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Politics

President Donald Trump on Tuesday tweeted “the Military will build the remaining sections of the Wall” if “Democrats do not give us the votes to secure our Country.”

“People do not yet realize how much of the Wall, including really effective renovation, has already been built,” he tweeted. “If the Democrats do not give us the votes to secure our Country, the Military will build the remaining sections of the Wall. They know how important it is!”

The president is pushing for $5 billion to be included in the government funding bill being debated now, before the lower chamber in the U.S. Congress changes hands next year.

House Minority Leader Nancy Pelosi, D-Calif., who is expected to become the next speaker, and Senate Minority Leader Chuck Schumer, D-N.Y., have fought the president tooth and nail.

Democrats, and more liberal Republicans, support a bill that includes a half-dozen government funding bills, along with a separate measure that funds the Department of Homeland Security at current levels through September 30.

The homeland bill includes only $1.3 billion for “fencing and other border security measures,” language similar to previous funds handicapped for use to construct the wall by outgoing Wisconsin Republican House Speaker Paul Ryan.

Tens of thousands of Central American migrants poured across the southern border monthly over the previous few months.

Caravans organized by activist groups were denied illegal entry into the U.S. last month, with others still claiming asylum. The migrants got into violent clashes with Mexican police, citizens and U.S. personnel.

President Trump tweeted "the Military will build

Economy

Headline Component Falls to 7-Month Low Post-2018 Election, But Remains Historically Very High

A team of millennial business owners collaborating on an online project using a touchpad tablet in a modern office space. (Photo: AdobeStock/AYAimages)
A team of millennial business owners collaborating on an online project using a touchpad tablet in a modern office space. (Photo: AdobeStock/AYAimages)

The NFIB Small Business Optimism Index declined modestly in November to 104.8, the lowest level in 7 months. That missed the median forecast of 107.0

“Small business owners are enthusiastic about the economy and have demonstrated their optimism by raising wages, creating new jobs, and investing in their businesses throughout 2018,” said NFIB President and CEO Juanita D. Duggan. “Overall, small business owners have shown a historic trend in optimism for their businesses and the economy and continue to be the driving force behind economic growth.”

The NFIB said respondents didn’t report significant changes before and after the election, though it may take time before those changes are recognized.

Throughout the Obama Administration, small businesses reported the tax and regulatory environment as their number one challenge to expansion. Now, it’s the skills gap, or finding qualified workers to fill positions.

As a result, wages have begun to finally rise, with the Labor Department reporting the largest gains since 2009 over the last two months.

In November, 25% of owners cited the difficulty of finding qualified workers as their “Single Most Important Business Problem.” That is up 2 points from last month and matches the August 2018 record high.

Small business’ plans to increase compensation rose 2 points to a net 25%, the highest since 1989, which NFIB said was directly related to persistently high levels of unfilled open positions.

Reports of higher worker compensation were unchanged at a net 34% of all firms, remaining very strong.

Sixty-one percent (61%) of small business owners reported capital outlays, a gain of 2 points from October, with 45% of those making expenditures, purchasing new equipment (+2), 22% acquiring vehicles (-4), and 18% improving or expanding facilities (flat).

“Small business employs about half of the private workforce, so investment and training in that sector is critical to improving overall worker productivity over the next five years,” said NFIB Chief Economist Bill Dunkelberg.

Twenty-nine percent (29%) plan capital outlays in the next 3 to 6 months, While that’s down 1 point and consistent with other views of the period, it is still among the strongest readings in the recovery period.

Plans to invest were most frequent in manufacturing (34%), transportation (32%), and the wholesale trades (38%).

The NFIB Small Business Optimism Index declined

Markets

A downtrend depicts the graphic concept of market volatility. (Photo: AdobeStock)
A downtrend depicts the graphic concept of market volatility. (Photo: AdobeStock)

The entire week was a wild roller coaster ride of volatility. It was marked by a whipsaw of price action, a test and retest of the November lows, several high impact headlines on a variety of the market’s favorite pressure points, and of course a few testy tweets from our President.

Some pressure points have been testing investor fortitude for a few months, while a couple are fresh, adding to an already heightened level of uncertainty among traders and investors alike. Additionally, while the second half of Q4 typically includes numerous crosscurrents, it’s rarely accompanied the volatility and anxiety that are dominant right now.

Highlights and Lowlights:

Friday, stocks were unable to repeat the near round trip reversal investors were treated to Thursday. While major market averages closed marginally off their worst levels of the day, they still settled with sharp declines ranging from 2% to 3%, leaving them with losses on the week between 4½ and 5%.

The S&P 500 (^SPX) closed at 2633.08, just fractionally above its November closing low of 2632.56 from November 23. The selling in the S&P 500 may have actually been buffered a bit by a 2% rally in crude oil Friday, after OPEC members agreed with Russia on a coordinated production cut of 1.2 million barrels a day.

