The jobs report was incredibly strong. Nonfarm payrolls rose by 268k, blowing away even the most bullish forecasts. The dollar has rallied to a six-month high.
Those MMT people who have been saying that "the deficit is too small" really have to stop now because they are totally discrediting themselves and making MMT look stupid.
We have been correct here at MNE all along, emphasizing top-line government spending as the key indicator.
I admit, however, as having taken a wrong turn recently on the dollar. I was bearish. Maybe it was all that, "making the euro harder to get" nonsense. People have to admit their mistakes or they have zero credibility as far as I am concerned.
24 comments:
If there is unemployment, underemployment or misemployment then there is insufficient spending of the right kind.
The deficit then just ends up where it ends up. It should never even be mentioned.
The issue is always spending, and the quality of the spending.
The deficit always ends up where it ends up. Exactly.
From what i gather when people says 'deficits are too low' they really mean 'the spending is too low'. Semantically is wrong but the underlying assumption (maybe) is right as there is not employed, or is unemployed, or has a precarious job (like most of that job creation is, but better than starving).
It's always good that more people is working instead of not-working unless they are unemployed because they can/want (not the case for most of the people) so is good news there is a strong job report.
Increases hike rate chance (the whole 0.25% of it! lol), not good for the stock market, good for the dollar and some fixed income classes IMO. There is already a 'flight to quality' effect from developing markets to safe assets in developed nations so this will likely reinforce the feedback loop regardless (the trend is going to continue even more so if there is a slowdown).
If the US economy is now returning to something like its normal, "recovered" state of employment, it is time to move the focus away from the obsession with countercyclical policy and toward deeper structural socioeconomic failures and long-term evils and toxic trends in US capitalism, such as:
1. grotesque income and wealth inequality;
2. An abandoned working class that is really deep in the shit, and now dying at a rising clip;
3. Stagnation, political dysfunction and inadequate state investment standing in the way of ambitious long-term national objectives;
4. Massive class divides along cultural-economic lines and the emergence of something like a new caste system;
5. Intense economic fear and slavish insecurity as a permanent feature of everyday life;
6. A culture dominated by the sick philistine norms of corporations: their incessant commercial hucksterism; their poisonous information environment of lies, bullshit and untruth; their manic nihilistic energy in the pursuit of ephemeral material acquisitions; their oppressively hierarchical command structures.
Dan pretty good summary, unfortunately a big chunk of the USA population is neoliberal and has drink the crony capitalism "cool aide" of "free markets", "freedom" and "the american dream" to the point there is no going back and are deeply individualistic.
So don't expect a change on the trajectory to a new feudal order while economists regurgitate how strong "growth" (for whom!?) is, how well everything is and that we live in the best of the possible worlds and all this is thanks to capitalism. Good grief and well played, but the part of the population which is not neoliberal is growing in dissatisfaction towards the status quo and that's why people like Trump and Sanders are in the political scene.
Interesting Dan.... you're saying if they can get away from the purely 'counter-cyclical' they might then start to look at the bigger picture... of course the risk is that a somewhat 'recovery' might just placate them and they wont think about doing anything more at all... "if it aint broke dont fix it..." type thing....
Off the employment report:
5yr UST is off about a half a point and the 10 year almost a full point (today)...
These USD based financial assets being reduced in price in USD terms .... yield back over 2.3% on the 10-year...
Real assets more stable in price in USD terms.... oil at $45...
Back at the USD highs, oil was down around $40 and the 10-yr yield was over 2.4% iirc...
Also important to note that Clinton had to balance the budget three times before it caused a recession.
I would add to Dan's points the neoliberal political theory based on economic liberalism as a necessary and sufficient condition for social and political liberalism as the basis of an optimal world order in which natural order arises spontaneously.
Until this erroneous and malicious paradigm for imposing neoliberalism on global society is overcome, the world is going to keep sliding down the slippery slope of authoritarianism through the confluence of social class, political power and economic wealth.
This cannot be solved as long as capitalism as the prioritizing of money and technology over people (labor) and the environment (land) as the chief factor and indispensable condition for natural order arising spontaneously through the world.
This is a pernicious ideology that must be overcome before it overcomes us.
People cannot be free as long as property ownership is considered to be the overriding legal right and the chief moral standard.
To the degree that people are not free, they won't be won't live up to their potential. This affects creativity and influences prosperity.
Free is not simply freedom from limitation, or freedom to choose, but also includes freedom for self-actualization, that is, unfolding shared potential as a human person and individual potential as a unique individual.
An ideal society is a human system in which the elements are free in the above sense and related as equals having identical rights in community under the rule of law arrived at through self-determination.
