November 2010

Productivity & Costs Q3 2010

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Q3 2010 Productivity & Costs was released today. Labor productivity decreased +1.9%. Output increased +3.0% and hours worked increased 1.1%. For the year, Productivity increased +2.5%, output +4.1% and hours +1.6%.

United labor costs dropped -0.1% and are down -1.9% for the year. Frankly this implies workers are being squeezed. Real wages only increased 0.7% for Q3 2010.

The QE2 Binge - Inflation on the Horizon

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By Numerian

bernanke.jpg
Don’t these men know the nasty history of central banks which monetize government deficits as the Fed is now doing?

The QE2 left New York harbor yesterday, on its voyage to ports all around the globe. Captain Ben Bernanke has promised to shower the inhabitants of such diverse locales as Brazil, India, and China with up to $600 billion of free money. Following his departure, central banks in these countries announced that they did not want the money and will enact regulations to forbid the QE2 to land in their country. (Image)

Such is the bizarre state of monetary policy in the United States that the second round of Quantitative Easing by the Fed is already being feared and rejected by economists and financial analysts around the world before it is even implemented. It may be that the market has come to realize that QE1 did not perform as promised. Job creation remained anemic, economic growth declined, commodity inflation accelerated, and bubbles popped up in a variety of markets.


Pumping up the Market

ADP Employment Report for October 2010 - 43000 private sector job gain

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ADP's private unemployment report for October is showing +43,000 private sector jobs were gained for the month. Additionally last month's dismal report was revised, for only a -2,000 private sector job loss. ADP is predicting lethargic job gains for the near future. We are too.

Employment gains of this magnitude are not sufficient to lower the unemployment rate.

QE2 Has Arrived - Fed to buy $900 Billion in U.S. Treasuries

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The long awaited day is here. In the spirit of QE2, aka quantitative easing part II, the Federal Reserve has announced $600 billion in U.S. Treasury purchases:

The Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

Also, the thing every one knows, they will keep the Federal Funds Rate at effective zero and sure doesn't look like they will raise it anytime soon:

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

Kansas City Fed President Thomas M. Hoenig voted against this.

But wait! There's more. From the New York Federal Reserve press release is appears they are actually buying up about $900 billion U.S. Treasuries de facto.

ISM Non-Manufacturing October 2010 Index - 54.3%

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The ISM Non-manufacturing report for October 2010 is out. The overall index increased to 54.3%, 1.1 points higher than September's 53.2%. Last month's services index increased 1.7 percentage points. The ISM indexes mean anything above 50 is growth, below 50 is contraction. Notice the jump is not as high as earlier in the year.

 

A "Decisive Defeat" But Is Anyone Winning?

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On the eve of Election 2010, most pollsters and pundits are predicting a decisive defeat for Democrats with most claiming this is a referendum of the Obama administration. But, what, exactly does this vote mean for the economy and U.S. middle class?

Reading the tea leaves, pun intended, one must wonder how the media can be so disconnected with what is really going on in America.

What are people so pissed about? Is it bi-partisanship, Obamacare, the Stimulus, taxes? Is it elected officials are not liberal, moderate, conservative, work across the aisle enough?

All of that is wrong.

As a site which has daily written about the United States economy, I can definitely say it's about jobs.

Wall Street got a bail out and bonuses, Americans got laid off and made poor. Special interests and even China got Stimulus, Americans got more jobs offshore outsourced and foreclosed upon. High frequency traders made billions, regular Americans lost their meager retirement.

Now there is pressure for Obama to shed himself of his advisers.

Among the complaints: Mr. Obama conveyed an incoherent message that didn't express what Democrats would do over the next two years if they retain power; he focused more on his own image than helping Democratic candidates; and the White House picked the wrong battle when it attacked Republicans for using "outside" money to pay for campaigns, an issue disconnected from voters' real-world anxieties.

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