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Tale of Two Reports

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It was the best of reports, it was the worst of reports.  The story of jobs in the USofA continues to wind down like a Dickens novel, crammed of details and well defined moments lush with feeling and energy but lacking a strong, driving plot.  We know when it ends, of course – somewhere many pages from now in the election in November.  Exactly how it goes down is entirely another question.

But for August we have two job reports.  The ADP report showed a private employment gain of 200k, a wonderfully robust gain that suggests a strong economy is really turning the corner.  The official household survey from the Department of Labor came in with an incredibly weak 96k jobs gained, a number that is not really treading water.  Why the discrepancy?  What is the real state of jobs?  How will this play in the election?

Keep reading.  This novel is far from done.

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The Real Power

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Between the political conventions, the people running for the second most powerful office in the land have to stand down for a moment and let the Big Guy speak.  That would be Ben Bernanke, who delivered his annual address at the Jackson Hole conference today.  You want real power?  If being able to print $1.6T ain’t it, I don’t know what is.

The speech was highly anticipated because in the past the occasion was used to announce rounds of Quantitative Easing.  There was hope there would be a third round of it, which is to say more greenbacks flowing out into the economy hot off the Fed presses.  It didn’t happen.  Bernanke spoke instead about what’s gone wrong and what they’ve done to try to get things to start back up.

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What, Nothing’s Wrong Here …

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Another day, another bank in trouble.  It might be easy to do little more than roll your eyes at the news that Standard Chartered of the UK is caught in a scandal, except this one is very different for many reasons.  To start with, the allegation is that they were the launderer in chief for the nation of Iran over a period of at least a decade, helping them hide $250B in money transfers around sanctions.  This is also one of the largest banks in the world, with total assets around $600B and operations around the globe.

But where this gets especially interesting is through the still developing role of the firm Deloitte & Touche.  They are one of the “Big Four” auditing firms that has been in the crosshairs of a large number of people convinced that the lack of truly independent assessment is one of the main problems in the teetering financial industry.  This scandal, different as it is, could be the one that coalesces a diverse group of detractors into a movement – even though auditing had very little to do with it directly.

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Investabots Amok!

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You are walking down the street, texting to a friend, when suddenly everything freezes. These things happen all the time, you reason, so as annoying as it is you reboot and carry on.  A desperate text a short time later comes as a call from your friend to please stop bombarding them!  What went wrong?  You have no idea.  You reboot again and keep walking.

Things like this happen to everyone these days and we’re all used to it.  Software glitches.  Bugs.  Crappy software runs amok in the hands of appliance users.

Now imagine that you are a Wall Street trading firm that handles orders for thousands of clients and this happens to you.  Except that this costs $440M in bum trades by the time anyone catches it.  That’s exactly what happened to Knight Capital, the company that used to handle 11% of all trading on Wall Street.  It’s something that was inevitable in a system that is too big to be useful – and the world is starting to realize how dangerous this is.

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Job Excitement!

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The July jobs report, and boy was it good!  163k jobs were added in July, far more than the 96k predicted (the same as last year).  The summer doldrums are apparently not hitting as hard in 2012 after all.

It’s not fantastic growth by any measure, but it means that we are still treading water – not drowning counts for something, at least.  More importantly, it got us out of the pattern where the summer slowdown sat on the economy like a mini-recession that gave us little hope for the pick-up in Autumn.

What changed?  It’s hard to say.  But we can make a few guesses.

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