Today’s News 8th December 2017

Time For Détente With North Korea

Authored by Robert McCoy via The Strategic Culture Foundation,

While the military and political environments on the Korean Peninsula have evolved, American policy towards the North has not changed since 1991

North Korea’s Hwasong-14 ICBM. Photo: KCNA via Reuters

The reality is North Korea has nuclear weapons – perhaps thermonuclear bombs – and they are probably miniaturized enough to fit atop its missiles, one of which will soon be, if not already, able to reach all parts of the continental United States.

Washington missed an opportunity for a preventive strike that would have stopped the North Korean nuclear effort – or at least seriously set it back – in 1994.

The decision to not take action was based on the advice of a former US president who believed that the United States would be able to successfully negotiate with Pyongyang.

And by relying upon diplomacy to deal with Pyongyang during that time, Washington has failed to get North Korea to cease developing nuclear weapons, and now to give them up.

The state of affairs can now be summarized as the three “no’s” of North Korea:

First, as Pyongyang has stated on many occasions, there will no negotiating away its nuclear weapons or missiles.

Second, there will be no collapse or internal revolution bringing down the Kim Jong Un regime.

And third, there will be no participation by North Korea in any reunification effort headed by South Korea – with or without any of Seoul’s allies.

No negotiations

With its nuclear and missile programs in their crowning stages, Pyongyang has absolutely no reason to negotiate with either Seoul or Washington. The goal of nuclear deterrence is finally in its grasp. As the North has often declared, its nuclear weapons and missiles are the only guarantors of its existence and they will not be given up.

Neither has Pyongyang indicated any interest in Beijing’s “freeze for freeze” proposal in which the North would stop developing its nuclear weapons and testing missiles in exchange for ceasing war games on the peninsula by Seoul and its allies. That is an unequal trade.

The North already has the ability to hold South Korea and much of Japan hostage to its conventional weapons. With the addition of nuclear weapons and longer-range missiles, the real target has been openly identified: the United States, as Pyongyang has asserted not only in the past but recently as well.

No revolution

Despite the appalling conditions endured by average North Korean citizens, there are no indications that the regime itself is anything but stable. While citizens have every reason to be dissatisfied and unhappy, the conditions for a successful uprising simply do not exist.

There is no critical mass of would-be revolutionaries, but even if a sufficient number did exist, communication among citizens is restricted and monitored. And heavy surveillance by authorities further prevents any organization or coordination of a revolution.

Above all, there is such a lack of knowledge about how the regime functions that it would be an insurmountable challenge to overthrow the Kim dictatorship from the grass-roots level.

And while some citizens may be holding in their discontent, it is because they are well aware of what punishment awaits protesters: either summary execution or sentences to prison camps, which often enough are death sentences in slow motion.

No reunification

There are reasons why there will be no reunification of the two Koreas any time soon. To begin, there is no significant economic or political engagement with the North. No trust has been established for such endeavors to proceed, so engaging Pyongyang in commercial activities such as reopening the Kaesong Industrial Complex is thus premature.

Another condition necessary for reunification is for at least one of the two states contemplating reunification to be in crisis. If both nations are stable – and both appear to be – there is no motivation to change the status quo. Predictions that the North will collapse or experience a destabilizing insurrection has been shown to be nothing more than wishful thinking for decades.

There needs to be some power-sharing agreement, however that doesn’t exist today and there seems to be nothing like that in the works. Moreover, for such an arrangement to work, compromises that would either be unacceptable to either side or cumbersome to deal with – “one country, two systems” for example – would be required.

Finally, for any reunification attempt to succeed, there would have to be some third-party guarantor of the process to prevent outside interference and to look out for the interests of both North and South Korea. Finding such a state acceptable to all other nations in the region looks an impossible task.

Detente only option

Military options by Washington are not possible because of the intolerable collateral costs to South Korea – and quite possibly to Japan as well.

Unfortunately, as the past 25-plus years undeniably show, diplomacy has not worked. The reality is that Pyongyang has nuclear weapons, it has the means to deliver them, and it will continue to exist for the foreseeable future.

The US established successful détente first with Moscow and later with Beijing as those two countries developed their nuclear weapons and delivery systems.

The US learned how to coexist with two nuclear adversaries in the past, and now needs to do that with Pyongyang. Washington must revert to realistic diplomacy. There is no other acceptable choice.
What's The Best Company To Work For Where You Live?
With unemployment in the US purportedly reaching its lowest level in 17 years (that is, according to the Department of Labor's flawed household survey) employees who once would've been too fearful to leave their jobs are now actively looking for opportunities. With that in mind, many have probably wondered what's the best company to work for where they live?

Well, HowMuch.com gathered data compiled by Forbes into an infographic to try and map out the best and largest employers in every country.

Forbes recently released a ranking of the best companies in the world using a variety of different perks and benefits, like the quality of food served to employees, parental leave policies or whether companies allow their employees to nap while on the job.

HowMuch mapped these companies by paying attention to their market capitalization to get a feel for how large an organization needs to be to afford such high-quality benefits. One company therefore represents each country, color-coded by market cap. Red countries have an employer worth over $100 billion, and dark blue countries boast relatively small employers under $10 billion.

Several trends immediately pop out from our map:
- Red countries with huge companies predominantly originate in North America and Western Europe.
- Alphabet is the largest on our list by a landslide with a market cap of $579.5 billion, bigger than the entire GDP of Argentina.
- The three exceptions proving the rule are a tobacco company in India called ITC with a market cap of $51.6 billion, plus Hong Kong (CNOOC, $54.8 billion) and Taiwan (Han Hai Precision, $54.4 billion). All three of these places experienced long-term and unique economic and political relationships with the West.
- Africa only contributes a single company to Forbes’ list, namely Remgro from South Africa, a conglomerate made of many subsidiaries from different industries.
- The Middle East and Eastern Europe also have only a few companies that made the cut.
Here’s a simplified list of the countries with the best employers in the world, ranked in order of their total market cap:
- 1. United States – Alphabet: Computer Services – $579.5B and 72,053 employees
- 2. Switzerland – Nestle: Food Processing – $229.5B and 328,000 employees
- 3. Netherlands – Unilever: Household/Personal Care – $143.9B and 169,000 employees
- 4. Germany – Daimler: Auto & Truck Manufacturers – $76.1B and 282,488 employees
- 5. Hong Kong – CNOOC: Oil & Gas Operations – $54.8B and 19,718 employees
- 6. Taiwan – Hon Hai Precision: Electronics – $54.4B and 1,000,000 employees
- 7. Canada – Suncor Energy: Oil & Gas Operations – $51.7B and 12,837 employees
- 8. India – ITC: Tobacco – $51.6B and 25,564 employees
- 9. Italy – Enel: Electric Utilities – $47.5B and 62,080 employees
- 10. Australia – CSL: Biotechs – $43.9B and 16,000 employees
Coming in at No. 1 is, of course, Alphabet. It tops the list because of its size and market dominance.
Expect Desperate, Insane Behavior From Government In 2018 – Part 3

Authored by Mike Krieger via Liberty Blitzkrieg blog,

In the first two installments of this series, I discussed the potential for the U.S. federal government to make some spectacularly foolish moves against its own people in the realms of cannabis and Bitcoin.

