Recap 12-2-11

Main Items:

  • US Nonfarm Payrolls declined to 120k vs 125k exp and 80k prev.
  • Unemployment dropped sharply to 8.6% off of a decline in the participation rate from 64.2% to 64%, down from 64.5% a year ago. Over the past year, according to the household survey, Household Employment increased 1.7mm, while the labor force decreased by 60k.
  • Hourly Earnings declined -0.1% MoM in Nov, vs 0.2% exp and prev. This keeps the YoY rate ate 1.8% vs 2.0% exp
  • US vehicle sales increased to 13.6mm in Nov, the highest level since Aug 2009
  • Canadian UE increased to 7.4% in Nov vs 7.3% exp and prev. Net employment declined -18.6k vs +20k exp


  • BBG reports that the ECB is rumored to lend 100-200bn via the IMF
  • Merkel to Bundestag:
  1. the German government has made it clear that the European crisis will not be solved in one fell swoop
  2. It’s a process, and that process will take years
  3. Violations and sanctions should be decided and imposed by the European Court of Justice Enforcement. For this to be grounded in law, she called for a revision of the EU Treaty as her first choice, but also pointed to the possibility of bilateral contracts if EU Treaty change could not be achieved in the near term
  4. strongly rejected the introduction of Eurobonds as a response to the current crisis, but acknowledged that a gradual evolution towards Eurobonds was under way on its own.


  1. Sovereignty can only be exercised with others. Europe doesn’t mean less sovereignty but more sovereignty because it gives us a greater capacity to act
  2. Europe must move towards decision taken by qualified majority
  3. Eurozone countries must examine national budgets together, seek better fiscal discipline
  4. He noted that France and every other Eurozone country must adopt a budget-balancing Golden Rule. He also said the Maastricht Treaty has flaws and France and Germany are fighting together for a new Treaty.

EU PPI declined to 5.5% YoY in Oct vs 5.6% exp and 5.8% prev

UK PMI Construction declined to 52.3 in Nov vs 52 exp and 53.9 prev

It appears that the market is expecting the US to decouple. This is supported by recent PMI data, of which the US is the clear leader. However, the global picture is not so rosy. A simple average of the US, EU, Japan and EM PMI’s have been below 50 for several months now, the first time this has happened since 2008. With the EU measure likely to continue lower, the question is, how long can the US stay decoupled?

Also, note how Draghi’s comments inspired confidence without committing to anything. Master example of manipulation. But it’s working. It also, however, does not inspire confidence for aggressive ECB action even if new fiscal guidelines are agreed to. Expectations for the 12/9 summit is now quite high – and likely to be disappointing. Ultimately, we may need to get expectations of deflation before the ECB is willing to act aggressively. (then the ECB can print because they are just following their mandate) Unfortunately, given Europe’s wage indexation schemes, that doesn’t seem likely for at least a couple quarters.