Good stuff, Kervick.
The times they are 'a changin' Ignacio:
http://www.thenation.com/article/why-grassroots-democrats-dont-have-a-problem-with-democratic-socialism/
"Interesting Dan.... you're saying if they can get away from the purely 'counter-cyclical' they might then start to look at the bigger picture"
Yes, Matt. Since 2008, the debate has been fixated on countercyclical policy: whether the deficit should go up or down; whether the Fed should lower, boost or hold firm on interest rates; whether we need various kinds of "stimulus". All this with the aim of "stabilizing" the economy and returning it to what the elites consider its normal pre-crisis functioning.
But a funny thing happens during a serious recession: it scrapes a lot of the masks off the ugly face of US-style economic oppression and class warfare, and then people start to realize they don't exactly want the old system to be "stabilized." Mainstream center-left Dems have been yammering on and on every day about interest rates and the Fed, which certainly have a role to play, but they have been totally AWOL from most of the larger structural debates which are starting the preoccupy people.
Thanks Mike.
Mike, I have question. I am a bit new to all this and need some clarification. What do you mean by top-line government spending is the key indicator? I have looked at the $6,132 trillion as % change from a year ago and it has been below 3% since 2011ish am I looking at the right chart?https://research.stlouisfed.org/fred2/graph/?g=2rgc
How should I look at it? What would should I consider as moving in negative territory?
Thank you in Advance and keep up the great work.
November 6, 2015
Another Phony Payroll Jobs Number
Paul Craig Roberts
The Bureau of Labor Statistics announced today that the US economy created 271,000 jobs in October, a number substantially in excess of the expected 175,000 to 190,000 jobs. The unexpected job gain has dropped the unemployment rate to 5 percent. These two numbers will be the focus of the financial media presstitutes.
What is wrong with these numbers? Just about everything. First of all, 145,000 of the jobs, or 54%, are jobs arbitrarily added to the number by the birth-death model. The birth-death model provides an estimate of the net amount of unreported jobs lost to business closings and the unreported jobs created by new business openings. The model is based on a normally functioning economy unlike the one of the past seven years and thus overestimates the number of jobs from new business and underestimates the losses from closures. If we eliminate the birth-death model’s contribution, new jobs were 126,000.
Next, consider who got the 271,000 reported jobs. According to the Bureau of Labor Statistics, all of the new jobs plus some—378,000—went to those 55 years of age and older. However, males in the prime working age, 25 to 54 years of age, lost 119,000 jobs. What seems to have happened is that full time jobs were replaced with part time jobs for retirees. Multiple job holders increased by 109,000 in October, an indication that people who lost full time jobs had to take two or more part time jobs in order to make ends meet.
The rest:
http://www.paulcraigroberts.org/2015/11/06/another-phony-payroll-jobs-number-paul-craig-roberts/
A gov surplus drains private sector wealth.A gov deficit boosts private sector wealth.And therefore spending and jobs,what is everyone here going on about.revising mmt??
@neil 'The deficit just ends up where it ends up'- huh?
Gov deficits should be commensurate to the gap between private sector spending and the trade balance and spending levels which support full employment,which depends on the saving choices of private sector.
Aww, PCR has rained on someone's parade. BLS has another statistic, U6, which for some reason never gets trumpeted. And then there's the labour participation rate. It's been going down, except for seniors.
There's your "recovery" for you.
inta look at your statement....
You say "govt deficits should be" (action govt)
then you say "depends on savings choices of the private sector" (action non-govt)
Policy cannot be set by non-govt....
"Next, consider who got the 271,000 reported jobs. According to the Bureau of Labor Statistics, all of the new jobs plus some—378,000—went to those 55 years of age and older. However, males in the prime working age, 25 to 54 years of age, lost 119,000 jobs"
Wow. If true that sure pours acid all over the hype emanating from this report.
Mal they will come up with whatever they have to in order to raise the rates.... its like "rationalization" ... I just hope they have thought it all through and the FOMC people are coordinating with the operations people or it might get interesting....
@intajake Yes that is my understanding of MMT and I agree completely. Which is why I am trying to get clarification on what Mike wrote about the top line number. Because even that number has been weak last 4 years on a % change from a year ago chart.
https://research.stlouisfed.org/fred2/graph/?g=2rgc
I'm glad I am not the only one here confused. Any insight would be great.
Matt,
Would be a little amusing to see if they overshoot and provide us with the dreaded inverted yield curve.
Its still up YoY.....
Imo they would think they were bankrupted. ....
Sting, you have to take into accounting ALL spending. Not just govt topline. Govt not the only thing that spends in economy.
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