My basic assumption is that government tends to despise freedom, and that “leaders” of an empire in decline like the U.S. are particularly vulnerable to very bad decisions.

Government propagandists constantly instruct the public that they need to be fearful of their neighbors or some guy in a cave overseas (who they probably funded in the first place), when they themselves tend to be the most unethical, corrupt thieves of all. It’s a very clever scam.

If you want to ban Bitcoin because of money laundering, crime and violence, we should really ban government first.

— Michael Krieger (@LibertyBlitz) December 6, 2017

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With that in mind, today’s post will zero in on what I consider to be the greatest threat to world peace going into 2018. While I remain unsure as to what the U.S. government may attempt when it comes to cannabis and Bitcoin, I’m far more concerned about the prospects of Donald Trump entangling this nation in an escalating and increasingly disastrous conflict in the Middle East. The signs are everywhere, and it’s all becoming very obvious. In fact, I’ve probably written more articles on this topic than any other in 2017.

Rather than rehash everything I’ve already said, below are links to my October series on the matter:

Empire Destroying Wars Are Coming to America Under Trump – Part 1

Empire Destroying Wars Are Coming to America Under Trump – Part 2

Empire Destroying Wars Are Coming to America Under Trump – Part 3

Confrontation with Iran has been the holy grail of neocons for decades, but it’s become increasingly likely under Trump, as I detailed above. Since I wrote those articles, the situation has only escalated and Trump has decided to attach himself even more clearly to the hip of crazed Saudi princeling Mohamed bin Salman (MBS) and Israel. It’s become obvious that Trump sees both Israel and Saudi Arabia as direct extensions of the U.S., and is quite willing to sacrifice his own country to protect their position. In prior posts, I spent most of my time focused on why I thought Trump would go in such a non-MAGA direction. Today’s post will focus on why I think it’ll be such a historical failure.

Conventional wisdom says that a dedicated alliance of the U.S., Israel and Saudi Arabia is an unstoppable force in the Middle East. Trump’s bought into this view hook, line and sinker, which is why he’s willing to go all in on such a foolish showdown with Iran. I’m going to take the complete other side of that view, and assert than a more aggressive posture against Iran in the Middle East will lead to another huge fail, sparking a more serious collapse in the U.S. empire and ultimately Iranian domination of the region. Crazy, you say? I also heard Brexit had no shot and that Trump couldn’t win. When it comes to conventional wisdom at this point in the historical cycle, I want to be short.

Why do I think this? First of all, the U.S. simply doesn’t have the position it thinks it has in the world any longer. The moral authority, irrespective of whether it was ever deserved in the first place, is gone. Disastrous and bloody wars based on lies and media propaganda have been exposed for the world to see, and many allies won’t be willing to go along with an unnecessary Saudi/Israel/USA mission against Iran. Empires always make increasingly stupid decisions toward the end driven by hubris and a lack of self-awareness. The U.S. is no different.

Second, the U.S. would be getting in bed with a complete and total lunatic when it comes to de facto Saudi leader MBS. Pretty much everything this guy touches turns to shite, with his campaign in Yemen and attempt to isolate Qatar being prime examples. Now with his mass arrests of Saudi princes and other powerful people/family members in a quest to firm his position, he’s lost even more credibility in the region and created a slew of dangerous enemies, who will never forget what he did to them.

And remember to NEVER humiliate a bedouin in public. pic.twitter.com/iwbHyEiZZB

— NassimNicholasTaleb (@nntaleb) November 10, 2017

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MBS is far, far weaker both internally and externally than he realizes. He thinks he’s this grand figure who’s destined to bring glory to himself and Saudi Arabia in the region, but he’ll end up accomplishing the exact opposite. In addition to all the the dangerous mistakes I’ve already mentioned, he recently made the biggest mistake of all by bringing the Saudi-Israeli alliance public for the world to see.

Here’s a little snippet from an NBC News article published last month to give you a little sense of what’s going on:

For Israel, Saudi Arabia’s growing willingness to confront Iranian influence in the Middle East presents an opening for an awkward alliance. As the kingdom’s dynamic new crown prince, Mohammed bin Salman, tries to rally an anti-Iran coalition, Israel — with the blessing of the Trump administration — is presenting itself as a willing and able partner.

The appetite for cooperation between two of America’s closest allies in the Middle East has grown in recent years as their security interests have dovetailed. Both Israel and Saudi Arabia view Iran’s growing influence in the region as an existential threat and want to squash militant Islamist groups like ISIS and Iran’s main proxy, Hezbollah.

A U.S. official who witnessed a Saudi and Israeli official hold a closed-door meeting together recently said such informal meetings have been taking place for “at least five years.”

Remember, MBS has an undeservedly huge head and thinks of himself as some brilliant strategician. He thinks by publicly cozying up to Israel he’ll gain the total support and blessing of the Trump administration for whatever insane crusade his twisted mind can envision. In that sense, he’s correct, but I’m of the opinion he loses a lot more than he gains by going down this route.

Everything this princeling does is shortsighted and driven by impulsive arrogance. He just gave the biggest gift possible to Iran by becoming close to Israel, because the average person on the street in the region will see this as a massive betrayal. The Iranian leadership gets this. As Reuters reported:

(Reuters) – Iranian President Hassan Rouhani urged Muslims on Tuesday to disrupt what he called a plot by unnamed countries in the region to build ties with Israel.

He gave no more details on the states. But an Israeli cabinet minister said last month that his government had covert contacts with Saudi Arabia linked to their common concerns over Tehran.

“Some regional Islamic countries have shamelessly revealed their closeness to the Zionist regime (Israel),” Rouhani said in a speech broadcast live by state TV.

“I am sure that the Muslims around the world will not let this sinister plot bear fruit.”

This entire thing is setting up to be the graveyard of the U.S. empire. Recall what I wrote in my October post:

It’s sad to say it, but over the course of the 21st century the U.S. government has exposed itself as a corrupt bully, not just to the outside world, but also to its own people. Moreover, those in positions of power and influence in America either don’t recognize this reality or don’t care. It’s this sort of disconnected hubris combined with rampant internal corruption that is the true graveyard of empires. I think both allies and enemies abroad have had enough, and given the right opportunity, will let the U.S. sink.

