January’s employment report missed substantially with 151,000 new jobs created. The official unemployment rate slipped to 4.9%. Average wages jumped .5% to $25.39 per hour. Last but not least the average work week gained .1 to 34.6 hours so the report marks a real win for earned income. The labor force participation rate increased to 62.7%. Other highlights from the report included a downward revision of 13,000 for the last few months. Average hourly earnings are up 2.5% over the last 12-months. As has been the usual trend for some time now most of the job creation occurred in low wage part time sectors. One month does not make a trend and I’ll give this report a mixed review.
Trade data continues to go in the wrong direction as the deficit increased to 43.4 billion in December. Exports fell .3% to $181.5 billion while imports gained .3% to $224.9 billion. Looking at a graph of this data shows quite clearly that trade volumes are rolling over with both imports and exports declining steadily since the beginning of last year. One of the hallmarks of a credit bust is currency devaluation as nations attempt to export their financial malaise to their trading partners. Indeed the last few years has seen considerable emerging market and some developed markets as well, ala Europe and Japan, currency devaluation. Something that has been particularly pronounced in developing markets. One of the side effects of this has been significant Dollar appreciation, which has hurt exports, as asset flows to the US have been substantial. Conversely asset flows out of China have reached record levels and threaten to destabilize their economy as foreign reserves plunge on an accelerating basis. There are two take a ways from this one is that substantial capital flows regardless of source drive up asset prices at the destination and drive down asset prices at the source. Another is that they, like credit bubbles, foster destabilizing boom and bust cycles that have become the hallmark of central bank driven modern engineered finance. It wasn’t different last time, it won’t be different this time and I’m more than willing to bet the pig farm that it won’t be different next time either.