New filings for jobless benefits dropped a bit last week, the Labor Department reported today. But the trend is still stuck in a rut. For most of this year, initial weekly jobless claims on a seasonally adjusted basis have been in a range of roughly 450,000 to 500,000. Last week’s tally of 456,000 is a slight improvement over the previous week’s 459,000, but there’s still no sign in the data that a dramatic decline is imminent for this series.
THEY POP BUBBLES, DON’T THEY?
They’re everywhere. In that market, in this country. The bubble detectors are out and about and productivity is up. If you don’t see the bubbles, well, you’re just not looking hard enough…or reading the right columnists.
MONETARY THEORY IN ONE PARAGRAPH….
Don’t try this at home, at least not without a dismal scientist as a chaperone. But if you could only read one paragraph about monetary policy (I know, I know), here’s a possibility to consider. It comes courtesy of Scott Sumner’s The Money Illusion. I’m reasonably sure that excerpting the following and trying to pass it off as a silver bullet for understanding, defining or otherwise explaining the fundamental laws of monetary policy is hopelessly misguided. Still, it’s hard not to admire one economist’s view of how the ebb and flow of money supply influences prices and market preferences (even if my editing runs the risk of running off the literary road into reductio ad absurdum). Enough…judge for yourself. For unexpurgated context, here’s the full essay. Meantime, here’s the laconic excerpt…
I want you to imagine that everyone understands and believes in the QTM. Imagine you live in a country where a typical 3 bedroom ranch house sells for $200,000. Also assume the money supply has been stable for years. Now the Fed suddenly doubles the money supply. What will happen to the price of that house? Keynesians will say “nothing”; prices are sticky. If they are right, I plan to buy up as many houses as I can, right after the money supply doubles. And then sell them again when the house prices double later on. But I actually think it more likely that the sellers will also understand this implication of the doubled money supply, and won’t hand me a $200,000 profit on a silver platter. They’ll immediately demand higher prices. The Keynesians are right that in the real world many prices rise more slowly, but in any case they do eventually rise.
IS THE DEFLATION RISK DEFUSED?
The jump in deflationary risk last month is still a real and present danger, if only marginally. But given the market reaction of late, it would be shortsighted to dismiss the threat. Yet there are reasons for optimism. One is that the inflation forecast in the Treasury market has stopped falling. Two, the money supply growth rate is no longer dropping like a rock.
ANOTHER FINE MESS
How did we get into this mess? More precisely, how did the United States, a bastion of financial insight and innovation, manage to wind up between the economic rock and the hard place at the opening of the second decade of the 21st century?
SATURDAY LINK LIST: 6.5.2010
Yesterday’s disappointing news on the pace of private-sector job creation sent the stock market tumbling. The S&P 500 lost more than 3.4% on the day and capital flowed into Treasuries, pushing the yield on the 10-year down to 3.2%. The risk-aversion trade is alive and kicking…again. That didn’t stop President Obama from declaring on Friday that “the economy is getting stronger by the day.” Mr. Market thought otherwise. But all’s not lost, explained one dismal scientist, who argues that the crowd simply needs an attitude adjustment. “Nothing in [the May employment report] suggests that the recovery is in trouble — the markets need to get a grip,” Bernard Baumohl, chief global economist at the Economic Outlook Group, said via The New York Times. Nonetheless, optimism is in short supply in the wake of the latest labor market update. Here’s a sampling of the chatter on the jobs front from various corners of the punditocracy…
PRIVATE SECTOR JOB CREATION SLUMPS IN MAY
Don’t let the top-line number fool you. The employment report for May was discouraging. Although total nonfarm payrolls rose by 431,000 last month—the biggest monthly gain in a decade—it was heavily padded with the government’s temporary hiring of Census workers. Stripping out the government factor reveals a tepid rise in private-sector nonfarm payrolls of just 41,000, a dramatic fall from April’s 218,000 gain in private-sector jobs. In other words, job creation in real economy is struggling…again. In fact, it looks like it hit a wall in May.
POSITIVE NEWS FOR JOBS AHEAD OF FRIDAY’S EMPLOYMENT REPORT
Today brings two bits of good news on the employment front, laying the groundwork for thinking positively about tomorrow’s jobs report for May. New jobless claims fell last week, the Labor Department advised, and nonfarm payrolls rose in May, according to the ADP National Employment Report. Are these positive changes a sign of things to come in the official employment report? We’ll have an answer in less than 24 hours.
CONSUMER SPENDING SOFT IN MAY, ACCORDING TO REPORT
A private-sector report on consumer spending advises that retail spending slipped last month. “Overall the environment in May has been relatively soft,” Mike Berry, director of industry research for MasterCard Advisors SpendingPulse, tells Reuters. “It looks like the consumer is taking a pause.”
HARRY MARKOPOLOS & THE “NEW” SEC
When Bernie Madoff’s Ponzi scheme imploded in December 2008, it unleashed two major scandals. One was simply an issue of money. Lots of losses because there were lots of victims. The tens of billions of dollars that went up in smoke rocked the financial world, thanks to the sheer size of the fraud and the fact that Madoff had snookered so many people (and institutions) for so long. The other great indignity (and arguably the bigger one) is that the world’s biggest financial con survived for years under the nose of America’s top regulatory agency: the Securities and Exchange Commission.