Virtuous Cycle: Will NFP Lead to More Capex, Hiring?

The employment situation has been gradually improving. Has it reached the point where an upside surprise is possible?

Like Housing, Unemployment has been a headwind facing the economy. The script following a major credit crisis typically involves high unemployment, low growth, and delveraging that impacts consumer spending, The post 2007-09 crisis is no different.

As of late, we have seen not great, but improving employment data. The Census noise is now behind us, and we are entering a period that will likely determine the next 12-18 months of economic growth.

The October data saw 151,000 new hires, and significant revisions to the prior 2 months. Put this number in context — we need 150k per month just to keep up with population growth. If we were to get a 150k/mo for the next 12 months,m we would not see an appreciable decline in the Unemployment rate.

A 200k monthly number (or better), however, will make a dent in the U3 Unemployment number. And the U6 number could also improve, as employers add hours to part time workers.

The psychology of a few months of strong data could have a very positive effect on hiring, wages, and capex spending.

If DC could marry an Accelerated Depreciation tax cut with a payroll tax holiday for just one year, I believe we would see a very signficant uptick in both Capex and Hiring. Add to that a temporary rate reduction for corporations repatriating overseas cash, and you have the makings of a more robust recovery.

Right now, I think more people would be surprised by stronger upside numbers than down. After a few months, it might even remove the fat thumb off the scales in favor of more QE2.


Chain Store Sales, Monster Employment Index, ECB Announcement, Jobless Claims and Pending Home Sales Index later today could provide some insight into what Friday’s Employment situation might look like . . .

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