Here is more concerning the low number of jobs created> "Clearly there's some disappointment here," said Anthony Chan, senior economist at JP Morgan Asset Management. "But this may be a gift to financial markets and Main Street because the Federal Reserve might not have to be so aggressive in raising rates. In that regard, it is almost a good report." Its good that there are few new jobs so that now we do not have to raise rates. Thats the silver lining?? People who are not in debt and live off interest from savings have been getting killed the last few years. Though the government says they want more savers, they really want more spenders and debt users.
I can imagine that what you said above would be very different if written from a different viewpoint than your apparent present personal one. As a matter of incentive to get out of that particular state or condition of reasoning, what do you think the statement would look like for a successful person or for a person who has a financial plan or a person who is familiar with financial planning. Obviously, the guy with the BS in Economics should call up his University and get a refund. Were an individual to embark on viewing the economy (econometrically speaking) from the express viewpoint of personal economic opportunity, he would look, simply, at the process of redistribution of capital to achieve greater overal economic performance. He would fit himself into this process to simply take an override on that capital movement from A to B. What are the better opportunities to do that in terms of size of the potential capital movement? Trading capital from losers to winners is a small one compared to others. As far as the oil/production numbers game is concerned, anyone who responsible enough to themselves is mandated to "know" how things work as a matter of normal intellectual understandings. They better have the four aspects of econnometric modelling down cold: direct, indirect, induced, and subsitition effects. So far this thread is barren with respect to this matter.
So far almost no one has offered an explanation of the original poster's question, even you Grob. In fact, you simply tell me I need to "get a refund" and you spit out bullshit about econometrics, but you offered absolutely no new, intelligent input. Just negative comments for ego glorification. The question was regarding oil and inflation, not trading or any other economic relationships. So, please, give us your intelligent explanations and check your ego and bullshit verbiage at the door.....
Grob, Before you go ahead and spill your wits, let me further a -- little-- into the relations of some variables that have been mentioned. And only the simplest relations... Let's take employment, for instance, and its relation to other variables. If labor gets to be scarce, its price will go up, and vice versa. Not rocket science... Usually scarce labor fosters inflation, because it is a cost component of all goods. BTW, oil is very similar, this commodity is also a cost component in almost any good... So, if we look at the unemployment numbers, it's important to fully recognize in what stage of the business cycle we're in. If unemployment comes down, during difficult times, then it's good because it is reflecting a pickup in production, which was poor (= difficult times). Later on, as production heats up, or during good times, a shortage of labor eventually leads to increases in salaries, and as a consequence we get inflation. Inflation, is not all that bad for some folks, homeowners with fixed rates are happy, producers are happy... On the other hand, lenders are not happy, they will get they're loans paid back with monopoly money. Not happy at all... And, you have some other folks that are unhappy, usually the ones that cannot defend their position in the economy: the poor, the retirees... They lose they're buying power. The happy ones are producers, they get to sell at higher prices than what they paid for. Of course, the happiest ones are the merchants who position themselves between producers and consumers, with inflation, they can't have it any better. In this group we see all kinds of sellers, wal-marts and the like... My point at underlining the personal view of the economy, is that all of us have a certain percentage of the producer, intermediary ( banker and merchant) and consumer component in the activities we do for a living. Understanding these components allow us to realize how the economy is affecting our particular situation. For instance, if you own stock, then an unemployment decrease at the harsh part of the cycle is good, because it hints the possibility that the co's sales of the stock you own will increase. But, later on, you will not be that happy, an increase in labor costs hurts the bottom line of your co.'s stocks... And most importantly, that we are not necessarily aligned with those views of the bankers', so well represented by Mr. Greenspin.
