Thursday, January 6, 2011
By: Michael Pento
This morning’s ADP report showed that employers increased payrolls by 297,000, which was the biggest gain in the history of the report. Although this is a very strong number it is important to point out that of the total 297k jobs created 270,000 were in the service sector. This means that over 90% of all jobs created were of the borrowing to consume variety, while less than 10% were of the saving and producing genre. The obvious conclusion from this data is that the trade deficit will surge in coming months.
Contradicting the ADP report was data released from the ISM non-manufacturing report. The employment component during December shrank to a 3 month low and registered 50.5, down from 52.7 in the prior month.
How can we reconcile the fact that the employment component ticked down to a 3 month low, yet at the same time, ADP says 270k service sector jobs were created? We’ll hopefully get some clarity on this when the BLS released the employment report for December on Friday. My guess is that if you accrue over a trillion dollars of debt per year, you will eventually hire some people to help consumers spend their borrowed money. But the bill is quickly coming due and there will be no bailout forthcoming. One can only bask in the eye of a hurricane for so long.
Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.