UBS | A below -consensus payroll print and a 37,000 increase in the pace of initial claims reported in May have caused some to question the health of the US labor market. We examine why these worries are unfounded and how, if anything, these signs of “weakness” may actually be sig ns that wage growth could soon begin to accelerate.
The way companies are behaving is creating distortions in the stock markets, particularly on the other side of the Atlantic. Share buybacks over there have increased by 20% in the first quarter of 2016 from end-2015 and by 31% in year-on-year terms, based on S&P Dow Jones Indices.
F. Barciela /F.G. Ljubetic |The stock market valuations of new technology firms have reached dizzy heights in the US over the last few years. And it doesn’t look as if their stratospheric rise has stopped. Google, now Alphabet, has a stock market value of 491 billion dollars, while Apple’s is 484 billion. Facebook is worth 345 billion dollars and Amazon 337 billion.
The US economy is trapped by outdated infrastructure. The big paradox is that financing it today is easy because of the overabundance of liquidity in the market.
It’s strange that in the US there are so many people worried about the possibility that the country might end up being like Greece. There are other crazy people who make the comparision with Zimbabwe. Greece or Zimbabwe, well it depends on whether the threat is related to the state going bankrupt or to hyperinflation.
Marc Chandler via Caixin | The U.S. dollar has had a rough few months. It has fallen against most major and emerging market currencies this year. A critical issue for global investors and policymakers is whether the dollar’s uptrend is over or is this just a respite. Much is at stake with the answer.
“This abnormal aversion to risk may be the worst legacy of the crisis. The reason why US companies do not use their extremely high profits – and stock market valuations – to invest, open up new markets…but rather to buyback their own shares and further boost their share price and bonuses.”
AXA IM | Yet when looking at the US economy we see low unemployment, continued strong job gains, increased personal income and rising core inflation. The traditional end-of-cycle dynamics (rapid increase in wage costs, monetary tightening, reduced profitability) are not screaming “recession” at us.
BoAML Research | One reason the Federal Reserve has been so dovish recently has been a lack of conviction in wage and price inflation. Fed Chair Janet Yellen ’ s speech earlier this week confirmed that she is not convinced that the recent rise in core inflation would “ prove durable ” and stated that more adverse -than -expected foreign developments could slow the pace of labor market improvement, and with it, “ growth in both wages and prices.
The big hope of political self-starters like Donald Trump are those voters without a university education, once members of the US middle-class, who accounted for 36% of the electorate in the last elections.