Monday, July 8, 2013

Employment Report Justifies Tapering QE (excerpt)

Needless to say, the strength in June’s employment report confirms that the US economy is showing more signs of self-sustaining growth, which certainly would justify phasing out QE. To keep focused on the bottom line of the employment report--which contains so much information about the labor market--I calculate the YRI Earned Income Proxy (YRI-EIP), which is aggregate weekly hours worked times average hourly earnings, both in the private sector. It is highly correlated with private-industry wages and salaries in personal income.

Our proxy jumped 0.6% during June to a new record high. It reflects the solid 0.4% increase in wages during the month--the best m/m increase since last November--and a 0.2% increase in aggregate weekly hours of private industry. Reflected in the YRI-EIP were a better-than-expected 202,000 increase in private payrolls during June and a 60,000 upward revision to April and May private payrolls. Private payrolls are up 205,700 per month on average during the first half of the year.

Today's Morning Briefing: Stock Theory. (1) New Fed Center and Blog. (2) From Great Liquidation to Great Rotation. (3) Bernanke’s “stock theory” isn’t working too well. (4) Big outflows from bonds. (5) The new normal for bond yields. (6) From whatever it takes to as long as it takes. (7) From QE-to-infinity to NZIRP-to-infinity. (8) Self-sustaining growth at last. (9) Earned incomes soared in June. (10) Yet another relief rally for stocks on ObamaCare postponement. (11) CFI sectors outperforming again. (More for subscribers.)

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