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Max Fraad Wolff
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Max Wolff teaches economics at the New School University, Graduate Program in International Affairs. Max can be seen/read on CNBC, Bloomberg, Marketplace, CBS News, The Wall Street Journal, Reuters, Al Jazeera English and elsewhere. Max is Chief Economist & Strategist at MVP.VC
My company:
Green Crest Capital
My blog:
GreenCrest Capital Blog
  • Middling Jobs Report

    Middling Positive with Upward Revisions

    The September Non-Farm Payrolls came in at + 114,000 with a lower unemployment rate 7.8%, slightly higher labor force participation and upward revisions of 40,000 to July (+181,000) and 46,000 in August (+142,000). The 2012 average monthly employment gain is +146,000 down from the 2011 average of 153,000. The labor force participation rate edged up to 63.9% from the August lows of 63.7%. Link:

    This number will receive massive attention, and significant skepticism from some quarters, given the Presidential contest and the focus on jobs by the candidates. We need about 110,000 net new jobs each moth to keep up with population growth. Thus, we are doing a touch better than treading water of late. We continue on a seasonal pattern of disappointing numbers in the spring, middling numbers in the fall and relatively robust numbers in the winter months.

    We continue to see very tepid GDP growth and underwhelming employment performance. All these numbers must be seen in the context of recovery from the second worse macro economic performance period in the last 80 years. Thus, we would like to see stronger job, wage and GDP growth than we have seen. We value the employment report for what it tells us about economic health. Labor force participation, graphed above, is important as well. This tells us how many are employed- full and part time- and looking. This number edged up in September but has been falling for the last decade. The downtrend is troubling. The employment population ratio is another vital measure. This allows a gage of the inclusive opportunity set. Employment population ratios have also been trending down, although were up in September.

    There was significant volatility by sector in the September jobs report. Manufacturing was weak with -16,000. Education and health services were very strong, +49,000; this was led by health care services, +44,500. The public sector added jobs in September +10,000 with state and federal hiring rising and local employment declining by 7,000. Temporary services, sometimes seen as a leading indicator, saw declining employment in September. Link:

    Wages are barely keeping up with headline inflation, in the best of months. The Bureau of Labor Statistics (BLS) tells us that average hourly earnings have increased 1.8% over the last 12 months. The BLS also tells us that the average increase in consumer prices (NYSEARCA:CPI), increased by 1.7%. The CPI less food and energy was up 1.9%, food increased by 2.0%. Thus, the average wage has not increased over the last year or the last 5 years. The 92% of the labor force that is working has not seen a wage increase in a very long time. Thusly, the economy is not improving for the majority of the labor force. Link:

    Next months October Non-Farm Payrolls will be profoundly political as it comes just 4 days before the elections. Thus, today's numbers will fade as attention re-centers on the October numbers and revisions. We would be well served to remember that these are volatile series and single month reports are subject to major revision and distortion. Lately, there is profound political spin and attention to the numbers as well.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 05 10:05 AM | Link | Comment!
  • Jackson Hole
    Waiting for GDP and Jackson Hole
    In the past few days markets have stumbled out of a fear gauntlet. We have just been through one heck of a rough a summer and are now bracing for a hurricane. Irene, not Bernanke, lies behind the hurricane reference. European and American sovereign credit has taken a symbolic and accreditation beating. The Euro Zone is straining under debt burdens and a virally spreading lack of confidence. We have serious confidence issues on our side of the Atlantic too. Bank of America is paying 6% for the confidence of association with Warren Buffett these days. Amidst all this tumult we will hear from Federal Reserve Governor Bernanke and see revised GDP today.
    We expect very little from the 10AM Jackson Hole speech. Folks seem to have forgotten that it is not the norm to announce major new policy initiatives from the Kansas City Fed’s retreat. We will get general language about commitments and reads on the US and World Economy. If the markets swoon and reaction is swift and harsh to a lack of concrete proposal, we might see a response later next week. This would be the earliest and would only occur if there is a dramatic and negative response.
    We are likely to see Bernanke speak about the temporary nature of our recent spike in inflation readings. We have seen a significant increase in price growth since last year’s summer weakness inspired QE2. We have CPI year over year increase of 3.6%. That is much higher than last year’s modest 1.3% reading going into the Jackson Hole meeting. As prices have come up, led by rapid increases in the prices of food and fuel, pressure has risen on loose monetary policy. We see this as three very loud voices of dissent were raised against the recent Bernanke assurance of low rates through 2013. Indeed, the spike in prices has been sharp and will likely come down. However, it reduces the likelihood of aggressive policy. The political opposition is high and the economic rationale is diluted by past stimuli.
    We do hope to hear significant attention paid to the balance between recession and inflation risk. This will open the way to greater policy freedom going forward. We also hope and expect a lengthy discussion of working with the ECB, BOJ and beyond. Tough times and jittery markets are in dire need for the calming influence of sage leadership policy. Regulators and banks need to invest in reassurance. Bernanke could provide some balm to market wounds today if he addresses Fed commitments to European banks and concerted policy actions.
    Finally, today’s expected corporate profits and GDP revisions are likely to show another quarter of strong profits and lackluster GDP. We have seen this pattern define the last 2 years. We need to see higher GDP to be able to sustainably anticipate good corporate profit numbers.
    Aug 26 7:45 AM | Link | Comment!
  • Technology Change, Political Change, Economic Opportunity

    As Libya joins neighbors in transformative political change, new information and information distribution systems figure prominently. The National Transitional Council, the rebel governing group, informed the people of Libya and Tripoli that they were capturing the capital via text message. As British authorities sift through the triggers of early August 2011 riots, social media figures prominently. You Tube videos and cell phone cameras have featured prominently in revolt and news flow from Syria.

    The Arab Spring, recent mass events- positive and negative- have been communicated to participants, news organizations and global opinion through new communication systems and new information distribution networks. Social networks have taken a leadership role. Facebook and Twitter, smart phone and tablets are in ever more hands. Facebook’s 750 million global users represent a potent new network. We look to new devices and the social networks that they use, to send out and taken in the news of the world. Social networks and mobile devices increasingly use clouds to connect people, places and ideas. New connections are possible. Different types of information move across different systems.

    As we move toward 2012, it is already clear that 2011 was the year of a new sector. We call this sector Web 4C. It’s certainly the web. it’s certainly not the web of a few years ago. Web 4C stands for crowds, clouds, connections and commerce. Crowds, linked by clouds are wielding new mobile devices to communicate different types of information across different types of network. New connections are being formed and reformed. The commercial implications are transformative. The political ramifications are revolutionary.

    By late in 2012, Web 4C will have even greater reach and effect than it has now.  Several leading firms will be public. The market value of this sector will be well over $150billion. Whatever the final name chosen for this sector- Web 4C, Web 2.0, The Social Web- we know it is changing the world and how we see it. Growth rates remain double and triple digits in Web 4C space. Governments rise and fall, video games are played, messages sent and received, love and marriage built and destroyed. Increasingly social networks and firms are contouring human interactions- personal and political.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: None of the mentioned firms are public companies.
    Aug 22 9:21 AM | Link | Comment!
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