With that in mind, read the following from Reuters:

France rejected the “unilateral” decision while appealing for calm in the region. Britain said the move would not help peace efforts and Jerusalem should ultimately be shared by Israel and a future Palestinian state. Germany said Jerusalem’s status could only be resolved on the basis of a two-state solution.

Trump upended decades of U.S. policy in defiance of warnings from around the world that the gesture risks aggravating conflict in the tinderbox Middle East.

Palestinian President Mahmoud Abbas, in a pre-recorded speech, said Jerusalem was the “eternal capital of the State of Palestine” and that Trump’s move was “tantamount to the United States abdicating its role as a peace mediator.”

Lebanese President Michel Aoun said Trump’s Jerusalem decision was dangerous and threatened the credibility of the United States as a broker of Middle East peace. He said the move would put back the peace process by decades and threatened regional stability and perhaps global stability.

Qatar’s foreign minister, Sheikh Mohammed bin Abdulrahman al-Thani, said Trump’s undertaking was a “death sentence for all who seek peace” and called it “a dangerous escalation”.

Turkey said Trump’s move was “irresponsible”.

Iran “seriously condemns” Trump’s move as it violates U.N. resolutions on the Israel-Palestinian conflict, state media reported. Supreme Leader Ayatollah Ali Khamenei said earlier in the day that the United States was trying to destabilize the region and start a war to protect Israel’s security.

If the decision on Jerusalem ends up inflaming the region in aa major way, the entire world will see Trump and the U.S. as directly responsible. This will further the perception amongst allies that the U.S. is a global problem, and raise the likelihood that any military adventure in the region instigated by the U.S., Saudi Arabia and Israel will fail spectacularly. This trio will increasingly look like an alliance of rogue states to most of humanity.

While I’m already sufficiently concerned about the likelihood of another stupid escalation in the Middle East by Trump, there are milestones I’m looking out for to let me know it’s about to get really bad. At the core of any major disaster will be Senator Tom Cotton, a rabid neocon who I unequivocally believe is the most dangerous, anti-freedom person in the U.S. Congress. He reminds me of an American Mohamed bin Salman, and his elevated prominence around Trump earlier this year is what got me increasingly concerned in the first place.

If Cotton takes on a more senior role in the Trump administration, such as a rumored position as CIA director, you can bet the farm that U.S. foreign policy is about to take the most dangerous turn since George W. Bush. Tom Cotton is a neocon on steroids, and seems to genuinely love conflict and authoritarianism. To get a better sense of what sort of person he is, take a look at him taking Twitter legal counsel to task. He believes U.S. companies act as an active arm of state intelligence.

If that doesn’t send a shiver down your spine, I don’t know what will.

Tom Cotton policy on anything represents a guaranteed nightmare for America and its people. If Trump promotes him in any way, prepare for almost unimaginable foreign policy disaster.

* * *

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Bloomberg Has Identified Buffett's Successor At Berkshire Hathaway (It Thinks)

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There are some well-kept secrets in the financial world. For example, there’s the identity of the person or people who designed Bitcoin under the pseudonym, Satoshi Nakamoto. Then there’s the identity of the parties responsible for the frequent dumping of billions of dollars of gold futures contracts on to the market without regard for maximising price. Another one is Warren Buffett’s successor as Chief Executive Officer Berkshire Hathaway.

Besides his advancing years, he’s 87, there are other signs that curtain is coming down on the era of the world’s most successful investor. As we noted in August in “The Value Of Lunch With Warren Buffett Plunges 22%”.

The winning bidder in legendary investor Warren Buffett’s annual charity auction has <span lang="EN" style="font-family:"Calibri",sans-serif;
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minor-latin;mso-ansi-language:EN;font-weight:normal;mso-bidi-font-weight:bold”>pledged $2.68 million for the privilege of eating lunch with the billionaire investor…While the sum is far greater than the $25,000 paid in 2000 – the first year Buffett held the fundraiser – it’s <span lang="EN" style="font-family:"Calibri",sans-serif;
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minor-latin;mso-ansi-language:EN;font-weight:normal;mso-bidi-font-weight:bold”>about $800,000 shy of the record sum of $3,456,789 paid in 2012 and 2016.

By his own admission, Buffett has also found it increasingly challenging to find “value” in keeping with his investment style which he modelled on an earlier doyen of value investing, Benjamin Graham. That’s not Buffett’s fault, it merely reflects the longevity of the latest iteration of central bank bubbles.

Speaking to the usual throngs of shareholders as Berkshire’s AGM in May 2017, Buffett admitted that.

“If I die tonight, I think the stock would go up tomorrow.”

He wasn’t joking, the world’s greatest capital allocator was merely acknowledging that the market would likely price the parts of his very disparate conglomerate higher than the whole. “It would be a good Wall Street story”, he was reported to have said.

Bloomberg Businessweek has published an article on Buffett and Berkshire Hathaway arguing that the pressure to break up the company will mount after he steps down. Buffett’s successor will be critical if that is to be prevented…and Bloomberg thinks it knows his identity. For the time being, while Buffett remains in situ, nothing is going to change.

The glue is Buffett, who’s argued persuasively for decades that this hodgepodge makes sense. His market-beating returns have helped: $100 invested in Berkshire in 1964, when he began aggressively buying shares to take control, would be worth more than $2 million today.

Nothing of the sort is likely to happen while Buffett is there. He’s still the controlling shareholder, Berkshire is his life’s work, and he doesn’t want it torn apart by investment bankers or activist investors. To slow that process, Buffett assembled a board that backs his approach, and after his death he’ll leave his remaining shares to charities run by family and friends who know his wishes. But the pressure to dismantle his creation will mount—eventually.

The bulwark against that impulse will be Buffett’s successor as chief executive officer, whose identity is one of the business world’s best-kept secrets. In all his years of giving interviews and taking questions at the company’s marathon annual meeting, Buffett has acknowledged that the board has picked his replacement, but he’s never disclosed the name.

In a cheeky dig at Buffet’s ego, the Businessweek article suggests that by naming his successor, it might take the spotlight away from the man himself, “who loves the attention”. While we think there’s some truth to that, we also agree that Berkshire’s board is keen to give itself room to maneuver. Prior to his resignation from Berkshire, it was widely accepted that David Sokol, known as his “Mr Fix-It and major influence on acquisition targets, would succeed Buffett.

 Arguing that “These days, however, most arrows are pointing toward one man”, Bloomberg begins making its case by re-capping what Buffett has said about the qualifications for his job.

Buffett, at least, has talked about the qualifications for the position. In a 2015 letter to shareholders, he said the board wants his successor to be drawn from the company’s ranks and “relatively young, so he or she can have a long run in the job.” He suggested future Berkshire CEOs should hold the post for more than a decade and that they should be “rational, calm, and decisive.” And, he noted, they should have upstanding character, be unmotivated by ego or a big paycheck, and be “all-in” at Berkshire.

