With the new year comes more Main Street winning; and the distinction between Wall Street’s economy and Main Street’s economy becomes stunningly clear.
The January jobs report showed a gain of 200,000 U.S. jobs, and more importantly, a 2.9% year-over-year growth in wages. –SOURCE– [Biggest wage rate jump since the phoney trillion stimulus-funded growth mid-2009.] We continue to remind of our two-year prediction that stunning wage growth will evidence in Q2 of 2018 (April-July)… today’s report is only the preview of that wage growth cycle.
Construction reported by the biggest gain by sector with 36,000. Bars and restaurants added 31,000 and health care was up 21,000. Manufacturing also showed a gain of 15,000 and durable goods-related industries added 18,000.
“Perhaps the biggest positive surprise on hiring is the continued surge for the goods-producing sector with manufacturing and construction leading the way,” said Mark Hamrick, Bankrate.com’s senior economic analyst. (link)
The Main Street economic engine is fundamentally detached from the drivers of the Wall Street economic engine (monetary policy). While the paper wizards are getting kicked in the teeth, interest rate increases will not diminish Main Street gains because wage increases will remain ahead of price inflation. Interest rate increases will, however, impact Wall Street because interest rates are monetary policy, and a great deal of Wall Street is based on speculation within the paper (false) economy.
Can you see now why we have been saying for two years MAGAnomics will draw out the new dimension in modern economics? There is a distance between Main Street’s economic engine and Wall Street’s economic engine. MAGAnomics operates in the space between them.
The stock market retracts today against fears of rising interest rates. Many on Wall Street have not recognized that monetary policy will not influence Main Street growth until interest rates, and/or inflation, surpasses the rate of wage growth. The parity within that dynamic is still about a year-and-a-half away.
If you pay attention the economic engine disconnect is visible. Note the market schizophrenia as Gold didn’t climb while stocks/bonds dropped.
February 2018 wage growth will exceed January (driven in part by new tax rates); March will exceed February; April will exceed March…. and so on, and so on, (remember these are year-over-year comparatives). This is the EXACT reversal of prior economic policies from several administrations that were killing Main Street.
At the very heart of America-First, MAGAnomics focuses on U.S. jobs and U.S. companies. Investment growth drives labor demand; labor demand drives wage rates; wage rate growth increases consumer demand for goods and services; that demand drives investment; more investment is expansion of production capacity – ie. need more labor.
There will be natural price inflation to come as an outcome of Main Street’s economy expanding. However, two factors: #1) inflation will creep slow, there’s a natural lag and built in downward price pressure within the gap of unfilled production capacity; #2) Most importantly growth in wages will exceed the inflation rate -for approximately two years- thereby making increases in product costs irrelevant to consumer demands.
Inside this mix, off-shore manufacturers will continue trying to get their products into the hands of Americans who have more disposable income. That unique aspect will continue to keep prices down during the phase of shifts from import manufacturing to domestic manufacturing. Unfortunately, imports might keep GDP growth rates down – but the underlying economy will be expanding as domestic production begins to replace imports.
Ongoing financial results will be solid for companies doing business in the U.S., and actual profit results will gain market weight over speculation. The Titans are rising.
Economic nationalism is winning…. globalism is losing…. multinationals are shrieking… paper weasels are crying…. Middle Class American workers are CHEERING!