I Think The Jobs Engine Is About To Get Going....

While some pundits continue to opine on how "fragile", "muted", or "non-sustaining" the recovery will be -- I continue to opine... and see... evidence of my highly variant view that US GDP be stronger than most expect. I will retract this view possibly near the end of this year when I feel most economists will by then have caught up to this view and perhaps overshoot 2011 growth.

As corporate earnings growth expands, and continues to be fueled by low interest rates, a natural economic growth cycles and additional government stimuli -- these companies in turn increase their investments to meet growing demand. Finally, the last thing to turn is the jobs creation engine. This is not abnormal but something that happens coming out of every recession. I called for jobs growth possibly in 2009 when nobody else even thought it possible and while not completely correct, we did print one month of jobs gains before the year ended.

At this point, I feel the jobs engine is about to fire up on at least a few cylinders and we will see the majority of months during 2010 exhibiting jobs gains. Additionally, in much of the year I expect these gains to be stronger than expected just as the last 2-3 quarters of earnings have been.

Even now after 2-3 fairly strong quarters of GDP growth and 2 very exceptional quarters of corporate earnings growth the consensus GDP figure for 2010 is a paltry 2.7%. I expect this number is anywhere from .8% to as much as 1.5% too low.

While much is made of the fear of policy tightening, from my perch this again will follow a semi-standard course of events. This time around we have one dynamic difference. We could tighten rates by 200 or even 300 bps and still at levels normally seen at the end of an easing cycle. Thus we tighten into a rate environment range that is still moderately to highly stimulative.

This is something I've pondered since we took rates to below 1.5% (and has been part of my broad market thesis for some time) and have not seen this thought in print anywhere as of yet. Though I suspect we'll start seeing echoes of this in the coming months/quarters to account for explanations of consensus beating growth.

Bottom line, I feel the expectations for a jobless recovery will prove to be inaccurate by magnitudes. Meanwhile, Philly Fed and ISM numbers now have room to moderate somewhat but still stay well above expansion levels of 50 plus for an extended period.....