Outlook: The payroll was 428,000 and the unemployment rate 3.6%. This almost matches the original March print of 431,000 and beats most forecasts.

Some people are still struggling to disambiguate the Fed’s, or rather Mr. Powell’s, comments. Ip, Fed watcher at the WSJ, sums it up perfectly: “Employment is the best contemporary indicator of the business cycle and it shows no signs of slowing down. Indeed, job growth remains well above its long-term sustainable pace, suggesting that the labor market is not just tight, but too tight.

“Furthermore, recent gains in labor supply evaporated as the labor force participation rate fell to 62.2% from 62.4%, although for those aged 25-54 , it fell only slightly to 82.4% from 82.5%, not far from its pre-pandemic level.The Journal is kind enough to note in the footnote to the chart that the 2022 data are not really comparable to previous data.

But at the end of the day, the main point we should take away is that the economy is nowhere near stagnation or recession, considering jobs data has predictive value.

We suspect jobs and employment data are inaccurate, to be polite, and while we have to take that into account, we prefer capital investments. Broadly speaking, capital investment can encompass consumer durables and things like housing and automobiles, while business capital expenditure is a proxy for GDP over time. Last week, the Atlanta Fed’s GDPNow forecast for the second quarter was raised from 1.6% to 2.2% as higher auto sales contributed to real spending growth in personal consumption from 3.6% to 4.4%. We have another forecast today.

When it comes to business capital spending, Capex itself is down slightly, although annual rates after a pandemic shutdown aren’t the best data. The maps are from the Yardeni package and, as always, intriguing. Expansion plans for non-defense capital goods and business owners are definitely encouraging and suggest Q2 GDP will NOT be another negative and therefore technically a recession.

As for the stock markets, it is not certain that the bubble has burst. It may leak, but we can’t say it burst. The pessimistic crowd is out in force, contributing to further casualties, but the cycling gang believe there is a chance the bottom is near. One of the reasons equities may come back is that after a global drop of around 15%, traders will realize that cash and bonds still offer a low rate of return and it is negative in terms of real returns, while equities have the potential to offer significant real returns. It’s the highly speculative high-tech sector that’s hurting the most and leading the pack, but some companies are seeing excellent growth (like the oil companies that Buffett bought out last week).

The wall of worry today includes zero Covid politics and lockdowns in China, crippled supply chains, high inflation, Russia’s invasion of Ukraine and its appalling conduct there, and the risk of slowing growth everywhere with a recession in some places (such as Europe). From a pure risk sentiment standpoint, the dollar still wins hands down.

Strangely, the risk this week is that US inflation starts to decline. We get wholesale sales and inventories today, with accompanying price data, and CPI on Wednesday. According to Trading Economics, the consensus forecast for the CPI is 8.1% versus 8.5% in March, with its own forecast at 8.2%. Is the top tucked in or almost tucked in? A decline in US inflation and/or inflation expectations is not necessarily anti-dollar, but it could lead to some reconfiguration.

Treat: In a section titled “Left Behind,” The Economist denounces the loss of small business exports. See table. We already knew Brexit would hurt the UK economy and we’re getting serious data to measure it. This dual chart shows that the UK is also experiencing increased inflation, partly due to tariffs.


Treat: You don’t have to be a screaming pinko to worry about income inequality, which can have lasting effects on trends in consumer spending, housing, debt, and more. Here’s a chart from the respected Pew Research Center. Notice the crossover around the same time as the financial crisis of 2007-08. The article points out that those who have done the best in the past 50 years are Asians and white men, and anyone with a college degree.

Studies like this make you wish you knew more than demographics. As we see in Japan, with a near total ban on immigration and a shrinking and aging population, demographics can have a huge effect on the economy and financial markets.


Treat: On Friday, Euronews aired a splendid video of Sweden building its island of Gotland, halfway to Russia in the Baltic Sea. It has been repeatedly invaded by everyone since the early Middle Ages – Denmark, Russia – but has been disarmed since World War II. Now the Swedes are arming it again as they also consider joining NATO. Neighboring Norway is a member. One of the problems is that joining or thinking about joining could trigger an attack from Russia, like in Ukraine. It doesn’t matter that NATO is a defensive organization and not an offensive one. The video is pleasing as much for the presentation of Swedes as it is for the geopolitical content – “sanity and common sense personified (the opposite of what we get in the US).

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