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US and them

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Politicians and journalists will try and sensationalize the US employment data. These are unreliable numbers that will be revised many, many times. Ignore the details. The trend is of a good US labor market producing respectable income growth (average hourly earnings are neither wages nor income growth).
  • US labor shortages could force the economy to slow. The US has low employment participation compared to history (or to parts of Europe). However, this may not reflect genuine spare capacity in a more complex world. Fed Chair Powell has suggested that immigration controls may cut longer term economic growth.
  • US trade data is due. Does anyone outside Washington and financial markets actually care? The US deficit has widened, with little obvious impact from tariffs. Tariffs are a rather 19th century tool in the 21st century – it is a bit like driving a horse and cart the wrong way up an interstate highway. You might reach your objectives, but the odds are not in your favor. 
  • President Trump has been tweeting optimism about a China trade deal. Before breaking out the beautiful chocolate cake, it is worth remembering that China would also have to agree, and has the capacity to hold out against current sanctions.