JOBS DATA AT 8:30 AM

The BLS releases the May employment report at 8:30 am. A potential upside surprise may occur, the result of a strong ADP private employment survey released yesterday.

Partially because of the data, the Atlanta Fed increased its estimates of second quarter growth to 4.0%. This would be the strongest growth rate since September 2014 pace of 5.0%, growth that was partially the result of massive inventory accumulation.

Dodd Frank was also fully implemented in September 2014, the regulatory behemoth that I believe has crushed the animal spirits.

Private job creation is one of the greatest generator of economic activity. Even if Trump’s deregulation polices fall flat, the mere reprieve of additional regulations is uncaging animal spirits.

Analysts are expecting a 180k and 173k increase in non-farm and private sector payrolls, respectively, a 4.4% unemployment rate, a 0.2% increase in average hourly earnings, a 34.4 hour work week and a 62.9% labor participation rate (LPR).

As noted the other day, the consensus view from the “Blue Chip Economists” is for annual growth not to exceed 1.8% for the next ten years or the around the same rate of the last 10 years.

The rational for this anemic growth rate is simplistic… reduced transfer payments, the slowing of the demand side (consumer) of equation and a systemically lower LPR the result of the retirement of the baby boomers.

I do not agree with the above assessment. Yes the demand side of the equation is slowing, the result of everyone owning almost everything they may need or want. But what about the supply side as the major contributor for growth, growth that historically increases both wages and productivity? Such investment has been moribund for over 15 years.

Regarding transfer payments… transfer payments have never produced the growth that such increases have projected.

Regarding the LPR, the data clearly suggests the LPR is rising for retirees, but falling for those in their peak earning years of 30-55. It is this segment that the LPR must rise and will if the economy demands.

The ramifications of healthy jobs market accompanied by a rising LPR are huge in so many dimensions, especially politically.

And then there is the possible roll back of Dodd Frank. The House is expected to roll back the more onerous provisions on June 8. I rhetorically ask what happens to growth and inflationary expectations if monetary velocity accelerates and funds gravitate back into the real economy? Is this why the small caps rose by the greatest amount yesterday in 3 months? I think yes.

George Soros stated yesterday globalism/the EU is in an “existential crisis,” partially the result of Trump/Brexit. If Trump’s proposals are legislated, the result of greater growth, economic nationalism could again become the dominant political/economic philosophy.

Last night the foreign markets were up. London was up 0.42%, Paris was up 0.98% and Frankfurt was up 1.67%. China was up 0.09%, Japan was up 1.60% and Hang Sang was up 0.44%.