You may remember I predicted a good year for jobs in 2014.
Right. So far, so good. The BLS released a decent May Jobs Report. Major highlight: another decline in the unemployment rate, with 288,000 jobs added to the economy. The labor force is not growing (with people dropping out of the labor force and not a whole lot more added), but we are at least adding SOME jobs into the economy, and boosting the employment rate a little bit.
Unfortunately, momentum isn't really picking up. A dynamic economy really should reabsorb all the people left behind in the economic bust. People aren't coming back in droves. Hell, we aren't even seeing part-time workers become full-time. So we do not have a booming engine of recovery.
Fortunately, certain macro-economic indicators are looking up, and I am actually going to revise my priors upwards.
The two big stories?
Housing Starts are making a come-back.
Obviously, our household needs a roof and four walls and....you know the drill.
Housing Starts have remained enormously depressed for years. But those have trended upwards for quite a while. This means that the housing market should start to pick up, which represents a huge boon to the economy, both in wealth effects (my house is worth more), and in actual GDP (we build more houses).
We're obviously still at a low level, but we're at a pretty low unemployment for this low level. A big upswing in construction should mean reabsorbing some people into the economy and some gradually rising wages.
Right now we're still, after all these years, in a weakened housing market....this really is something that should turn around in the next year or two, in my opinion.
The other story? Business are getting aggressive, too.
For background, capital expenditures are the dollars businesses spend on new things like factories or software or anything that's designed to grow their business. CAP-EX is uniquely important, as the balance between savings and investment is a critical link in the economy. A decline in business investment has disproportionate effects on the economy, and a recovery in business investment is the same in the other direction.
So this is an extremely positive sign that businesses are looking to expand and put dollars to work.
Financiers are getting bold, too. Despite the extremely poor conditions in the European Union right now, investors are sending tons of money to Europe and bidding down interest rates, in an effort to get some more yield. If the two primary emotions are greed and fear, this is definitely greed. Sick of getting 1% interest rates at home, investors will chance the default of Portugal for a 3.5% return.
Kind of sickening when you think about it.
All of this aggression, to me, indicates growth in the near future. I am really hoping for a solid second half of 2014.
