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Step Aside Washington Let The Economy Work


Despite Washington’s dysfunction, the US Labor Department’s Non-Farm Payroll report showed 155,000 jobs were added in December. Additionally, another 15,000 jobs were adjusted to the November total. By all accounts, the figure continued a steady progressive trend.

Based on the antics of a devastatingly dysfunctional 112th Congress, many analysts feared for the worst. Over the last 60 years, the unemployment rate has averaged 6.0 percent. Today, the unemployment rate is 7.8 percent and there are few reasons to think the economy can re-create more prosperous times. The December unemployment rate is one percent less than 12 months ago.

There are many theories about the direction of the US recovery. However, analysts all agree that the dysfunction in Washington may be the nation’s biggest hurdle.  With momentum leaning forward, the economy received no lift from the pitiful resolution of the fiscal cliff. There is not one provision in this divisive piece of legislation that gives the economy direction much less the much needed stability to know where the country is headed. Lacking than a clear direction of financial policy, the government has engulfed the business community with instability. Business leaders have learned very little about what demands a resolution to the debt crisis will make.

The end result of the first leg of the self-imposed fiscal cliff is that business leaders know less about the direction of the solution than before negotiations commenced. Businesses are again forced to hoard their capital in preparation for the next Congressional debacle. It is a sorry state and not one worthy of the world’s largest economy.

In December, average hourly earnings increased by 0.3 percent. Two important sectors that have been gutter-bound since the outset of the recession, construction and manufacturing, reflect progress as new jobs increased in both sectors.

To many observers, new job creation in December is disappointing. To others, it is a miracle that the economy has withstood a government seemingly on a path of self-destruction. Retail sales over the holidays were below expectations. Consumers started the holiday buying season at a good pace but as the fiscal cliff approached, many consumers applied the brakes. Now, facing several more agonizing fiscal negotiations and when the country needs the full power of the American consumer, it becomes difficult to see positive growth and new job creation.

Will the Congress Remove the Shackles?

The politicians will be negotiating the debt ceiling, and the pending portion of the fiscal cliff in upcoming months. If that isn’t enough to dim the economy, consider it a miracle.

On a positive side, automakers have achieved great success in 2012. And, local, state and national payrolls cut 13,000 jobs in December.

What the country needs is a well-considered debt reduction plan. Only the development of such a plan will encourage corporate investment and return consumers to open pocketbooks. The chances for a resounding debt resolution plan are cloudy at best.

Richard Gilhooly, an interest rate strategist for TD Securities, New York, offered a sound observation regarding the current job marketplace. “Private sector payrolls at 168,000 were fairly robust in December and the general view is that the recent numbers were likely depressed by fiscal cliff issues, such that improvement should be seen in coming months.

“The household survey was weaker, with only 28,000 jobs, while 192,000 people entered the labor force, pushing the unemployment rate 0.1% higher. Bonds initially traded higher on the unemployment rate and the idea that QE is pegged to at least 6.5 percent, but the market has traded back to the lows subsequently on what is generally a firm report and likely better ahead.”

Imagine where the economy would be if Washington stopped presenting obstacles to a motivated environment.

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Construction Sector Slowdown Weighs On Pound Sterling


Pound sterling gains were halted in the overnight following the release of the Markit/CIPS UK construction PMI survey.  Although still relatively positive, survey results were worse than had been anticipated by analysts, leaving some still skeptical of any short term UK economic recovery.  As a result, the British pound traded slightly lower to yesterday’s high at 1.5841 against the US dollar.  The exchange rate hit as high as 1.5869 in midday trading yesterday.

According to the construction sector survey, index readings dipped to a 51.4 in January – below the December 53.2 mark.  Although this is the 13th consecutive month of gains, the figure stands as the weakest reading in 4 months and compounds fears that the recession isn’t just over yet.  Notably, however, today’s survey findings still portend to a thin silver lining for Europe’s second largest economy.  According to subcomponent readings, confidence among construction companies and business leaders continues to be optimistic – although the same companies are unlikely to add to current payrolls.

The recent round of optimism seems to have been spurred on by improving month to month comparisons in recent weeks.  Notably, manufacturing sector activity improved to an 8-month high, while confidence among consumers recovered to the highest in almost the same time period.

Given the overwhelming and rising optimistic sentiment, today’s results may be temporary as traders begin to shift their sentiment to a potential turnaround in the UK economy.  This should support the current sterling momentum – if at least for another session or two.

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