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Reasons to be cheerful

By John M. Berry

John M. Berry, who has covered the economy for four decades for the Washington Post and other publications, is a guest columnist.

Doing more with less is a corporate mantra that some say bodes ill for job growth. Data last week showed that productivity at non-farm business jumped at an extraordinary 9.5 percent annual rate in the third quarter.

Yet the sharp gains in efficiency are helping drive corporate profits and that could be just what’s needed to convince employers that it’s safe to begin hiring again.
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John Meriwether writes to investors (again)

This purports to come from the hedge fund investor John Meriwether but mysteriously carries a Nigerian postmark:

Dear friend,

Greeting,

Permit me to inform you of my desire of going into business relationship with you. I got your contact from the International web site directory. I prayed over it and selected your name among other names due to it’s esteeming nature and the recommendations given to me as a reputable and trust worthy person I can do business with.

Playing politics with Social Security

By John M. Berry

The White House’s knee-jerk reaction to the news that inflation was so low that Social Security beneficiaries won’t get a cost-of-living increase next year was a seriously bad omen for long-term control of federal spending.

The problem wasn’t the $13 billion cost of another one-time $250 payment to each retiree proposed by President Barack Obama. No, it was the utter disregard of the discipline inherent in indexing payments to changes in consumer prices.

Kohn on V-shapes, housing, inflation and a whole lot more

Donald Kohn, the Fed’s number 2, has a lot to say about the economic outlook but not a whole lot new in terms of when the central bank will reverse course on its extraordinary easy monetary policy. Full speech at the National Association for Business Economics in St. Louis can be found here.

Some choice bits:

I don’t think a V-shaped recovery is the most likely outcome this time around.

Been down so long, it looks like up

The latest S&P Case-Shiller home price data is feeding into the feel-good vibe of the moment, of mergers the Dow approaching 10,000 and other green shoots. The composite index of home prices for 20 U.S. metropolitan regions rose 1.6 percent in July from June — a stronger gain than expected and the third consecutive monthly gain. As the release notes, there have now been “six months of improved readings,” and this is giving some early support to stocks and the dollar.

Yet the year-over-year rate remains well in negative territory: a 13.3 percent decline for the 20-city index and a 12.8 percent decline in the 10-city index. Yes, 17 of the 20 cities had monthly gains, but 14 are still showing annual declines in the double-digits.

As the Fed sleeps

It’s not even October and the Federal Reserve already appears to be going into policy hibernation.

Today’s statement appears intended to attract as little attention as possible. Even the more gradual tailing away of mortgage purchases by the Fed seems calculated to assist the Fed’s quiet retreat.

A compelling case for carry in Treasuries

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Under normal circumstances, U.S. Treasuries should probably be getting clobbered.

The worst of the credit crisis is over, the economy is expected to snap back in the second half of the year, and the appetite for riskier, higher-yielding assets should be siphoning off demand from boring, safe-haven assets like Treasuries.

Barroso’s EU vision lacks levers for change

Could the European Union be among the big losers of the global financial crisis?

Despite signs that recession in Europe may be bottoming out, the 27-nation bloc risks emerging from the turmoil with its economic growth potential stunted, its public finances shackled by mountains of debt, and its international influence weakened.

That is the backdrop to Jose Manuel Barroso’s campaign for a second term as president of the executive European Commission.  In a manifesto sent to EU lawmakers last week, he warns that unless Europeans shape up to the challenge together, ”Europe will become irrelevant”.

Job declines slow, but unemployment rate jumps

The Labor Department’s August report on the jobs market has a bit of a good news/bad news slant to it. Job cuts slowed to “just” 216K, below expectations and better than last month’s 276K (up from the originally reproted 247K). But the unemployment rate, which is calculated through a distinct survey of households rather than businesses, jumped to 9.7% from 9.4% the previous month. You’ll remember that a slide back in July made some hopeful that maybe, just maybe, joblessness has stabilized.

Still, the market doesn’t seem to be too worried, at least for the moment as Treasury yields head north. The benchmark 10-Yr note has inched up about 2BPs to 3.39% since the report hit the wires.

ADP still showing steep job losses

The ADP national employment report showed job losses still huge in August, though better than July and the smallest decline it’s recorded since September 2008.

Though it came in worse than expected, markets aren’t doing a whole lot with the data, with Treasuries hovering around the unchanged mark and stocks down only slightly.

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