Tuesday , November 12 2019
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Mike Shedlock

Mike Shedlock

Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Articles by Mike Shedlock

Chinese Debt Imploding: Hospitals Need Loans From Nurses

9 hours ago

Speculative loans in China are souring rapidly. Ruzhou, a city of one million people provides examples.
Struggling to keep its economy growing, the city of Ruzhou spent big, but is now asking its health care workers for cash to stay afloat.

Begging Nurses for Money
The New York Times asks How Bad Is China’s Debt?

Ruzhou, a city of one million people in central China, urgently needed a new hospital, their bosses said. To pay for it, the administrators were asking health care workers for loans. If employees didn’t have the money, they were pointed to banks where they could borrow it and then turn it over to the hospital.

Ruzhou is a city with a borrowing problem — and an emblem of the trillions of dollars in debt threatening the Chinese economy.

Local governments borrowed for years to

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Farage Backs Down, Won’t Field Candidates in Tory-Held Seats

11 hours ago

Nigel Farage will not field Brexit candidates in any districts won by the Tories in 2017. What’s it mean?
Unilaterally Backed Down
After making numerous threats and demands, Nigel Farage unilaterally backed down in 317 constituencies won by the Tory Party in 2017.
It was a huge climb down given Boris Johnson offered nothing in return.
Yesterday, in Johnson and Farage In Secret Deal? Who Forced Whom? I commented "Today’s video allows Farage to save face. Farage can claim he got Johnson to bend even if he didn’t."
The video is one in which Johnson strongly emphasized that he would not extend the transition period beyond 2020. But that is the same thing he has said all along. By emphasizing that position at precisely the right time, he may have helped Farage climb down.

Leave Split Reduced

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Single’s Day Shopping Sales Top $12 Billion in One Hour

1 day ago

China lead the world’s largest one day sales event with Alibaba’s annual "Single’s Day" shopping event.
Alibaba’s annual "Single’s Day" shopping event tops Black Friday sales, in the US by a mile. Black Friday is the day after Thanksgiving.
Reuters reports Alibaba Singles’ Day Sales Hit $12 billion in First Hour.

Chinese e-commerce giant Alibaba Group Holding Inc said on Monday that sales for its annual Singles’ Day shopping blitz hit 84 billion yuan ($12 billion) within the first hour, up 22% from last year’s early haul of 69 billion yuan.

Akin to Black Friday and Cyber Monday in the United States, Singles’ Day has been promoted as a shopping fest by Alibaba Chairman and CEO Daniel Zhang since 2009, growing rapidly to become the world’s biggest online sales event.

Also known as

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Number of Job Openings Falling Dramatically

1 day ago

The number of Job Openings is down since the beginning of the year. Hires are up
The BLS released its report on Job Openings and Labor Turnover (JOLTs) for September on November 5. The release is for the nonfarm sector.
The above chart shows hires vs openings.
Three Key Points
Since January, openings are down from 7.625 million to 7.024 million, a net of -601,000 total.
Since January, openings are down 7.88%
Since January, hires are up from 5.829 million to 5.934 million per month.
Over the 12 months ending in September, hires totaled 69.9 million and separations totaled 67.4 million, yielding a net employment gain of 2.5 million.
Point number 4 is from the JOLTs report.
All Nonfarm Employees

Employment Level

BLS Benchmark Revisions
Wait a second. What about Benchmark Revisions?

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Johnson and Farage In Secret Deal? Who Forced Whom?

1 day ago

Rumors are swilling of a secret deal between Boris Johnson and Nigel Farage? What’s the real story?
Farage Softens Stance
Yesterday, the Guardian commented Nigel Farage Softens Stance in Attempt to Form Pact with Tories.

Nigel Farage has pulled back on his “drop the deal” threat to Boris Johnson in an attempt to get the prime minister to sign an election pact with the Brexit party.

Farage offered Johnson a deal last week in which his party would stand down in seats where the Tory candidate believed in a no-deal or “clean Brexit” and would want to abandon Johnson’s deal. In return, he wanted his party to have a free run at Labour heartland seats.

Farage has been criticised for the logic of his strategy to go after the vote in Labour heartlands, given that the majority of Ukip’s vote in

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How to Spend $45,000 on a $27,000 Car

2 days ago

As cars become more expensive and trade-ins worth less and less buyers go deeper in debt on new cars.
Please consider taking a $45,000 Loan for a $27,000 Ride.

Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value. This phenomenon—referred to as negative equity, or being underwater—can leave car owners trapped.

Some 33% of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity, compared with 28% five years ago and 19% a decade ago, according to car-shopping site Edmunds.

Easy lending standards are perpetuating the cycle, with lenders routinely making car loans with low or no down payments that can last seven years or longer.

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UK Election Math: What are the Odds of a Hung Parliament?

