Friday, March 06, 2009

Jobs report.....

Well, the jobs number is mixed, but I suspect the market may be happy with it. Another 651k jobs lost in February which was slightly better than the forecast. The unemployment rate however cracked 8% as a result of revisions to past month's data.

Only places adding jobs - government, education and healthcare.

Bloomberg has the full story.... Futures are virtually unchanged.

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I just heard a pretty interesting take on the catch 22 that the US and China find themselves in right now.

China's economy is clearly suffering a dramatic downturn as a result of the pullback of the US consumer. In an effort to stimulate their own economy China may need to repatriate some of their investments (from US dollars back to Chinese Yuan).

This will mean that there is potentially less money available to buy US debt,

which means that US Government spending might be curtailed,

which may prolong the recession,

which will further hamper China's economy,

which will leave less money to buy US debt.....

wash, rinse, repeat.

There are only a couple of ways to break this cycle -

1) For the Chinese it means moving up the food chain in manufacturing from making consumer goods for Walmart to making high value add products (similar to the move that Covidien is making). Obviously, this isn't a good option for Americans, but it's a possible outcome.

2) For the US it means we may have to once again become the financial backer of our government. We already shoulder most of the burden via our taxes, but I think we need to institute a program similar to the old War Bond programs in the 40's. I'm not sure anyone has a lot of extra money to lend to the US right now, but I'd rather we control our own destiny rahter than let China decide when they are going to stop lending to us.

Cheers!

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