Many economists view January’s payroll report as robust; however, some skeptics caution that the seasonal adjustments made in January are typically substantial, suggesting the positive news might not be as promising as it appears. This leads to a closer examination of the unadjusted year-over-year data for a clearer picture. Encouragingly, the results in this context are quite positive.
● The People’s Money: How Voters Will Balance the Budget and Eliminate the Federal Debt
By Scott Rasmussen
Interview with the author via Newsmax
Independent pollster and political analyst Scott Rasmussen claims the actual federal debt stands at $120 trillion — he also introduces a new book outlining proposals that could potentially save the government over $100 trillion within the next decade.
Today’s employment report from the U.S. Labor Department has cast doubt on the notion that there is an immediate risk of recession. In January, private nonfarm payrolls saw a net increase of 257,000, while total nonfarm payrolls experienced a slightly lower rise of 243,000 due to a 14,000 decrease in government employment. This represents the most significant monthly growth for private sector jobs since last April, surpassing December’s adjusted gain of 220,000. Expectations had been for a notably lower growth of under 200,000 in private payrolls for January, making this update suggest that job creation is gaining momentum in corporate America. This isn’t entirely unexpected; I’ve noted for months how the downward trend in new weekly jobless claims has indicated that the labor market would continue to improve, with potential for moderate acceleration in growth. Today’s report certainly supports that perspective.
The latest weekly update on jobless claims raises an important question: when will we receive clear evidence of a new recession, if one is indeed imminent? The answer remains elusive. Currently, there are no explicit signs suggesting a downturn is on the horizon. In fact, last week the new applications for unemployment benefits fell by 12,000 to a seasonally adjusted 367,000. While one figure doesn’t provide a complete picture, the underlying trend cannot be ignored.
Brett Arends of MarketWatch provides an insightful profile on James Grant, known for his long-standing advocacy for a return to the gold standard. Grant, author of the newsletter Grant’s Interest Rate Observer, is recognized as a leading proponent of this monetary policy. There’s speculation that he could be a candidate for a position at the Federal Reserve. If that were to materialize, his approach would likely emphasize maintaining a stable value for the dollar, implicitly suggesting that such a policy could prevent future economic crises.
January showed positive signs through the lens of the ISM manufacturing index, which climbed to 54.1 from December’s 53.1, marking the third consecutive monthly increase. Readings above 50 generally indicate economic growth. While this isn’t a definitive counter to concerns regarding recession risks, it certainly represents progress. At this crucial juncture for the global economy, any sign of stability is beneficial.
Risky assets performed well in January, with every segment of our broad benchmarks for stocks, bonds, REITs, and commodities showing positive results. Interestingly, cash (3-month T-bills) saw a slight decline during the month. Overall, the performance in January was the best we’ve seen since last October, with the Global Market Index (a passive, market-value weighted composite of major asset classes) rising impressively by 4.0%.
According to ADP, job growth experienced a slowdown in January. While this decline wasn’t severe, it has fueled ongoing discussions about recession risks. The U.S. nonfarm private sector saw an increase of 170,000 jobs last month, a decrease from the 292,000 jobs added in December, according to the ADP Employment Report. Despite this slowdown, the labor market continues to expand, which remains a positive sign for the optimists. However, the extent of the decrease complicates the outlook for future economic trends, leaving a slightly uncertain business cycle ahead.
The latest report from the Bureau of Economic Analysis indicates that American consumers are both spending less and saving more. While this is a favorable trend for household financial stability and could promote long-term economic growth, it falls short of providing clear evidence that the economy is steering clear of a recession.
Later this morning, the personal spending and income report for December will be released. Analysts are anticipating a rebound following November’s modest growth. The stakes are significant given the recent downturn in the trend. I’ll be monitoring today’s data from a distance, as I’m heading to IMCA’s investment consultant conference in New York. A comprehensive reaction to today’s economic news will follow once I return to my regular schedule.
In summary, the economic indicators discussed suggest a mixed but ultimately cautiously optimistic perspective on the job market and overall economic health. While some trends show improvement, uncertainties still linger, warranting continued observation as the economy evolves.