As the article points out, Buffett neglected to mention stockpicking skills, although the next CEO will be able to call on the two former hedge fund managers hired by Buffett, Todd Combs and Ted Weschler. The two manage about $20 billion of Berkshire’s stock portfolio, but are unlikely to have the skills or the desire to oversee Berkshire string of operating businesses. The role of Chairman is expected to be given to eldest son, Howard Buffet who’s job will be to “guard the company’s culture—and force out any future CEO who messes with it”.

Bloomberg thinks that a major clue to the identity was dropped by Buffett’s partner, Charlie Munger.

Munger called two executives—Ajit Jain and Greg Abel—examples of the company’s “world-leading” managers who are in some ways better than their boss. While Buffett later denied that any executives were in a “horse race” to succeed him, the logical inference from Munger’s letter was that the board had already settled on one of these two—and probably wasn’t as seriously considering other internal candidates such as BNSF Executive Chairman Matt Rose or Tony Nicely, the CEO of Geico. Abel declined to comment, and Jain and Buffett didn’t respond to requests for comment.

Jain and Abel each fit many aspects of Buffett’s carefully tailored job description. They’re deeply committed to Berkshire’s culture, which prizes efficiency and long-term thinking. Neither has outward character flaws that would immediately be disqualifying. And each has built large businesses for Buffett.

Jain runs the insurance business, which remains the core of Berkshire, while Abel runs the energy/utility businesses. It’s tough to make a judgement between the two, but Bloomberg thinks that, in the end, Abel’s youth will sway it.

Jain runs the company’s namesake reinsurance operation, which for decades has provided Berkshire with billions of premium dollars for investments and acquisitions. Buffett has repeatedly said that Jain has probably made more money for shareholders than he has. In 2011 he said the board would make Jain CEO if he wanted the job.

Abel has steadily expanded a utility holding company in Iowa into a colossus in the energy industry. It runs several power companies throughout North America and the U.K., interstate natural gas pipelines, and giant wind and solar farms. It’s a big part of Berkshire that stands to get only bigger, Buffett said in May, adding that it’s “hard to imagine a better-run operation.”

A key distinction between the two executives is age: Jain is 66, Abel is 55. Buffett is proof that the CEO can do well by shareholders long past typical retirement age. Even so, Jain has been facing some health challenges that could eventually make working more difficult, according to people who’ve recently spent time with him. Analysts and some longtime investors don’t think he wants the job. He’s also spent his career in insurance, a business less essential to Berkshire than it once was.

Bloomberg notes that others are increasingly sharing the same view about Greg Abel, including Berkshire investors and analysts. If Abel is the man for the job, he will have to contend with Berkshire’s need to allocate around $400 billion of capital over the next decade, a larger sum than Buffett deployed during the last half century. The article argues that Abel is far from a bad allocator.

That’s a skill Abel has spent years honing. An accountant by training, he joined the business he now runs in 1992 when it was a small geothermal power producer in California. Its head at the time was Sokol, who spotted talent in the young executive and promoted him to bigger roles. In 2000, as investors chased the latest dot-com stocks, Berkshire bought a majority stake in the business.

Being part of Buffett’s empire created an opportunity. Abel’s company, then called MidAmerican Energy Holdings, was able to retain its earnings, a rarity in the utility industry, where the norm is to pay generous dividends..For a time, he ran a utility in the U.K. People who’ve worked for him say he’s steeped in the details of his operations. He often visits his far-flung utilities in person. “He’s made big bets,” says Jeff Matthews, an investor who’s written three books about Berkshire. “He’s as smart as they come.”

Ironically, if Abel is promoted to fill Buffet’s considerable boots, one scenario which would make his job considerably easier would be a market crash. Finding value would be much easier in deploying the company’s $100 billion cash mountain.
Silicon Valley's 'Working Homeless' Shows How Hard Life Is In "Democrat's Paradise"

Authored by Mac Slavo via SHTFplan.com,

Silicon Valley is the home to tech giants like Facebook, Apple, and Google. It’s also home to a surging working homeless population who live in dilapidated RV’s, tents, and their own cars, all thanks to the policies Democrats love to implement.

The surging number of those working in Silicone Valley and still unable to afford adequate housing should be a warning about big government, but it sure doesn’t seem like anyone is taking notice as their taxes continue to rise.

As governments creep toward socialism though, poverty becomes the norm, not the exception.

Silicon Valley has the highest median income in the nation. But a soaring tax burden and expensive regulations have caused housing prices to increase which has also caused homelessness to surge.

More than 10,000 people were living without shelter across San Jose and Santa Clara Counties on any given night in 2016, though that figure is probably low. Thanks to big government, the cost of living is not low.

An influx of tech workers along with decades of under-building (thanks again to the regulations of big government) has created a historic homelessness in the Bay Area.

The governments in California continue to attempt to control deadly Hepatitis A outbreaks caused by a booming homeless population and usually do so by taking even more from those who actually work. The cycle will continue: socialists governments will put a cheap band-aid on the gaping wound they created themselves.

Rather than freeing poor people from dependence on benefactors and bosses, they merely transfer the dependence to the state, leaving the least politically connected people at the mercy of the political process. – FEE

The one thing government has are programs to help those in poverty. But those have proven ineffective. And the one thing that will work is the very thing government refuses to do: Climb off the backs of those they pretend they want to help.

Progressives routinely deplore the “affordable housing crisis” in American cities. But it is the very laws that Progressives favor—land-use policies, zoning codes, and building codes—that ratchet up housing costs, stand in the way of alternative housing options, and confine poor people to ghetto neighborhoods. Historically, when they have been free to do so, poor people have happily disregarded the ideals of political humanitarians and found their own ways to cut housing costs, even in bustling cities with tight housing markets. – FEE

Imagine just how much more money the working poor would have if the big government in California wasn’t stealing over half their income to implement the very rules and laws that continue to make “scraping by” even more expensive.
IMF Stress Tests Find $280 Billion Black Hole In Chinese Banks' Capital

The IMF released a new analysis on the ~~instability~~ stability of the Chinese financial system. Speaking to the media in an online briefing, some of the insights from Ratna Sahay, deputy director of the IMF’s Monetary and Capital Markets Department, hardly advanced our knowledge much.

Sahay noted that “Risks are large. Having said that, the authorities are really aware of risks and they are working proactively to contain these risks.”

That’s why the authorities are finally racing to contain the worst excesses of China’s insane credit boom following October’s Party Congress, for example overhauling the $15 trillion shadow banking and asset management sector. As we noted on the latter, the new measures don’t take effect until the end of June 2019, no doubt reflecting the enormity of the problems uncovered by Chinese regulators.

