The Economic Data calendar for the week of the 10th of October through the 14th of October is full of critical releases and events. Here is a snapshot of some of the headline numbers that we will be focused on.
In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough highlights the outlook for the U.S. Dollar , walks you through his asset allocation model as well the importance of knowing where we are within the cycle.
In this no-punches pulled excerpt from The Macro Show, Hedgeye CEO Keith McCullough explains what the media missed about today’s jobs report.
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Here's how the dominoes fall. Jobs growth slows => Number of Hours Worked falls => Productivity slips => GPD dips.
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Takeaway: There are whoppers. And then there are WHOPPERS. This is a case of the latter.
Remember this beauty from President Obama in his final State of the Union address? We do.
"Anyone claiming that America's economy is in decline is peddling fiction."
Well, we may have discovered how Obama was able to deliver that statement (with a straight face) in spite of overwhelming economc evidence to the contrary. Consider who he's listening to.
Jason Furman, chair of the White House Council of Economic Advisers
Mr. Furman appeared on CNBC this morning, shortly after release of the lackluster September jobs report, peddling the White House's own headscratching spin of economic fiction. Here's what he had to say.
"I don't think you're late cycle... I just don't believe in the concept of late cycle."
Before we dissect this nonsense, let's take a look at the series of untruths Furman puts forth ... shocking even to CNBC anchors Carl Quintanilla and David Faber:
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Quintanilla: On non-farm payrolls, last year's average was 229,000. We're doing 178,000 so far this year leading a lot of people to believe that we are in what we call late cycle. Do you agree with that?
Furman: First of all, our analysis says you need 80,000 a month to stay stable with the unemployment rate and the participation rate. And the fact that you're well above that is why you'll continue to see the labor market improve.
I don't really believe in late cycle. I think the US economy has the potential to continue to grow going forward. You see consumers who are confident, that have wage gains, and you see high levels of consumer spending. That's 70% of the economy. So I don't think you're sort of late cycle. I think it's a matter of the choices you make and I think we can keep going
Faber: So those are the reasons you cite for why you don't believe it's late cycle?
Furman: Oh, I just don't believe in the concept of late cycle.
Faber: Why not?
Furman: I think if you look at business cycles historically, the evidence is that they don't die of old age. There's not an increased probability that an expansion comes to an end as it gets older. It just could happen at any point in time, but right now with consumers confident and optimistic the way they are, and with wage gains, I feel good about where we are.
* * * * *
The most glaringly irresponsible statement of the day.
Maybe Mr. Furman should have been on our Macro Themes call yesterday? Sounds like he may have learned a thing or two from Hedgeye CEO Keith McCullough as he discussed #Labor'sLags, why jobs growth will continue to slow from its cycle peak. (Note: Mr. Furman, if you're reading this we'd be more than happy to send it to you. Below are a few slides from that 114-page deck on the house.)
Let's unpack Furman's Fiction point-by-point:
"Our analysis says you need 80,000 a month to stay stable with the unemployment rate and the participation rate."
That's convenient. So now that jobs growth has rolled off its cycle peak the White House says we only need 80,000 in monthly job gains. Tell that to the 553,000 "discouraged workers," people who, according to the Bureau of Labor Statistics, "want a job, including those who are not currently looking, because they believe no jobs are available." The lackluster job gains Furman is talking about won't help them.
Year-over-year jobs growth continues to slow from its cycle peak of 2.3% in February 2015 to today's 1.7%.
"You see consumers who are confident."
No. Consumer confidence is well past peak and continues its slide from a level of 98.1 hit in January 2015 to 91.2 in September.
"We see wage gains."
"You see high levels of consumer spending."
Wrong. As jobs growth has slowed so has income and consumption growth.
And finally the most dishonest statement of all...
"I don't think you're late cycle... I just don't believe in the concept of late cycle. I think if you look at business cycles historically, the evidence is that they don't die of old age."
Here's a dose of reality, Mr. Furman: the U.S. economy just entered its 87th month of economic expansion. History is clear on this. The average U.S. economic cycle lasts 59 months before recession. We are now 28 months past that.
The Obama White House can keep peddling whatever fiction it pleases but a casual review of reality is crystal clear... This time is not different. The U.S. economy is slowing. People are understandably concerned. In other words, no, things are not good Mr. Furman.
"We have a clear monetary policy framework in the United Kingdom," Bank of England head Mark Carney said earlier this week.
The BoE's policy is crystal clear:
And that's precisely what's happening this morning. The pound is down 1.7% today, bringing its year-to-date decline to -16%. Meanwhile, the FTSE is up 0.7% today and +13.3% year-to-date.
Bloomberg blames a "flash crash" for the pound's drop today, caused by blips in algorithmic trading models. #Cool. But the year-to-date call on the pound has everything to do with the BoE's pernicious policy to do whatever it takes to devalue the currency.
And while that's great for wealthy Londoners who have the dough to buy stocks, the true losers in this regime are the country's poor, who who can't afford to offset the resulting loss of purchasing power with gains in the stock market. Hedgeye CEO Keith McCullough calls this out in a note sent to subscribers today:
"Why is it that every time something crashes faster than it’s already been crashing (in this case for months), everyone calls it a “flash crash” and blames the algos? #1 to blame here is the Bank of England who has an explicit policy to devalue (crash) the purchasing power of the people in exchange for FTSE, etc. asset inflation that isn’t driven higher by algos?"
Britain's new Prime Minister Theresa May called the BoE's Carney out on this earlier in the week saying low rates had "bad side effects." She continued:
"People with assets have got richer. People without them have suffered. People with mortgages have found their debts cheaper. People with savings have found themselves poorer. A change has got to come. And we are going to deliver it."
"I entirely agree with the spirit of what the prime minister said. Monetary policy has been overburdened and we need a better balance between monetary policy and fiscal policy."
In other words, here comes the big push for fiscal spending (and the BoE keeps monetary policy easy). Don't expect relief for Britain's poor any time soon.
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