The Unemployment Quandary
So now we’re hearing stories that the Mubarak government in Egypt is bribing citizens with promises of food to take to the streets and violently confront the protestors. Pro-Mubarak demonstrators have been linked to attacks in foreign journalists.
It would seem as though the Egyptian military will have the final say. It already appears that the military has sided with the protesters. And with the rhetoric from international leaders gaining in intensity, Mubarak’s reign will likely be numbered in days.
What’s going to be particularly interesting is how this Egyptian protest affects other Middle Eastern countries. We’ve already seen Jordan’s King Abdullah preemptively fire his Cabinet. And there may be changes coming in Yemen and Algeria.
We haven’t heard much about a “peace dividend” since the U.S. invaded Iraq. But a move toward democracy in the Middle East could put the peace dividend back on the table.
*****The U.S. stock market has been a model of resilience this week, battling back from minor sell-offs and a rallying dollar to post new post-recession highs. Even today, the indices have battled back from early weakness to trade in the green.
We got the latest non-farm payroll numbers this morning. And frankly, the numbers raise more questions than they answer.
After the ADP private payroll showed 187,000 jobs added to payrolls. The government number came in at a measly 36,000. But amazingly, the unemployment rate dropped to 9%.
It’s probably not wise to think too much about the obvious discrepancies here. But that’s not going to stop me…
So, how does the unemployment rate drop dramatically when “official” job growth is at a standstill? The easiest explanation is that a lot of unemployed have simply fallen off the unemployment roles and are now classified under one of the long-term unemployed categories that is ignored by the “official” unemployment number.
But how do we explain the difference between the ADP number and the government number? After all, the ADP number has come in far stronger than the “official” number for months.
Not being a government economist skilled in the arcane art of obfuscation, I don’t have a ready explanation. But I will say that strong job growth would put a lot of pressure on Ben Bernanke to end his QE2 stimulus. But with job growth barely ticking higher, Bernanke’s position on stimulus is safe.
*****Speaking of Mr. Bernanke, you gotta love the speech and Q & A he gave at the National Press Club yesterday. Of particular interest to me was Bernanke’s comments about rising commodity prices (inflation) in emerging markets.
The Fed Chief basically said that central banks have the same tools as the Fed to fight inflation, that is, raise interest rates. Or in China’s case, break the yuan-dollar peg.
There was some conjecture when QE2 began that Bernanke was hoping to pressure China to break the yuan peg and let that currency appreciate. And his comments yesterday make that seem even more likely.
China has kept its currency weak and managed to attract manufacturing and other foreign investment for over a decade. And clearly, that strategy has both enabled China’s growth and created some serious imbalances. For the second largest economy in the world to have a pegged currency is pretty absurd. And if Bernanke is putting the pressure on, good for him.
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