This is a good post that links two major aspects of the US econometric model most used. Energy was introduced into the mix of things as a major component around the beginning of the 70's so it is an integrated part of economic planning sine the first inflationary shock wave it created at that time. The direct effect of oil increases is in the retail market at the pumps. Consumption is majorly affected in the general population in accordance with the normal rules associated with available disposable income and capital. This is an economy slower directly. the bigger direct effect occurs in industry where oil is a raw material of production and marginal anal ysis tells us that there will be a subsitition effect where inefficient users will stop making profits and terminate producing products for the GMP contribution. Call this effect -1 unit. The indirect effect of lower consumption of higher priced oil is the lost of jobs. This effect is felt immdeiately and belt tightening and as a delayed effect when savings run out as unemployment increases as no jobs are found. Terminating production of products directly, leads to inventory increases of undelivered ancillary raw materials and their direct and other effects as well. their is no incident potential recovery (substituion on this stuff). Call this effect -2 units. The induced effect is greater as it relates to the local economies where oil consumption has fallen. Paint at hardware stores and no perms at beauty salons. Call his effect up to -2 units. There will be few subsititions for the direct, indirect, and induced effects. Skills transfers to other sectors is about the best shot. Call this recovery substitution factor 1 to 2 units. The net negative effect of oil increases is -3 to -4 times the net change in cash flow. -1 +(-2) + (-2) - (1 or 2) = -3 or -4. The tota effect is a negative one for the economy and it arises from how our country is behaving internationally. the US, at this time, is missing almost all economic opportunities and simultaneously creating serious downsides on all fronts by acting upon the urges of many ill chosen efforts. For further reference, you can go to citations on the econometric model provided from EOP (It was not a DOE inititiative at that time) to the World Bank around new years the first year of the Carter admin. Use John instead of Jack for searches under lead contributor. Personally, at this point, I am pursuing positioning in the health care industry to move federal cash flows to private sector cash flows. The ratio of gross override collections to all costs of business is about 5 to 1 and the rate of expansion is about 200% a month so far. there appears to be a void in the marketplace so I find zero competition. I will have the cookie cutter done in 90 days.
Actually just don't ask for it...be insistant. my comment to you is a one liner and a positive one economically speaking. The oil was coupled to production as I read it. The combination of oil and lowered production was at the heart of it. With his comments on inflation and its set and alternative sets, he suggested to me that he wanted to consider "effects" or how oil/production reflects into inflation or its alternatives. What you say here is a reflection on how you read what I said more that an expression on the value of anything I said. Right now anyone with a neutral bias for making money is having a hayday in two ways: The change dynamic and the present magnum oppotunities to fix so many things that have been busted over the last few years. Let me know if you can find anything better to fix than the health delivery system in the big bucks arenas. Low income housing is a close second; you can take 3 to 4 dollars a square foot to 23 buck a square foot in 18 months in that sector. I have very pragmatic views based upon very high quality theory in modelling. This is how industry sector track records are made and it is definitely where I chose to operate.
These are two distinct situations. As I've explained, the effects are different depending on our personal activities. Having said that, inflation erodes most consumers buying power, they're falling behind in the inflationary curve. Merchants do a lot better, because they're able to quickly readjust their prices. Consumers salaries are not that easily adjusted, try asking for a raise... In the first situation, the concern may be characterized as originated by a potential galloping inflation. In the second case, this is not the case, although oil prices have increased, and other price increases have surely followed, production is stalling, because sales are decreasing as a consequence of the higher prices. Which means, there's not that much money out there, and this is putting a hamper to price increases. Getting back to our personal views. A bond holder could not be happier and a stock owner too... You see, the Fed are not urgently required to raise their interest rates to cool down the economy, no danger of runaway inflation, which it does by restricting the circulation of money by increasing its rates. On the other hand, it's also telling us that it's not that rosy out there, and your concerns are well seated. But for bond holders, or lenders...
Oil is a primary input of production, and the price of the primary input rises. What do you think happen? Production slows down. But we are less dependant on oil that we were. Unless oil jumps to 200$, we'll only notice a temporary little slowdown.
Interesting reads: http://www.businessweek.com/bwdaily/dnflash/jun2005/nf2005063_0591_db016.htm http://www.businessweek.com/@@8Mv9KmUQxFAEdhMA/premium/content/05_24/b3937029_mz007.htm
a temporary little slowdown?? I wonder what the CEO's at FEDEX, airlines, Boeing would think about your comment? Truckers? Chemical industry? The guys at the gas station? The old ladies during the winter months? Electric utility plants? And, the look on the face of the consumers when they get their electric utility bills? In particular, the ones from California...