Sahay pointed to three main risks: credit growth, the complex and opaque financial system and implicit guarantees which “encourage excessive risk-taking” (think WMPs).

However, the IMF does a better job in explaining why a massive financial crisis in China is all but inevitable – the conflicting needs of social stability versus financial stability. According to Reuters.

But the near-term prioritisation of social stability seems to depend on credit growth to sustain financing to firms even when they are non-viable, it said. “The apparent primary goals of preventing large falls in local jobs and reaching regional growth targets have conflicted with other policy objectives such as financial stability,” the report said. “Regulators should reinforce the primacy of financial stability over development objectives,” the fund said.

Too late.

Xi Jinping and his predecessors allowed the excesses to go too far before Xi had solidified his grip on power sufficiently to intervene. The IMF itself has been missing in action when it comes to assessing China’s financial stability, as the latest report was the first of its kind since 2011. In terms of a financial system which has been out-of-control, we can use growth in the wealth management products (WMPs) as a proxy.

The IMF conducted stress-tests on 33 Chinese banks in a so-called “severely adverse scenario” and the majority failed. The capital shortfall even under this scenario was a staggering $280 billion dollars, about 2.5% of GDP. We should highlight – and we suspect it’s significance won’t be lost on readers – that the IMF stated in a footnote that the PBoC did not provide access to all of the “supervision data” it needed to properly conduct the stress tests. Bloomberg discusses the results.

China’s banks should increase their capital buffers to protect against any sudden economic downturn following a credit boom, the International Monetary Fund said. In its first comprehensive assessment of China’s financial system since 2011, the IMF recommended “a gradual and targeted increase in bank capital.” In a worst-case scenario, IMF stress tests suggested the country’s lenders would face a capital shortfall equivalent to 2.5 percent of China’s gross domestic product — about $280 billion in 2016 — together with ballooning soured loans.

Overall, 27 of 33 banks stress-tested by the fund, covering about three quarters of China’s banking-system assets, were under-capitalized by at least one measure. A larger financial cushion would better reflect potentially underestimated risks stemming from the banks’ exposure to opaque investments, and absorb losses as implicit government guarantees are removed, the fund said.

We are struggling to believe the IMF’s finding that the “Big Four” state-owned banks have sufficient capital. As we explained in detail in “How Ghost Collateral And Yin-Yang Property Loans Will Collapse China’s Credit Bubble”, there is an epidemic of fraudulent loans in China, with all parties, including the legal profession and the courts, complicit. At the same time, Xi is cracking down on the systemic corruption within government, so it doesn’t take much to link the two in the case of the Big Four. Nevertheless, Bloomberg notes the IMF’s assertions.

China’s top four banks, led by the world’s largest lender by assets Industrial & Commercial Bank of China Ltd., have enough capital, the fund said. But it said the nation’s smaller lenders, including those focused on individual cities “appear vulnerable.”

“Stress test results reveal widespread under-capitalization of banks other than the Big Four banks under a severely adverse scenario,” the fund said in its report. “Increasing capital would enhance the resilience and credibility of the financial system, as well as reassure markets.” The fund didn’t name the specific banks that need more capital.

There are some moments of mild tragi-comedy in the IMF’s report, for example, when it notes that the official proportion of non-performing loans in the Chinese banking system – 1.5% at the end of June 2017 – may understate the reality. Even using the official figures, China’s “debt at risk” exceeds most other major EM economies.

Stress-testing the 22 Chinese banks under the “severely adverse” scenario, the IMF calculate that the non-performing loan ration would rise from 1.5% to 9.1%, cutting tier 1 capital ratios by 4.2%. Under these circumstances, bank would have to slow the pace of lending to the Chinese economy and the fiscal impact could exceed the direct recapitalization needs of the banking system “by a wide margin”, a.k.a a major crisis.

The PBoC responded surprisingly quickly to the IMF report. Regarding the very low official figure for bad debts, it noted that it resulted from banks having written off the bad ones, although obviously doesn’t square with the incredibly low number of defaults which continues to be a feature in the banking system. Bloomberg reports the response to the stress tests as follows.

Responding to the report, the People’s Bank of China said the assessment was generally fair but disputed the IMF’s interpretation of the stress test results. “Comments about the stress test in the report do not fully reflect the results of the tests," the central bank said in a statement on its website Thursday. "China’s financial system has shown relatively strong capability to cope with risks.”

As we’ve found to our own cost on many occasions, hubris is not a good think when it comes to financial markets.

To its credit, the IMF’s staffers did place a lot of focus on the risk from guaranteed returns and off-balance sheet exposure in China’s $4 trillion WMP sector. Without calling it a Ponzi scheme, they identify the possibility of a bank-run.

“Off-balance sheet WMPs also represent a significant risk to capital,” the report said. “They are not guaranteed, but banks almost always compensate retail investors for principal losses. In a stress scenario, the costs to the banks of supporting WMPs could be substantial and could, in case of a run, place the liquidity position of some banks under strain.”

As part of the stress-tests, the IMF discovered four banks that could suffer liquidity shortfalls within 30 days, while confirming that the liquidity position of the Big Four was “strong” (hmmm). Besides increasing bank capital, holding more liquid assets and reforming WMPs, we were intrigued by another of the IMF’s recommendations. The IMF stated that the PBoC and other regulators needed a substantial increase in staffing. We find this hard to believe…and very worrying…but the IMF found.

…the staff count at the “PBoC and the regulatory agencies has not risen in 10 years, while the financial sector has doubled in size.

It’s even less surprising how fraudulent lending grew into an epidemic in the Chinese financial system. What the IMF report doesn’t say is that it’s gone way too far to ever be reined back in orderly fashion. We are reminded of some Bank for International Settlements (BIS) analysis discussed by Bloomberg a year ago. The BIS found that the single most reliable indicator of looming banking crises is when the aggregate of credit to households and businesses exceeds GDP by more than 10% (as it did prior to the US subprime crisis). Needless to say, China was well past the point of no return.
World's Largest Online Seller Of Gold Is Now Accepting Bitcoin

It’s not quite the non-fiat singularity just yet: for that to happen, one should be able to buy gold with bitcoin, and bitcoin with gold… but thanks to Apmex, the world’s largest online retailer of precious metals, one can now cross out one half of the missing links, because as of yesterday Apmex is now accepting bitcoin.

From the company’s statement:

For more than 15 years, APMEX has been an industry leader and along the way has adapted to the growing needs of our customer base. As bitcoin becomes more popular and widely accepted as payment, we are thrilled to welcome the use of this cryptocurrency for buying Gold, Silver and other Precious Metals by integrating BitPay into our website.