The NASDAQ Composite (^IXIC) lost 3% on Friday alone, closing below the benchmark 7000 level at 6969.25 The November closing low for the NASDAQ was 6908.82 on November 20.

The fact that this was the worst weekly performance for the Dow Jones Industrial Average (^DJI), S&P 500, and NASDAQ in over 8 months is even more striking. Since Monday, stocks finished with gains of +1½ to 2%, and Wednesday markets were closed.

Thursday, stocks went on an epic round trip, wiping out late morning losses of 2½ to 3% to close with mixed results on the day. Two big stories dominated investor attention. Initially stocks were under heavy selling pressure, sparked by the arrest of the CFO of Huawei, a Chinese technology company. While Investors had already began to discount renewed optimism on U.S. – China trade negotiations, the Huawei incident just adds a whole new level of potential toxicity to those talks. This story is in the first inning.

While the initial bounce Thursday was a trading rally, it was comments by Federal Reserve Chairman Powell that the added the substance. While Powell had made similar comments just over a week earlier, his emphasis that the FED was nearing a “wait and see” approach to further interest rate hikes, was a breath of fresh air for the remainder of the day.

That being said, Powell’s comments, or rather the WSJ article laying out the likely shift by the Federal Reserve, was not enough to follow through on Friday. The key takeaway here is that anxiety over trade negotiations with China, is a heavier weight, for now than relief from a less hawkish posture by the FED.

What about the Week Ahead?

There’s no doubt that markets are short term oversold, but that alone will not prevent further selling.

The fresh breaking story Monday morning is that British Prime Minister Theresa May has postponed the vote in Parliament on her negotiated BREXIT plan that was originally scheduled for tomorrow. Obviously, she didn’t have the votes secured to pass it.

Early trading in stock index futures has gone from mildly negative to slightly positive since the announcement the BREXIT vote has been postponed.

My cynical explanation for this, which I’m sure is correct, is that markets would rather see a lousy BREXIT deal passed rather than deal with the optics of having it defeated.

Definitely stay tuned here. This is a story tailor made for the British tabloids, with multiple subplots behind the scenes, I’m sure.

The entire week was a wild rollercoaster

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America is facing an uphill climb in the next two years with the demographic changes coming and the change in party in the House.

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*The Shift in Arizona
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America is facing an uphill climb in

Opinion

Muhamed Awwal, a 13-year-old from Syria, works in his father's basement factory in Istanbul. Around 665,000 school-age Syrian children who live in Turkey are not in school. (Photo: Syria)
Muhamed Awwal, a 13-year-old from Syria, works in his father’s basement factory in Istanbul. Around 665,000 school-age Syrian children who live in Turkey are not in school. (Photo: Syria)

When refugees from the conflict in Syria started arriving across the Turkish border in 2011, Ankara initially welcomed them with open arms, thinking the situation was temporary, and the need for assistance would be small and manageable.

That turned out not to be the case.

As the number of those seeking protection crossed the 100k mark, Turkey began looking at the problem in a different light, and proceeded to build large refugee camps, and provide across-the-board services to the migrants, while still welcoming all.

Again, this policy was not long-lasting, as migrant movement was not controlled, and identities were not confirmed. As the war raged on, and the Islamic State became entrenched in northern Syria, terror and security became a material problem.

ISIS members were able to come and go at will; this was obviously not a sustainable situation.

Eventually, a wall was built, and border controls re-instituted for those wishing to cross into Turkey. At that stage, Turkey still advertised a welcoming to all approach, as long as those wishing to cross were identified and vetted. The welcome mat was not always laid out for refugees however, and the open-door policy has not been consistently applied.

Turkey is now home to almost four million Syrian refugees, as well as hundreds of thousands of Iraqi, Iranians, and others, wishing to apply for asylum. The Turkish government has instituted a policy of ‘temporary protection’, although it is obvious nothing is temporary about the situation.

Refugees are allowed to apply for work permits, get access to healthcare through the Turkish socialized system the same as Turkish citizens themselves, and Turkey is educating refugee children. The European Union, along with other international entities has provided significant financial assistance to Turkey with the caveat that Ankara will prevent the unlimited flow of migrants into Western Europe.

There seems to be much to be learned from the Turkish experience on handling this massive inflow of people. The Turkish Heritage Organization helped send a student delegation into the border regions last summer, who returned to Washington with recommendations on how to help solve the problem, and how the U.S. could benefit from Ankara’s steep learning curve.

During the month-long program, participants conducted a modest research project on a subject of their choosing in relation to the program theme. The program gave students and recent graduates the unique opportunity to learn firsthand about refugees, humanitarian aid, and how Turkey manages the humanitarian crisis.

