The Financial Post today reports that US private sector hiring surged in December as employers added 325,000 new workers, while claims for jobless benefits fell. This come from the ADP National Employment Report. As a comparison, in November 2012, 204,000 private jobs were created.
“The number is stunning” quote by Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
This matches increasing consumer confidence, increasing auto sales, and a general healing in the economy. While Christmas season hirings tend to be seasonal to some degree, the numbers far exceed all analysts estimates.
A separate report from Challenger, Grey & Christmas, consultants reports that planned layoffs fell to a five month low in November 2011.
The Interpretation
The effects of the bottoming of the current cycle are beginning to be felt, As with every cycle in the past, doom and gloom, pervades the market place and people decide that ‘this time it is different’ and future prospects are gloomy, and in a similar fashion to the optimism at the height of boom cycles, believers think ‘ This time it is different’.
Those realizing that every cycle is just that – a cycle – anticipate ‘the next big thing’, which will prompt the next cycle and bring prosperity to the new class of entrepreneurs and investors.
European Change from Bazooka Actions
A speech by US Treasury Secretary Hank Paulson 3 years ago, used the phrase “bazooka” to describe the policy power of the US government in dealing with financial matters. Essentially he said that if you have that power, it rarely has to be used as the knowledge of its existence was sufficient for onlookers.
However, the US did use “bazooka” power in its quantitative easing, and Europeans did use it in rescuing some of their financial institutions.
Bazooka power is an effort by government to influence the market place, and is somewhat of a bridge between Capitalism beliefs and Socialism/Communism beliefs. Essentially it is government’s attempts to control the marketplace. In a future blog, I will give some examples of the failure of bazooka power in countries that have used it.
Effects in the USA
Many, including myself, believe that much of the trillions spent in QE, were misguided and poorly understood. The effect was to extend the downturn and not let the basic marketplace deal with its failure in a quick and effective way. Instead we had continuing malaise.
Bazookanomics also became the standard in Europe, as evidenced by a speech by the UK Prime Minister David Cameron, last October, when advocating a much larger financial ‘firewall’ around Greece and the creation of much larger European funds to combat the possible contagion of the debt crises.
Germany
Due to it’s fear of inflation and resulting political instability, Germany has blocked some of this unrestrained enthusiasm for printing money and hiding all financial matters under the carpet, as Greenspan did in the USA.
What we are seeing now, is a rising lack of support for this type of “bazooka” action, as politicians in the USA battle over reducing deficits with a common theme but different approaches, and Europeans face the reality of Greece or others defaulting on their debts, and aside from supporting some financial institutions, public support is weakening for creating prosperity where it is proven fact the government spending and actions do not really create long term economic prosperity.
As the world realizes that markets have to be allowed to function normally, prosperity will return and all of these trillions spent on efforts to rejuvenate the economy, will have been realized to have been incorrect.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.
