ISM and Jobs: Same Story
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2019-11-01 10:21 by Karl Denninger
in Macro Factors , 86 references Ignore this thread
ISM and Jobs: Same Story
[Comments enabled]

So the ISM came out with a number that was at best described as "punk."

While the number was up a bit from September, it remained below the "50" number that signifies equilibrium.  Production was actually down, but some of this may be the GM strike.  The bad news is that if it was GM you'd expect backlog to be up, but it isn't.

Three months of manufacturing ISM contraction in a row, which we now have logged, are associated with recessions.  That new orders firmed a bit helps offset that, but that will have to be reflected into production next month or it's going to look more like desperation than recovery.  What's especially bad is that both prices and backlogs decreased, which is not good at all.

This was also reflected in the employment report today; while "services" employment was strong the same cannot be said for goods-producing.  Construction continued to be decent, but the rest of the "goods" side of the ledger was balanced to soft; manufacturing workweeks contracted by 0.2 hours, which is enormous.  As a reminder a tenth of an hour in workweek is approximately the equivalent of 350,000 jobs in terms of economic impact; changes here are utterly enormous in terms of individual economic prosperity.

There's another problem showing up in the data: Contraction of young workers.  Specifically over the last year close to half a million people have disappeared out of the "high school or less" population cohort (!!)   While they're certainly showing up in the other cohorts with more education that belies the problem -- the next generation coming up isn't replacing those who are here now.  20 years from now this will turn into a disaster in terms of tax receipts and distribution between those who are old and frail and those who are producing and paying if it continues.

Continue it will for as long as our government continues to promote policies that impoverish young people and then hose them up the ass for so-called "health insurance" along with pricing them out of things like houses -- so-called "asset inflation" goes directly to inhibiting people's desire to start families and increase their size!

These policy choices, which take years if not decades to filter through the economy and effect behavior, have no quick resolution available, nor is there any way out of the box for the government without cutting the crap with deficit spending, suppression of interest rates and attacking the monopolists, any or all of which would produce an immediate market crash.  As such don't expect any of that to happen -- right up until cap-ex, which is severely impacted by said ramps in asset prices, folds back and forces the issue.

Does the PMI tell us that's coming?  Maybe.

Give us six months and we shall see.

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