With BitPay integration, APMEX customers can now pay using bitcoin and complete their order in seconds. Because bitcoin works like cash for the Internet, customers enjoy a quick process, as the only delay is in the “mining” required of all bitcoin purchases. Additionally, all eligible bitcoin orders will be processed and shipped within one business day of your payment’s clearing and processing with the QuickShip® guarantee (domestic orders only).

Buyers can make purchases with bitcoin at any time, from nearly anywhere, just as with most credit cards. International orders become significantly easier as cryptocurrency like bitcoin is accepted worldwide without conversion. Also, many customers prefer Bitcoin payment because of the anonymity offered by a blockchain purchase.

And best of all, there’s an added extra: a 4% discount on your new, shiny yellow metal:

For a limited time, all bitcoin orders are eligible for a 4.0% cash discount, similar to orders paid with check or bank wire. Take advantage of this new payment type and the limited-time introductory pricing offer. Start shopping today!

Oh, and with a whole lot of bitcoin millionaires and billionaires suddenly popping up, guess what countless other struggling online retailers, desperate for the sudden riches of these newly minted, pardon the pun, bitcoinaires will do? Exactly the same, as bitcoin acceptance suddenly becomes the next big thing…
China Launches World's First All-Electric Cargo Ship

Authored by Zainab Calcuttawala via OilPrice.com,

Tesla is not the only one bringing electric engines to cargo transport.

China just launched its first all-electric cargo ship, which will travel 50 miles at a top speed of 8 miles per hour on a single charge. Though it will be able to carry 2,200 tons of cargo with every haul, that battery capacity is barely enough to fulfill any transatlantic shipments. It will take just two hours to recharge, which is about as much time the vessel needs to unload at a destination.

Of course, the vessel is the first of its kind, so ports will have to be fitted with charging stations specifically for the ship. So far, only two ports have received the special upgrade.

“As the ship is fully electric powered, it poses no threats to the environment. The technology will soon be likely … used in passenger or engineering ships,” Huang Jialin, head of Hangzhou Modern Ship Design & Research Co, said regarding his company’s new innovation.

Claiming it poses “no threat to the environment” is a stretch though. Electric vehicles are only as green as the manufacturing of their batteries and the sourcing of the electricity that powers them. Charging the ship with the Chinese electric grid in its current form—which is largely powered by fossil fuels—will definitely contribute to more carbon emissions. But China is diversifying away from oil and gas quickly, meaning the electric engine will get greener by default in the coming years.

The battery system contains 1,000 lithium-ion packs, which can be supported with additional units if the cargo is heavier or needs to travel a longer distance.

The biggest impact of this innovation could be seen in consumer markets. Goods transported on the new ships can cut some transportation costs since the price of electricity is cheaper than the equivalent price of diesel for massive combustion engines. BUT, the ship is currently slated to primarily ship coal up and down the Pearl River. Oh, the irony. Related: Oil Prices Slide On Major Gasoline Build

“This kind of ship takes into consideration the harmony between humans and nature and can protect water quality and marine life, and should be copied by other ships sailing on local rivers,” says Chinese environmentalist Wang Yongchen. Still, the ship, which took its maiden voyage in November, has a long way to go before it can be considered as a green contribution to the shipping industry.

Tesla, Daimler, Cummins, and Toyota are working on the trucking end of the equation. Most containers spend at least a portion of their lives on trucks, after being hauled across an ocean and over hundreds of miles of train tracks.

“This is no mere ‘truck.’ It will transform into a giant robot, fight aliens, and makes one hell of a latte,” Tesla CEO Elon Musk said of his company’s latest bid to increase the scope of electric vehicles.

The other three major companies taking on this challenge have equal promise, but lack the Apple-like fanfare that Tesla enjoys. The Chinese innovators who got the first electric cargo ship going will face a similar fate. The concept will need to be tested out in Asian markets—with more ships on more rivers carrying more kinds of cargo—before Hangzhou can hope to sell the model abroad, if that is the firm’s game-plan.

China is the leading producer of solar panels and wind turbines, as well as a speedy adopter of natural gas and other alternative fuels. The development of this major innovation in China means that the ship will have ample exposure to innovators in green space who could help the electric ship become a global product.
Preview Of Tomorrow's Jobs Report: Here's What Wall Street Expects
What a difference a year makes: last December, just as the ECB was about to shock the market with the announcement of its first €20 billion QE tapering, macroeconomic data mattered, especially since the Fed’s tightening intertia appeared to truly be data-dependent, if only for a very short period of time. Fast forward one year, when 3 rate hikes into the Fed’s “paradoxical” tightening cycle, in which much to the BIS’s shock the higher Fed Funds rates rise, the easier financial conditions get, a “dovish” December rate hike is assured, and as such tomorrow’s payroll report, which will probably print withint a few thousands of 200K, is completely irrelevant.

Still, to at least some headline-scanning algos, tomorrow’s jobs report will matter, if only so that it can respond in a knee-jerk reaction, and be stopped out by yet another group of headline-scanning algos whose only job is to make sure the first group of algos pukes their trades at a loss, regardless of what the underlying data is.

With that in mind, and with the understanding that fundamental data hasn’t really mattered since 2009, here is what Wall Street expects – and algos – will expect from tomorrow’s charade, which no matter what will send the market higher.

From RanSquawk

The BLS will release November’s Employment Situation Report at 1330 GMT (0830 EST) on Friday 8 November
- After October’s bounce-back, analysts expect normalisation in the rate of payroll additions (consensus 200k)
- Wage growth may be buoyed by calendar effects, pushing the Y/Y rate up to 2.7%
SUMMARY: Analysts expect payroll growth to ease in November; the October data was boosted by unwinding negative effects from hurricanes Harvey, Irma and Maria, and therefore, analysts will see a slowing as more of a normalisation, rather than the beginning of a new slowdown. There may be some upside in retail hiring given the early Thanksgiving Holiday. Rounding effects may result in the rate of joblessness slipping slightly. Earnings growth is likely to be supported by calendar effects, which may push the Y/Y rate up to 2.7%, matching the pace of annualised wage growth seen in Q3.