One thing is for sure, the human migration problem is not going away; on site experience dealing with the consequences is obviously of value. The group primarily called for more resources and freedoms for those in the host country, as well as permanent integration into Turkish society. As the war winds down, is this a valid solution? Or is migrant return more appropriate?

With many American veterans having first hand experience in the Middle East with the movement of different populations in a violent, harsh environment, it would be of value to consider their ideas and solutions to handle the migrant crisis we are experiencing here in the United States.

Both sides of the issue have validity. There are human rights concerns, as well as security imperatives in North America as well. As tens of thousands of Central Americans make their way through Mexico to the southern border, drawing on the Turkish experience can only help our policy makers make wise decisions.

When refugees from the conflict in Syria

Economy

A collage graphic concept for industry and labor. (Photo: AdobeStock)
A collage graphic concept for industry and labor. (Photo: AdobeStock)

A series of jobs reports released this week split opinions over conditions in the labor market, even as wages rise and unemployment remains near a 49-year high.

The Labor Department via the Bureau of Labor Statistics reported Friday the U.S. economy created 155,000 jobs in November and the unemployment rate held at 3.7%. 

The labor force participation rate, at 62.9%, and the employment population ratio, at 60.6%, were both unchanged. Wages grew at a slightly slower-than-expected pace, but rose 0.2% for a second month.

Average hourly earnings have increased by .81 cents, or 3.1% from the previous year, matching October, the largest single-month gain since 2009.

But consensus forecast was looking for 190,000 jobs, closer to the ADP National Employment Report released on Thursday. ADP said the U.S. private sector added 179,000 jobs in November, slightly beating the consensus forecast.

Wall Street loved both reports, even though the BLS Employment Situation easily missed the whisper number. Some question whether hiring has begun to cool. Others put more emphasis on the skills gap.

“Job growth is strong, but has likely peaked,” Mark Zandi, chief economist of Moody’s Analytics, said. “This month’s report is free of significant weather effects and suggests slowing underlying job creation.”

The firing rate has held well below 300,000, which is widely considered to be the sign of a healthy labor market. Weekly jobless claims declined less than expected, falling 4,000 to 231,000 for the week ending December 1.

Still, the advance seasonally adjusted insured unemployment rate declined to an even lower 1.1% for the week ending November 24. The advance number for seasonally adjusted insured unemployment during the week ending November 24 was 1,631,000, a decline of 74,000.

A preliminary reading of consumer sentiment came in at 97.5, slightly beating the consensus forecast.

Richard Curtain, the chief economist for the Survey of Consumers, said respondents did indicate news was more negative about the outlook for the labor market.

“As noted in last month’s report, as long as job and income growth remain strong, rising prices and interest rates will not cause substantial cutbacks in spending,” he added. “In the early December survey, however, consumers did mention hearing much more negative news about future job prospects.”

The U.S. economy created roughly 2.3 million jobs thus far this year.  That’s already more than the previous year, and it’s on track to surpass 2016.

Christine Romans said on CNN with a “very low unemployment rate, it very well could be not that companies aren’t hiring as much but that they can’t find the workers.”

“This is what you call full employment.”

A series of jobs reports this week

Economy

Consumer Spending and Consumer Sentiment. (Photo: AP)
Consumer Spending and Consumer Sentiment. (Photo: AP)

The Survey of Consumers preliminary reading of consumer sentiment came in at 97.5, slightly beating the consensus forecast. Economists had pegged the index from 93.0 to 98.2, with the consensus at 97.4

Preliminary December Read Nov Dec M-M Y-Y
2018 2018 2017 Change Change
Index of Consumer Sentiment 97.5 97.5 95.9 +0.0% +1.7%
Current Economic Conditions 115.2 112.3 113.8 +2.6% +1.2%
Index of Consumer Expectations 86.1 88.1 84.3 -2.3% +2.1%

“Consumer sentiment was unchanged from last month’s reading and has remained at very favorable levels since the start of 2017,” Richard Curtain, the Chief Economist for the Survey of Consumers. “In the two years from January 2017 to December 2018, the Sentiment Index was consistently above 90.0, averaging 97.5, identical to the early December reading.”

Mr. Curtain said the Sentiment Index hasn’t been consistently above 90.0 for this long since the period from 1997 to 2000, which it posted a a four-year average of 105.3.

“As noted in last month’s report, as long as job and income growth remain strong, rising prices and interest rates will not cause substantial cutbacks in spending,” he added. “In the early December survey, however, consumers did mention hearing much more negative news about future job prospects.”

The U.S. Bureau of Labor Statistics (BLS) reported earlier Friday the U.S. economy created 155,000 jobs in November, less than the 179,000 in the ADP National Employment Report released on Thursday.

Wages rose 3.1% last month, according to BLS.

