Goldilocks Jobs Friday
And now for the Big Kahuna Economic Number of the Week:
The US added 136k jobs, and the unemployment rate fell to 3.5% from 3.7%, a 50-year low.
To me, this sounds like a “Goldilocks” number — not so high so as to turn the Fed “hawkish,” not so low so as to damage fundamentals.
Last night, I attended a panel on the state of the economy with a room of smart folks representing a broad swath of the economy, ranging from manufacturing to services. My big takeaway is that while there is still a fair bit of PTSD from the Great Recession and angst over the current “longest expansion ever,” there was inconclusive evidence of a broad-based slowdown; in fact, in individual discussions afterward, I heard about as many “bullish” data points as I heard “bearish.”
My thesis is that we have a broad, diversified economy akin to a giant cruise ship — it’ll take a Titanic-sized iceberg a la 2008 to sink us, and while there are many small icebergs here and there, it’s tough for me to see The Big Kahuna on the horizon, especially when we have a 50-year low in unemployment.
I really don’t think I’m whistling past the graveyard and being a blind Pollyanna, saying “this time it’s different.” While there are definite mini-bubbles here and there (private equity, media/streaming, etc.), there are equally many mini-busts (crypto, cannabis, energy, etc.). I would be much more worried if everyone was gung-ho on everything and uniformly seeing “clear skies ahead” than the current environment where CEO’s seem to be cautious in containing costs and NOT over-investing in capacity simply because we are into uncharted territory with respect to the length of the expansion. I say that the intensity of expansion matters (or lack there of), and the tepid growth of most of the last decade suggests to me that this particular expansion takes the shape of a very long and shallow “U” rather than the “V” we saw leading up to the past several crashes.
To paraphrase a famous stormtrooper, “this is not the ‘irrational exuberance’ we are looking for.”
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Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets. I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.
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