A lot of annoying political analysis followed Friday’s jobs report. But if you strip away the spin, it was a good set of numbers – even “near perfect,” as Thomas Simons of Jeffries called it.
With the expansion entering its ninth year, and already the second longest on record, now’s the time to be looking for signs it is coming to an end. Friday’s report offered none. Job growth was solid, but not strong enough to spook the Fed. Wage growth picked up, but not enough to threaten inflation. Discouraged workers began making their way back into the job market, indicating that despite an unemployment rate of just 4.3%, there’s still some slack to fuel future growth. An important milestone was passed: the Hamilton Project calculated the U.S. job market has finally fully recovered from the Great Recession. And The Wall Street Journal calculated layoffs are at their lowest level in half a century.
Does President Trump deserve some credit? Yes, of course. Presidents usually get more credit – and blame – for the economy than they deserve. But Trump’s election clearly stirred animal spirits, helping drive the stock market to its record highs. And his campaign to roll back regulation certainly calmed business leaders, whose concerns over rising regulation was reaching fever pitch prior to the election. Ultimately, though, the Journal’s editorial board says it will be the fate of tax reform that will “make or break” the economic legacy of Trump’s first year.
By the way, here’s one more reason to be encouraged. Late cycle stock-market surges are usually driven by “dumb money” – i.e. small investors – pouring funds into the market at just the wrong time. But Jason Zweig reports small investors have pulled $17 billion out of U.S. stock mutual funds and exchange traded funds in the past month. That’s partly because so many American now own retirement funds that keep stock investments at a set percentage of total investments. So when stock prices rise, the funds sell stocks to “rebalance.” Zweig argues that makes the market less susceptible to bubbles than it was, say, in 1999.
So you can start the new week in comfort that — barring a war with North Korea, a trade war with China, a massive cyberterror attack, a conventional terror attack, a constitutional crisis, or any number of other circling black swans – the U.S. economy is in pretty good shape.
• Memo Inflames Gender Debate at Google
Google was embroiled in a heated debate over gender bias after a 10-page memo from a senior engineer accused the company of creating an “ideological echo chamber” informed by left-wing bias, conscious and unconscious. The author admitted to bias of his own, but that failed to protect him from a furious response by employees on social media. Google’s new head of diversity and inclusion Danielle Brown criticized the memo, which comes against the background of some high-volume soul-searching about the representation and pay levels of Google’s female staff.
• Samsung’s Lee Goes on Trial
Korean Prosecutors said they will seek a 12-year jail term for Samsung vice-chairman Jay Y. Lee, as his trial on bribery and corruption charges opened in Seoul. The trial is set to run for a little over two weeks. Samsung’s share prices has doubled in the last 18 months as it has invested heavily in chip-making, a bet on the growth of the ‘Internet of Things’ that reduces its reliance on a maturing smartphone market. That has raised some questions as to whether the company actually needs the son of its incapacitated patriarch to succeed him as CEO.
• U.K. Blinks Again on Brexit
The Brexit Quadrille continued over the weekend. This dance involves leaks out of Westminster showing a willingness to compromise with the EU’s demands over the terms of their divorce, only to be contradicted immediately by Brexit hardliners, with 10 Downing Street then trying to mediate. Theresa May’s office had to downplay reports that the U.K. was preparing to offer a 40 billion euro settlement to cover existing obligations under the EU’s multi-year budget. The EU has demanded progress on this issue before it starts to talk about their trade future trade relations after 2019, when the U.K. leaves.
Daily Telegraph, subscription required
• Son Weighs His Options
Softbank CEO Masayoshi Son said he was interested in investing in both Uber and Lyft but hadn’t made a decision one way or the other. Given reports of early Uber backers looking to cash out, Uber could represent an easier entry point, or at least one that it is non-dilutive for other shareholders. However, he may find it easier to put a price on Lyft, given the many uncertainties thrown up by Uber’s internal turmoil and its retrenchment internationally. Reports suggest that at least some investors have marked their investment in Uber down by 10% or more. Uber has reportedly boiled down its CEO hunt to three candidates, all of them male, after approaches to least five female candidates including Sheryl Sandberg, Susan Wojcicki, Mary Barra and Meg Whitman led to nothing.
Around the Water Cooler
• GM Recalls Trucks Over Power Steering Failure
General Motors is recalling nearly 800,000 trucks for faults in their power steering function. The National Highway Traffic Safety Administration said the problem can cause drivers to lose control of the vehicle in certain situations. If the trucks’ power levels drop below a certain point, power steering can be suddenly disabled. The sudden steering jolt can cause drivers to lose control. The recall impacts certain 2014 Chevrolet Silverado and GMC Sierra pickup trucks. It encompasses about 690,000 trucks in the U.S. and another 100,000 in Canada and other countries. GM says a software update is all that’s needed to fix the issue, so the cost for the automaker is likely to be modest.
• Barely Rational Exuberance at Bitcoin
The price of Bitcoin surged over the weekend, hitting a new record high against the dollar of over $3,360 before falling back. The move may have been partly caused by holders of ‘Bitcoin Cash’ dumping their holdings and switching back to the original iteration in the wake of last week’s resolution of a dispute over how to scale the digital currency. But the size of the move is more suggestive of new money being sucked in. Ethereum, a rival digital currency, also rose sharply over the weekend, which suggests that a more generic (or if you like, less discriminating) rise in confidence in the asset class as a whole was the main force at play.
• Service Growth Puts Apple on Collision Course With Beijing
The furore over Apple’s decision to suspend the sale of VPNs on its Chinese app store illustrates a very profound change at the company itself: the increasing importance of services as a revenue stream. The WSJ observes that Apple’s Chinese app store generated more revenue than its U.S. one last year. Having made significant inroads into the Chinese smartphone market, Apple has much more to lose from a government ban on its products than it did a couple of years back. That won’t impress those who think Apple should be acting as an arm of the State Department in defending U.S.-style freedoms wherever it operates, but Tim Cook can take solace from the fact that he’s far from alone in his priorities.
WSJ, subscription required
• Fox Harassment Sweep Snares Bolling
Fox News suspended Eric Bolling, one of its anchors, while it investigates allegations that he harassed female staff by, among other things, sending them pictures of male genitalia. The allegations are largely historical, having taken place several years ago. That suggests the case is rather a reflection of continued housecleaning than evidence of persistent problems with sexism after the departures of founder Roger Ailes, president Bill Shine and anchor Bill O’Reilly. Fox Business presenter Charles Payne has also been suspended since July pending an investigation of harassment allegations.