Chart that will surprise you
Kategori: Allmänt
In my last two comments I have been negative on stocks due to China's weakness and the stock market's performance being completely out of sync with economic expectations (as per German IFO expectations). I am still negative, as I believe stocks need to correct before the long-term upward trend can continue.
However, just like two negatives miss one positive, I will give you two charts that will surprise a few and at the same time confirm why Jim Chanos might be right when he says that the US economy is coming to an end of the deleveraging cycle.
The first chart shows the estimated total employment in the US private sector and the year-over-year growth. What this chart tells us is that private sector job growth in the US has been on an almost continuously accelerating growth path (year-over-year) since late 2009. In fact, the current expansion of two percent is on par with the fastest expansion observed during the previous boom back in early 2005. However this could hardly be deduced by looking at mainstream media headlines. So what is actually dragging the job picture down and allegedly forcing the Federal Reserve to continue quantitative easing (QE) for as long as it is required and conditional on its dual mandate of jobs and price stability?
The second chart explains why very well. It shows 12-month rolling employment in the US government. Since early 2010 the year-over-year growth rate has been negative and dragging on total employment change. The US government is running a large deficit and austerity is being implemented across the board (federal, states and local communities), contrary to what is happening here in Europe. Again the US is ahead of the curve.
If the US government's layoffs gradually stop and year-over-year growth rises to barely unchanged levels, in addition to private sector employment growth being around two percent, then the US conomy will add around net 200K new jobs a month and that will push the unemployment rate down fast.
Unless we see any major disruptions from the fiscal side or the global economy (predominantly China) and the Eurozone, then the US economy could be closer to a tipping point in terms of the total employment situation than most believe.
