ADP just released its monthly shot at the number of workers hired for October – 130,000. Of course, this released a flood of other projections that suggested the government number would come in much lower.
- U.S. private-sector employers hired the fewest number of workers in six months in October while tepid domestic demand kept inflation benign last month, suggesting the economy was still in need of stimulus from the Federal Reserve.
Of course, the employment number, along with the data on inflation and consumer spending (inflation benign, consumer spending up slightly) gave rise to the conclusion above – “… still in need of stimulus …” This, of course, led to the market jumping … oh wait! The market is down right now. Could it be that the Fed stimulus theme has run its course, at least until it gets back on course when the media hype starts it up again?
- There’s no denying the challenging environment American businesses face in creating jobs and growing their companies. And as the nation emerges from the latest showdown in Washington, the pattern of legislating through manufactured crises is stacking the odds ever higher against U.S. economic growth.
The above is true and the market understands the challenge, just as it understands the effect the idiots in Washington had on the US economy recently. It also understands that there is always more to the story than the headlines.
- However, one very understudied segment of the economy defied all odds this year and is on track to create 1.25 million jobs. This quiet yet critical economic growth engine is the nation’s middle market, composed of approximately 200,000 firms with annual revenues between $10 million and $1 billion. They are companies like Sunny Delight, Groupon, Tervis Tumbler, Marucci Bats and Jamba Juice.
A quick calculation without a calculator tells me that the average number of jobs created per month is just about 100,000. This also tells me the problem with hiring, then, is not with the middle of the pack; it is with the big dogs, the ones who can both “offshore” jobs and who can most afford to lay back and live off their fat. The leaner businesses have to hire to keep pace and, generally, they hire in the US. This scenario suggests a question. How long can this situation last, meaning, how long before the big boys begin carrying their share of the US hiring?
Perhaps sooner, rather than later is one answer. It appears that on the offshoring front, things are changing. With Apple’s announcement late last year that it was bringing some manufacturing back to the US other big dogs are following along.
- Apple’s insourcing is high profile because it’s Apple. But GE has also brought manufacturing home in a big way — much bigger than Apple. GE is spending nearly $1 billion in redressing one of its idle manufacturing plants in Louisville, Kentucky.
Both GE and Apple are really big dogs and both have to watch the bottom line, as both need to keep their stock price up, so why then are they moving manufacturing here when it is cheaper overseas? The answer is that that old “reality” is no longer necessarily true. Rising energy costs and rising wages, particularly in China, as well companies needing more highly-educated workers, has changed the reality to a new one – making it at home just be better for the bottom line.
- A gauge of U.S. consumer spending rose in September as Americans likely snapped up Apple’s new iPhone and bought leisure goods, but falling sales of automobiles pointed to sluggish economic growth during the third quarter.
Okay, so Apple is doing fine, as it beat the street (even though the market discounted its beat), but US automobile sales are falling, right?
- General Motors Co (GM) on Wednesday posted a better-than-expected third-quarter profit as the U.S. automaker’s new lineup of pickup trucks and other revamped models boosted North American results, and revenue rose in Europe for the first time in two years.
Maybe the US auto sales numbers ticked down during September, but not enough to hurt GM’s North American sales. Apparently, in good news for the global economy, sales in Europe also pointed to a brightening picture.
- GM’s progress in Europe during the third quarter echoed comments made by its smaller U.S. rival Ford Motor Co last week. Ford painted a brighter picture in Europe and forecast turning a profit there by 2015.
The market may be tired of all the Fed tapering talk, so watch it for signs of fatigue, as well as signs of waiting to see what happens with the numbers – employment, earnings, retail sales, and on and on. Boring but this is reality. The market wants to see profit and it is, more than less, so, up or down today, in the near and longer term, it will still keep pushing forward as long as money is being made.
Trade in the day; Invest in your life …
