Contradictory, antithetical, and conflicted are three words that come to mind after thinking about recent economic news. First off, last week’s employment report came in at less than 150,000, which broke the record string of consecutive months of 200,000 plus jobs gained. And then …
- Hourly pay was a silver lining in Friday’s monthly jobs report, rising by 0.3 percent from the prior month and 2.1 percent from a year earlier.
My thinking is, and maybe I am a dim bulb, but if employers are not hiring, why are they raising wages, and make no mistake, they are raising wages. It seems contradictory, no?
- Wal-Mart Stores Inc., its stock up five straight years, announced a pay increase in February for 500,000 of its hourly workers. T.J. Maxx, Marshalls and other chains owned by TJX Cos. matched it a week later. On April 1, McDonald’s Corp. said it will raise pay at company-owned locations to at least $1 more than the local minimum wage.
The above pay increases alone put additional millions in the pocket of consumers daily. Now, add that to lower gasoline prices and economic stimulus is created, which brings me to another contradictory reality – rising oil prices.
Now, the Saudis just raised prices to Asian customers for the second month in a row citing demand increase as the reason. This has caused oil prices to jump, but …
Granted, demand in Asia is increasing as oil prices stay low, so, when the Saudis raise rates, two things could happen. One, demand decreases, and other is oil vendors, say, form Latin America, make pitches to the Asian market with lower pricing, which threatens Saudi market share, which is antithetical to the reasoning for the Saudis not cutting production – to protect market share.
Both of these realities fly in the face of oil prices rising, especially since the Saudis are losing market share in the US, the world’s largest oil buyer of oil and the Saudis number one customer. Oh, and speaking of the US …
- Refiners are poised to make gasoline at a record pace this year, keeping the biggest U.S. crude glut in more than 80 years from overflowing storage.
So, we have an oil glut in the US, so much so that storage capacity is strained, which has helped keep the price of oil down. Okay, so to address the issue just mentioned, refiners have increased, well, refining so much so that now gasoline will be coming out a record pace. What will that do to the price of gasoline in a market already saturated with oil? Does this seems contradictory, or am I missing something?
- The pace of growth in the U.S. services sector fell in March to its lowest level in three months but exports rose to the highest level in over two years, according to an industry report released on Monday.
- Financial firm Markit said its final reading of its Purchasing Managers Index for the services sector rose to 59.2 in March from 57.1 in February. The March reading was the highest level since August and was above the preliminary, or “flash,” reading of 58.6.
Straight out of the gate, the above two reports seem conflicted, unless, of course, you parse the language. If you read slowly, you notice that in the first news bite, you have a truth – the “pace” of slowed to a three-month low, but, in reality, another truth, the Services sector grew, again, as stated in the second news bite. Which is more important to understand, relative to the market?
And, finally, another piece of data that is conflicted, contradictory, and antithetical to the market’s mindset about the strength of the US Dollar – US exports rose to the highest level in two years.
- The rise in the exports index came despite the U.S. dollar’s surge against a basket of major currencies of more than 20 percent since last May. A strong dollar typically crimps demand for U.S exports and reduces the value of overseas sales when they are translated back into U.S. dollars.
Is it possible that lower energy prices across the globe have offset the rise in the US dollar because as global consumers have more money, they spend more money (regardless of higher costs), which means demand for products increases?
Maybe it is just me. As I said, sometimes I think my bulb does not shine so brightly, but you do have to admit that the above economic data is oppositional. Now, there is another world to include in my list. Here is yet another – contrary.
All of the in-the-moment “bad” news runs contrary to the longer-term reality that the global economy, led by the US, is slowly but surely growing, and, perhaps, the fact that the Saudis are raising oil prices in Asia suggests my statement has merit, is something to consider.
Trade in the day; invest in your life …
