US Economy


How high will US interest rates get?

Via Westpac: Though credit spreads in the US are off their lows, they have remained relatively impervious to the heightening global risks surrounding trade and geopolitics. This partly reflects the strength in the US economy which has continued to support corporate earnings. With credit spreads in the US and Australia tightly linked, our spreads have


US jobs boom will fizzle

More on the US jobs market from Westpac’s Elliot Clarke today: The US labour market delivered again in September, as strong employment growth continued and the unemployment rate fell to a new low dating back to 1969. Despite this strength however, the wages data did little to rebut Chair Powell’s message of recent weeks that


Previewing US jobs

It’s NFP day again. From Calculated Risk: On Friday at 8:30 AM ET, the BLS will release the employment report for September. The consensus is for an increase of 180,000 non-farm payroll jobs in September (with a range of estimates between 150,000 to 195,000), and for the unemployment rate to decline to 3.8%. The BLS


Chinese ‘sharp power’ crisis grows as US reveals global “hack”

Via Bloomie today: In 2015, Inc. began quietly evaluating a startup called Elemental Technologies, a potential acquisition to help with a major expansion of its streaming video service, known today as Amazon Prime Video. Based in Portland, Ore., Elemental made software for compressing massive video files and formatting them for different devices. Its technology


New NAFTA is good for North America, bad for Australia

Via the WSJ comes the detail: Automaking The new three-country pact would require auto makers to build a greater portion of a car in North America and with higher-wage workers to avoid duties when a car crosses borders. That would be a relative win for Detroit’s Big Three auto makers, which rely heavily on factories


Have US earnings peaked?

The Wall Street Journal suggests that they may have: I’m not seeing it yet in my data: I use Factset rather than the Bloomberg data used by the Wall Street Journal, and so maybe there is a timing issue. But Thomson Reuters data concur with Factset: Also, it is worth noting the fall in earnings in the


10% of Trump tax cuts were productive

And guess where the rest went? Via FTAlphaville: The wave of money repatriated back by US companies, following Trump’s tax reforms implemented at the start of the year, is slowing to a ripple, according to new estimates from JPMorgan’s Flows and Liquidity team: Assuming the deceleration pattern between Q1 and Q2 continues over the coming


Trump plans “administration wide broadside” on China

Via Axios: The Trump administration is planning to launch a major, “administration-wide,” broadside against China, according to two sources briefed on the sensitive internal discussions. These sources, who weren’t authorized to discuss the plans with the media, told me the effort is expected to launch in the next few weeks. The details: The broadside against China


Kohler contracts Trump derangement syndrome

Via Alan Kohler today: An alliance of the American military establishment and Republican trade hawks wants to break up the connections that have become embedded between US companies and China, as part of an attempt to prevent China gaining economic, geopolitical and technological predominance. …Beijing is digging in, settling in for a long siege because


Evans-Pritchard develops Trump derangement syndrome

Via an increasingly hysterical Ambrose Evans-Pritchard today: If Donald Trump and his close advisers think China’s economy is tottering on the brink and acutely vulnerable to pressure, they are sorely misinformed. …Construction is picking up after a slowdown earlier this year. Industrial profit margins are at a seven-year high of 7 per cent, despite a


Doctor Doom returns

Via Nouriel Roubini today at Project Syndicate: As we mark the decennial of the collapse of Lehman Brothers, there are still ongoing debates about the causes and consequences of the financial crisis, and whether the lessons needed to prepare for the next one have been absorbed. But looking ahead, the more relevant question is what


US wages still contained

Via Westpac: The US economy delivered another strong employment gain in August, with nonfarm payrolls rising 201k. While that was a little above our expectation, the August report also cut 50k jobs from the prior two months. The 3-month average now stands at 185k – coincidentally the exact figure we forecast for August. Despite the


No place like home for US investors

Via Moody’s: The U.S. economy and financial markets have been pulling away from the rest of the world. Of special importance is the lagging performance of emerging market economies, which, not too long ago, had been the primary driver of world economic growth. The combination of higher U.S. interest rates and the relatively stronger performance


Could the US be on the verge of a “very long cycle”

Via Goldman: All of these variables are related. Tight labour markets are typically associated with higher inflation expectations. These, in turn, tend to tighten policy and weaken expectations of future growth. High valuations, at the same time, leave equities vulnerable to de-rating if growth expectations deteriorate or the discount rate rises, or, worse still, both


How did Trump deliver his boom?

It wasn’t hard, via Shane Oliver: It’s been the norm for the US budget deficit to blow out when unemployment rises (as tax revenue falls and jobless claims go up) and decline when unemployment falls. Thanks to Trump’s fiscal stimulus it’s now blowing out when unemployment is collapsing and looks to be on its way


US Democrats have a good idea about GDP

By Leith van Onselen With US real GDP expanding at an annualised rate of 4.2% in the second quarter, partly on the back of the sugar hit from the Trump Administration’s massive corporate tax cuts: A new bill from Democrat Senators Chuck Schumer and Martin Heinrich are demanding a new measure of economic growth that


Which yield curve inversion is the one to watch?

Via the Federal Reserve: Information in the Yield Curve about Future Recessions Michael D. Bauer and Thomas M. Mertens The ability of the Treasury yield curve to predict future recessions has recently received a great deal of public attention. An inversion of the yield curve—when short-term interest rates are higher than long-term rates—has been a


CLOs: The new US sub-prime debt bubble

Via Moody’s: Significant Differences, Erie Similarities The U.S. business cycle has entered its boom phase. This is a period that typically comes closer to the end of the cycle, just prior to a recession. It is characterized by robust economic growth, tightening labor and product markets, intensifying wage and price pressures, monetary tightening, and higher


Risk schmisk! Why US stocks are bullet proof

Investment markets are late in the economic cycle,  the issue being that you never know when the end will come. However, there are some signs that it is not here yet for US equities at least – and there is the potential that US equities will hold the rest of the world out of the abyss


Trump impeachment odds surge

Via Oddschecker: A spike in bets have followed the guilty plea of Michael Cohen. Michael Cohen yesterday pleaded guilty to violating campaign finance laws during the 2017 presidential run and that has caused pressure to build on Trump’s administration. That admission relates to hush money paid to Mr Trump’s lovers and has seen the 72-year-old’s