Shhh … Can you not hear it? Can you not hear any news out of Europe today? That’s all I want to say …
So, I was saying last Friday that market overreacted to the US jobs data. I say that again this morning. The headline number of 69,000 is just part of the story. In fact, the survey that produced that number has a margin of error plus or minus 100,000. Ergo, we cannot be sure if any jobs were created or, if so, how many. Hard to say, but what I can say is that Household survey from the Labor Department has a margin of error plus or minus 400,000, so …
The Labor Department’s household survey, based on a sample of 60,000 households, found that the number of people employed rose by 422,000 in May, bringing the unemployment-to-population ratio to 58.6 percent. That’s up from 58.4 percent in April and matches the ratio in February, which was the highest since May 2010.
In the end, statistics from surveys are always suspect as to their accuracy, but if you use them to guide you, the latter survey suggests more strongly that the economy is not going backwards. Moreover, to go along with the other point I made on Friday, there are leading indicators to watch and they suggest the US economy is moving forward.
The pace of growth in manufacturing slowed modestly in May but a gauge of new orders rose to its highest in over a year.
The market will eventually catch up to the fact that the economy is not sliding toward recession, but the trick is to be ahead of the market, to be in place when the behemoth moves in a direction strongly. All I am saying is that this is not 2008, so we should not expect a huge market sell off because of the economy. True, geopolitical events could topple the market, but my assumptions keep those aside. My issue is the economic fundamentals. Nevertheless, I keep a close eye on geopolitics and these days there is nothing hotter than Europe, although that will change soon, as I have already said. Iran and the US debt chatter will affect the market soon enough. In the meantime, I said I would not say any more about Europe, but apparently, I cannot stick to my own words.
BERLIN (Reuters) – Chancellor Angela Merkel praised higher German wage deals and signaled flexibility on a financial transaction tax on Saturday, in a sign she is open to new measures to boost growth in Europe.
It is amazing what a switch in popular thinking will do for a politician. Her coalition is collapsing and popular sentiment is moving swiftly against her strict austerity stance. Merkel is now singing a different tune.
A day after Germany said it supported giving Spain an extra year to cut its deficit to the 3 percent of GDP threshold, Merkel sent the message she was ready to compromise with the opposition SPD and European partners in other areas.
I am glad to see Merkel is coming around to the idea that putting a debtor in prison is the very best way to ensure one will never see any repayment of debt. Europe will come around on all fronts, but the pace will be slower, which will keep the US economy at bay, but not dead.
Trade in the day – Invest in your life …