ANALYST FORECASTS:
- Non-farm Payrolls: Est. 200k (144k to 261k), Prev. 261k
- Unemployment Rate: Est. 4.1% (4.0% to 4.3%), Prev. 4.1%
- Average Earnings Y/Y: Est. 2.7% (2.5% to 2.8%), Prev. 2.4%
- Average Earnings M/M: Est. 0.3% (0.1% to 0.5%), Prev. 0.0%
- Average Work Week Hours: Est. 34.4hrs (34.4 to 34.5hrs), Prev. 34.4hrs
- Private Payrolls: Est. 190k (155k to 250k), Prev. 252k
- Manufacturing Payrolls: Est. 17k (9k to 35k), Prev. 24k
- Government Payrolls: Est. 5k (-4k to 10k), Prev. 9k
- U6 Unemployment Rate: No forecasts, Prev. 7.9%
- Labour Force Participation: No forecasts, Prev. 62.7%
CONSENSUS ESTIMATES BY BANK:
- Capital Economics (261K)
- Goldman (225K)
- Wells Fargo (220K)
- Lloyds (220K)
- Barclays (200K)
- UBS (190K)
- BMO (190K)
- TD Securities (175K)
- RBC (175K)
- JPMorgan (175K)
- Societe Generale (165K)
TRENDS: US payroll growth has averaged 169k per month in 2017; as a comparison, in the first ten months of 2016, payroll growth was averaging 192k, and as a whole for 2016, payroll growth averaged 187k per month in the year. The trend rate was hit in September following disruptions caused by hurricanes Harvey, Irma and Maria. However, on a three-month rolling average basis, payroll growth is running at a clip of 162k heading into the holiday season, rising from the previous 121k on the same basis.

INITIAL JOBLESS CLAIMS: Heading into October’s Employment Situation Report, initial jobless claims were averaging 231,250 on a four-week rolling basis; and heading into the November data, that pace has increased to 241,500 on the same basis. “Back to the pre-hurricane trend,” Pantheon Macroeconomics said, “the trend in claims has been re-established just under 240K, returning to its pre-hurricane level and perhaps even a bit lower.” The economic consultancy has noted that, as a share of payroll employment, claims are now at an all-time low, and that appears to be consistent with labour demand at elevated levels. “This picture is unlikely to change anytime soon; indeed, if economic growth is sustained at the recent 3% trend, claims probably will fall to new lows. That, in turn, will reduce fear of job loss and support even higher levels of consumer confidence.”

ADP EMPLOYMENT REPORT: The ADP reported 190k payrolls were added to the US economy in November, which was in line with the consensus, and the prior remained unrevised at 235k. “The job market is red hot, with broad-based job gains across industries and company sizes,” according to Moody’s chief economist, who helps compile the survey. “The only soft spots are in industries being disrupted by technology, brick-and-mortar retailing being the best example. There is a mounting threat that the job market will overheat next year.”

CHALLENGER JOB CUTS: The payrolls processor’s survey showed US employers announced 35k job cuts in November – up 30% Y/Y and 17% M/M; it brings the 2017 total up to 386k which is 22% fewer than the November’16-YTD total. “Employers have reported a lack of skilled workers to fill demand in many industries,” Challenger said, “in this tight labour market, those with requisite skills and training have a leg up over the competition.” It added “opportunities exist for job seekers,” though “it remains to be seen whether the recent tax reform bill will have a significant impact on job growth or announced cuts. It may make it easier for companies to combine, which generally leads to eliminating redundancies.”

BUSINESS SURVEYS: The November ISM manufacturing survey recorded the rate of employment growth easing slightly (59.7 vs 59.8 previous), though has now remained in expansion for the fourteenth consecutive month; ISM noted that “employment expansion remains strong in spite of signs of labour market tightening.” The non-manufacturing ISM saw the employment sub-index fall by around 2 points, though has been in expansion for the 45th consecutive month. November’s manufacturing PMI from IHS Markit noted that employment levels were growing at the second-strongest rate since June 2015. The services PMI saw employment growth rising to a three-month peak, and points to “solid non-farm payroll growth of circa 200,000 as companies continue to take on staff in encouraging numbers to meet rising order books,” the survey-compiler said.

WHAT BANK DESKS ARE SAYING

BARCLAYS (EST. 200K): We expect payroll employment to rise by 200k, with private payrolls up 195k and government payrolls up 5k. Our forecast would represent a modest slowing from the 261k recorded last month, but we see that number as influenced by a storm-induced rebound in hiring that is not representative of the underlying trend. Hence, we view the moderation in employment growth this month as labor markets returning to a more normal state. At 200k, employment growth remains in line with the average monthly increase during the recovery and well in excess of that needed to keep the unemployment rate steady. For the unemployment rate, we forecast another one-tenth decline to 4.0%, but note that this is partly due to rounding effects, as the unemployment rate in October to three decimals stood at 4.065%; a minor drop will cause it to tick lower. Elsewhere in the report, we forecast a bounce in average hourly earnings to 0.3% m/m (2.7% y/y) and expect average weekly hours to remain unchanged at 34.4.

BMO (EST. 190K): After getting buffeted by hurricanes in the past two months, nonfarm payrolls are expected to increase a solid 190,000 in November. This would mark a pickup from the 12-month average (167,000) due to the perkier economy. A steadier participation rate (following a big retreat last month) should hold the unemployment rate at a 17- year low of 4.1%, with downside risk given a further improvement in net job prospects in the Conference Board’s consumer confidence survey. A likely snapback in average hourly earnings should kick the yearly rate up to 2.8%, at the high end of its past-year range, though still no threat to inflation. Following Chair Yellen’s recent upbeat testimony on the economy, the expected solid jobs report should seal the deal on a December 13 rate hike.

CAPITAL ECONOMICS (EST. 261K): After the disruption to the payrolls figures caused by Hurricanes Harvey and Irma, with a near-stagnation in September being followed by a 261,000 surge in October, we forecast a more normal 200,000 gain in non-farm payrolls in November. The latest indicators suggest that employment growth remained strong last month. Jobless claims are close to multi-decade lows, while the business surveys still look strong. The employment index of the Markit Services PMI climbed to 54.1 November, putting it close to its highest level in two years. Meanwhile, we expect that the unemployment rate held steady at 4.1% in November. Surveys suggest it could fall further before the year is out. The surveys are also consistent with a steady acceleration in wage growth over the next year or so. (See Chart 1.) We have pencilled in a 0.3% m/m gain in average hourly earnings in November, lifting the annual growth rate up from 2.4% to 2.7%.

GOLDMAN SACHS (EST. 225K): We estimate nonfarm payrolls rose 225k in November, compared to a consensus of +200k. November job growth likely benefited from additional normalization in hurricane-affected regions. Additionally, the early Thanksgiving this year is likely to boost retail job growth, as relatively more of the holiday hiring will occur before the survey week. The arrival of over 200k Puerto Ricans in Florida (following Hurricane Maria) could also increase payrolls this month. We estimate a stable unemployment rate (4.1%), as the downward trend (-0.3pp over the last three months) seems due a pause. For average hourly earnings, we estimate +0.3% with upside risk, reflecting somewhat favorable calendar effects and a boost from the unwind of hurricane-related distortions.

