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Registered Investment Adviser Caleb Lawrence 

The major averages failed to hold their early gains entering the final hour mixed on little news. Despite more than a few questions surrounding the latest Employment report, regional and state level data shows Hawaii with the lowest unemployment rate at just 2.1%. While Alabama, California, Maine, and Mississippi set new series lows, California saw its unemployment rate fall to 4.4%. Admittedly quality of jobs created remains an issue as does the propensity for the economy to create part time as opposed to full time jobs, headline official unemployment rate notwithstanding and I would think that this is a good part of the reason why wage gains remain hard to come by.

It’s been argued that deficits don’t matter and that government finances aren’t like consumer finances at all. Largely based on the idea that governments can borrow without limit, especially when they can print money. Consumers on the other hand can easily borrow themselves into bankruptcy. Record high asset prices for real estate, stocks and other investment classes have come through the use of record amounts of debt. Easily measured by looking at margin debt, student, auto and credit cards as all are at new records, just for starters. Despite far lower interest rates today than just prior to the previous crisis debt service costs have reached the previous peak, a reflection of the record debt levels. Consumer debt levels are about 40% higher than that seen in 2010. This has helped to push the personal savings rate to lows last seen just prior to the 2007-2009 crisis. Recent data has shown that delinquency rates are increasing, still very low, but trending higher. All of this data is compliments of FRED, aka the Federal Reserve Economic Database. So, it is neither a surprise nor the product of some poorly informed crackpot, some I’m sure would argue this last point. But the real question is can debt expansion, and by implication asset prices, continue indefinitely?

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