The Survey of Consumers preliminary reading of

Economy

Job seekers wait to meet with employers at a career fair in New York City, October 24, 2012. (Photo: Reuters)
Job seekers wait to meet with employers at a career fair in New York City, October 24, 2012. (Photo: Reuters)

The U.S. Bureau of Labor Statistics (BLS) reported Friday the U.S. economy created 155,000 jobs in November and the unemployment rate held at 3.7%.

The consensus forecast was looking for 190,000 jobs, closer to the ADP National Employment Report released on Thursday.

The labor force participation rate, at 62.9%, and the employment population ratio, at 60.6%, were both unchanged in November.

In November, manufacturing added 27,000 jobs, with increases in chemicals (+6,000) and primary metals (+3,000). Manufacturing employment has grown by 288,000 over the year, mostly in durable goods industries.

Wages, or average hourly earnings for all employees on private nonfarm payrolls, rose by 6 cents to $27.35, missing the forecast by 0.1%.

Over the year, average hourly earnings have increased by 81 cents, or 3.1%. While that was basically in line with the 3.2% consensus, as well, it does represent the continuation of growth after stagnation.

“Futures have rallied on this report because it supports the idea that the Fed might pause after one more rate hike,” Tim Anderson, analyst at TJM said. “It’s almost a Goldilocks report showing the rate of hiring slowing, but not enough for alarm, just caution.”

Employment gains for October were revised down by 13,000 from 250,000 to 237,000. The month of September was revised up from 118,000 to 119,000. Combined, employment gains in September and October were 12,000 less than previously reported.

The U.S. Bureau of Labor Statistics (BLS)

Economy

U.S. jobless claims graph on a tablet screen. (Photo: AdobeStock)

U.S. jobless claims graph on a tablet screen. (Photo: AdobeStock)

The U.S. Labor Department (DOL) said seasonally adjusted initial jobless claims came in at 231,000 for the week ending December 1, a decrease of 4,000. The previous week’s level was revised up by 1,000 from 234,000 to 235,000.

The 4-week moving average was 228,000, an increase of 4,250 from the previous week’s revised average. The previous week’s average was revised up by 500 from 223,250 to 223,750.

[su_table responsive=”yes”]

Prior Prior Revised Consensus Consensus Range Actual
Initial Claims – Level 234K 235K 225K 220K to 240K 231K
4-week Moving Average – Level 223.25K 223.75K 228.00K
Initial Claims – Change 10K 10K -4 K

[/su_table]

The advance seasonally adjusted insured unemployment rate declined to an even lower 1.1% for the week ending November 24. The advance number for seasonally adjusted insured unemployment during the week ending November 24 was 1,631,000, a decline of 74,000.

The 4-week moving average increased by 250 to 1,667,000, while the previous week’s average was revised down by 1,000 from 1,667,750 to 1,666,750.

No state was triggered “on” the Extended Benefits program during the week ending November 17.

The highest insured unemployment rates in the week ending November 17 were in Alaska (2.9), New Jersey (1.9), Puerto Rico (1.7), Connecticut (1.6), Pennsylvania (1.6), California (1.5), Illinois (1.5), Washington (1.5), Montana (1.4), and Rhode Island (1.4).

The largest increases in initial claims for the week ending November 24 were in Pennsylvania (+3,544), Wisconsin (+2,119), Massachusetts (+1,224), Kentucky (+1,181), and Oklahoma (+1,026), while the largest decreases were in Texas (-5,480), California (-4,245), Florida (-2,081), Illinois (-2,021), and Georgia (-1,679).

The Labor Department said seasonally adjusted initial

Economy

The ADP National Employment Report said the U.S. private sector added 179,000 jobs in November, slightly beating the consensus forecast. The forecasts ranged from 161,000 to 195,000, with 175,000 being the consensus.

“Although the labor market performed well, job growth decelerated slightly,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. ”Midsized businesses added nearly 70 percent of all jobs this month.”

Small businesses with 1-49 employees added a solid 46,000 jobs this month, but midsized with 50-499 employees added a whopping 119,000. Large businesses with 500 or more employees added just 13,000.

“This growth points to the midsized businesses’ ability to provide stronger wages and benefits,” the vice president added. “It also suggests they could be more insulated from the global challenges large enterprises face.”

The higher wager-paying Goods-producing Sector added just 16,000 total private sector jobs in November, with Natural Resources & Mining (+2,000), Construction (+10,000) and Manufacturing (+4,000) all making small but positive contributions.

“Job growth is strong, but has likely peaked,” Mark Zandi, chief economist of Moody’s Analytics, said. “This month’s report is free of significant weather effects and suggests slowing underlying job creation.”

The lower wage-paying Service-providing Sector created 163,000 of the total private sector jobs in November.

“With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls.”

The ADP National Employment Report said the

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