tim@iaconoresearch.com and provide a brief description of what you have in mind.

Be advised that the odds are stacked against your ad appearing here, as sponsors must meet a rigorous test.

Why?

Mostly, because prominently placing an ad for a specific product or service from a particular company would lead many readers to conclude that I have used and/or that I endorse that product or service.

With the exception of ads for my own investment service and Google ads (and probably some recommended reading when I get around to adding it), no other advertisements will appear here unless I have:

1. used the company's product or service personally and have been satisfied with the results, or
   
   
2. established a personal relationship with the advertiser leading me to believe that the product or service is of the highest quality, or
   
   
3. received recommendations from trusted colleagues who have used the product or service and have been pleased with the results

The ad for Firefox browsers is a good example. I use this product and am quite happy with it - I'd recommend it to readers regardless of whether there was an ad on this blog.

If you're still interested in advertising here, please send me mail and I'll be happy to discuss it with you.

Read more...

Oil and Gold Contest Update

This is just a quick update on the progress of the "Guess the mid-year price of oil and gold" contest, set to conclude four weeks from today. The winner receives a free one-year subscription to Iacono Research where the model portfolio turned in a very strong performance this week.

Blue Event Horizon is still in the lead, but six or eight other contestants will soon be in the mix if there is follow through in the gold price next week.


The contest will be repeated this fall. If you forgot to enter a guess, check back in October or November to join in on the fun.

Check out the price of silver this week.


Silver sometimes go up as fast as it goes down - not very often, but often enough to make you wish you'd placed that order or made that phone call to the coin shop a few days ago.

The poor man's gold seems to bounce pretty strongly off of its 200-day moving average - especially on days when the European Central Bank announces that it isn't going to sell any more gold until September.

Somehow it feels as though re-taking the $15 level is just a matter of time.

Read more...

A good jobs report

Thank goodness for an aging population and a seemingly inexhaustible supply of money with which to pay for its medical costs. Health care has been the most consistent source of new employment for many years now and the trend remained intact with this morning's nonfarm payrolls data.

The Bureau of Labor Statistics reported 157,000 jobs were created in May, led by 36,000 new positions in health care and social assistance. Not far behind health care were the 34,000 new waiters and busboys in the food service category, a continuing testament to the economic benefits of huge portion sizes at the nation's dining establishments.

Overall, there has been a distinct slowdown in job creation over the last year but, so far, the most important economic statistic has failed to show any significant signs of distress.


Unlike the second most important economic statistic, consumer prices, there appears to be little or no reality gap between what the government reports and what its citizens experience when it comes to employment. With some notable exceptions, jobs seem to be plentiful, so long as you don't mind changing bed pans or super-sizing orders.

Continuing a trend that began in the 1970s and accelerated in 2001, only to be interrupted by a three year housing boom a few years back, the goods-producing segment of the economy is again in steady decline.

The combined net change to payrolls for natural resources/mining, construction, and manufacturing has been negative for six of the last eight months and a total of 190,000 jobs have been lost. This again demonstrates the impact of globalization where about the only area of goods-producing employment growth since the turn of the century has been the three-year housing boom that came to an end last year.

On the bright side, construction employment has again failed to disappoint the many housing pessimists by posting a goose egg for the month when many had been expecting a bloodbath. And only a few thousand retail trade positions were cut, indicating that the consumer continues to spend.

Within the professional and business services category surprising strength was seen in accounting, architecture, and computer systems design where 32,000 jobs were created.

Overall, this was not a bad report, though the details make very clear the changing nature of the economy.

Read more...