JPMORGAN (EST. 175K): We forecast that nonfarm payrolls increased 175,000 in November while the unemployment rate ticked down to 4.0%. The payroll data have been choppy lately, in what appears to be weather-related distortions that depressed the September reading and then boosted the October data. We think that the bulk of the weather-related distortions are now behind us and we look for a more trend-like reading for job growth in the upcoming report. We do think that the November figure will be a bit stronger than the average gain from recent months considering some upbeat employment data in the PMI surveys as well as mostly favorable jobless claims data over the past month or so. For the main details of the payroll count, we believe that private goods-producing industries added 30,000 jobs in November while the private service sector contributed 140,000. We think that government payrolls will continue to trend higher, with another 5,000 jobs added in November. Elsewhere in the establishment survey, we forecast that average hourly earnings increased 0.3% in November (2.7%oya). The tighter labor market likely is putting upward pressure on compensation and we think that the weak October reading reflected noise in what is often a choppy series. We think that the average workweek held at 34.4 hours between October and November; when combined with our forecast for job growth, we estimate that the aggregate hours index ticked up 0.1%. For the household survey, we forecast that the unemployment rate declined from 4.1% to 4.0% between October and November. The October report showed large declines in the household measures of both employment and unemployment. We think that we will probably see more of a bounce back in the employment data than the unemployment data considering that employment has been trending higher in recent years while unemployment has been trending down, and we think that this will result in a decline in the unemployment rate.

LLOYDS (EST. 220K): We look for a solid rise of 220k in November, no change in the unemployment rate at 4.1% and a 0.3% month-on-month rise in average earnings which will pull the annual rate up to 2.7% from 2.4%.

PANTHEON MACROECONOMICS (EST. 225K): We think payrolls rose by a robust 225K, following sustained strength in leading hiring indicators. The return of the last few people kept from work by the hurricanes should lift the numbers too. The unemployment rate should be unchanged at 4.1%. Hourly earnings should rise 0.3%, boosted by a calendar effect.

RBC (EST. 175K): We expect U.S. employment rose by 175k in November. That would be down from the 261k increase in October – a gain that reflected the unwinding of hurricane-related disruptions that slowed job growth to just 18k in September. The November employment data should provide a ‘cleaner’ read and the increase we expect would be above the 140k average gain over the prior two months and well above the pace needed to put downward pressure on the unemployment rate. Although labor markets increasingly look to be bumping up against capacity limits, the U.S. economy has shown clear signs of strength, arguing for near-term job growth to be sustained at a pace well-above trend in the near-term. We expect November’s employment gain will be enough to push the unemployment rate down to 4.0% — building on a 0.3 percentage point drop over the last two months.

SOCIETE GENERALE (EST. 165K): Hurricanes restricted job gains in September to just 18,000, but job growth rebounded by 261,000 in October. Looking through the weather-related swings the last two months, payroll gains have averaged about 169,00 year-to-date, and we expect that the labor market returned to that pace of advance in November, as the economy likely added 165,000 new jobs. Similarly, private payrolls averaged 150,000 over the last three months, 157,000 over the last six months, and 162,000 year-to-date. In other words, the underlying trend does not seem to have shifted dramatically despite the hurricane-related swings recently. The big move in job growth the last two months was in the leisure and hospitality industry, which shed 102,000 spots in September but bounced by 106,000 jobs in October. Prior to those sharp changes, this industry averaged job gains of about 31,000 from March to August. Meanwhile, the anticipated surge in construction jobs failed to materialize in October, rising by just 11,000, the same as in September and in line with the six-month average rise of 10,000. As we noted prior to the last report, a shortage of construction workers likely held back growth in this sector. One bright spot in October was manufacturing, which added 24,000 positions and has added an average of 25,000 jobs per month in the last three months. In any case, we expect that softness in retail, a modest cooling in factory job growth, a more trend-like reading in the leisure industry restrained payrolls, although a reading in line with our estimate would still be a healthy figure. In any case, average hourly earnings jumped by 0.5% in September but were flat in October, pushing the yoy rate down from 2.8% to 2.4%. We expect that earnings increased by 0.2% in November, which would push the yoy rate back up to 2.6%. We also expect an unchanged unemployment rate, and we anticipate that the workweek may have remained steady.

TD SECURITIES (EST. 175K): We expect nonfarm payrolls to advance by 175k in November. Data on persons not at work due to bad weather suggest that hurricane impacts should have faded by this month, allowing payrolls to print closer to their current trend in the 150-200k range. Upward revisions to the prior two months are also likely. Meanwhile, labor market indicators (regional Fed surveys and consumer confidence) remained supportive of solid job growth. We expect the unemployment rate to tick higher to 4.2% from 4.1%, given the outsized decline in labour force participation that has the potential to correct. We also look for a relatively modest 0.2% m/m increase in average hourly earnings, as calendar effects are less favourable this month. Still, that should leave earnings tracking higher on a y/y basis at 2.6% vs 2.4%.

UBS (EST. 190K): Our payrolls forecast for November reflects idiosyncratic swings in employment in a number of industries. State level data suggest that the storm-related swings in payrolls are mostly in the past. In Texas, the payroll rise in October more than made up for the shortfall (relative to trend) in September. In Florida, the October bounce almost made up the September shortfall. However, we still see some potential for storm-related employment gains in November, and the jobs data will also reflect businesses’ preparation for the holiday shopping season. We estimate a fairly rapid increase in payrolls in leisure and hospitality. Within leisure and hospitality, food services employment reversed most but not all of its hurricane-related weakness in October—suggesting some potential for a further temporary boost to November. Food service payrolls had been rising about 25k per month in the year before the storm, with some hint of faster increase in Q2. We allow for a 40k rise. There are risks on both sides of the estimate: industry employment had been on the soft side prior to the storm effects—suggesting either more to make up or a somewhat softer underlying trend. Growth of food services sales has been slowing. We forecast softness in retail payrolls but strength in transport and warehousing as online sales continue to shift retail distribution. Last year, retail payrolls weakened throughout Q4, while couriers and warehousing payrolls offset much of their deterioration. We expect a repeat this year, signalled by the pattern in retail and transportation hiring plans. Strength in construction payrolls is likely, amid momentum in housing starts and new home sales. We expect another solid gain in manufacturing payrolls. With strength in relatively high paid manufacturing and construction and weakness in lower-paid retail, average hourly earnings probably rose slightly above trend, +0.3%m/m. Wages would be pick up from 2.4%y/y in October to 2.7%y/y in November, reaccelerating to their Q3 pace. The unemployment rate was probably unchanged following a steep, 0.3 pt decline since August.

WELLS FARGO (EST. 220K): We expect nonfarm payrolls to rise by 220,000 in November, which should keep the unemployment rate steady at 4.1%. Overall, job growth should average 197,000 in the fourth quarter, and we expect the unemployment rate to end the year at the current 4.1% rate. We continue to expect the pace of job growth to gradually decelerate next year as slack in the labor market continues to diminish. By the end of 2018 we see the unemployment rate at 3.9%.