3 days ago

With the UK general election less than five weeks away, let’s analyze election chances.
The above chart is from Electoral Calculus. Prediction based on opinion polls from 25 Oct 2019 to 04 Nov 2019, sampling 15,917 people.
Tory Starting Point

Majority Math
650 Seats
Expect Sin Fein to pickup one seat. If Sin Fein does not sit, and it’s likely they don’t sit, Parliament will have 642 MPs.
The Speaker and 3 deputies do not vote and are considered non-partisan.
650-8-4 – 638.
A majority is over half. Thus 638/2 + 1 = 320
If the speaker and deputies do count, then the majority is 322.
DUP was part of Theresa May’s fragile majority but will not be part of Johnson’s.
Tory Starting Point 270
Assume the Scottish National Party wipes out 13 Tory seats,
Assume the Liberal Democrats alliance works

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4th-Quarter GDP Forecasts Off To Weak Start

3 days ago

GDPNow and Nowcast Forecasts for 4th-quarter GDP are 1% and 0.7% respectively.
The 4th-quarter GDPNow and Nowcast forecasts start off on a weak footing, 1% or less.
The saving grace for GDPNow is its estimate of Real Final Sales, the true bottom-line measure of the economy. The rest is inventory adjustment which nets to zero over time.
Thus, GDPNow sees Change in Private Inventories (CIPI) as subtracting 0.5 percentage points from GDP.
The Nowcast report does not break out CIPI.
Mike "Mish" Shedlock

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10-Reasons Why Productivity Is Declining

4 days ago

Economists debate whether the decline in productivity is real. It is real. let’s investigate 10 reasons why.

Productivity Measurement

Brookings questions the Productivity Slump. It cites measurement issues.

Much of the recent debate, and related research, on productivity measurement issues has focused on this decline in productivity in the U.S. Predating the financial crisis and the ensuing Great Recession, and now continuing for more than a decade, the productivity slowdown in the U.S. does not appear to be just cyclical in nature, but rather seems to reflect also deeper, structural phenomena. There are different views on what factors explain the slowdown. But one view challenges the very reality of the slowdown, arguing that the slowdown wholly or largely reflects the failure

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Decline in Profit Margins and Investment Suggests Recession Due Now

4 days ago

A handful of chart by Albert Edwards at Society General suggests a recession is long overdue.
The following snips are courtesy of Albert Edwards at Society General
Unit Business Costs and a Profit Squeeze
Aside from payrolls, the economic data has certainly been lukewarm. So that rapid payroll growth spells dire productivity growth. In short, the sharp 3% jump in unit labour costs in Q3 is crushing corporate margins (chart shows inverse).
Our US economist Steve Gallagher shows below that, if history is any guide, a recession is due just about now. Yet investors fear of recession has all but evaporated.
Extent of the Margin Squeeze

Recession Overdue

Regular readers will know that we have long believed that it is the business investment cycle that ‘causes’ recessions, in an accounting

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Bloomberg Enters the 2020 Democrat Election Campaign

4 days ago

After denying he would run for president, former New York City mayor Michael Bloomberg has changed his mind.
Mr. Bloomberg announced in March he wouldn’t run for president because of the difficulty in winning the Democratic Party’s nomination.
His adviser, Howard Wolfson, says Bloomberg just changed his mind out of concern that the current candidates may not be able to defeat President Trump,
The Wall Street Journal reports Michael Bloomberg Preparing to Enter 2020 Democratic Race.
Wolfson Statements
“Mike believes that Donald Trump represents an unprecedented threat to our nation.”
“Mike is increasingly concerned that the current field of candidates is not well positioned” to win
“If Mike runs he would offer a new choice to Democrats built on a unique record running America’s biggest

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What are the Real Reasons for Declining Productivity?

4 days ago

Economists debate whether the decline in productivity is real. It is real. let’s investigate 10 reasons why.
Productivity Measurement
Brookings questions the Productivity Slump. It cites measurement issues.

Much of the recent debate, and related research, on productivity measurement issues has focused on this decline in productivity in the U.S. Predating the financial crisis and the ensuing Great Recession, and now continuing for more than a decade, the productivity slowdown in the U.S. does not appear to be just cyclical in nature, but rather seems to reflect also deeper, structural phenomena. There are different views on what factors explain the slowdown. But one view challenges the very reality of the slowdown, arguing that the slowdown wholly or largely reflects the failure of the

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Battle for the Soul of Great Britain

4 days ago

Labour leader Jeremy Corbyn and Conservative candidate Boris Johnson are in an epic battle for the soul of Britain.
The UK general election is less than 5 weeks away. The winner will change the face of the UK for decades.
Nearly every pollster had Johnson in front, but no one is really confident of the numbers.
Radical Marxist Corbyn
In a forced distribution scheme, Labour Proposes Workers to Get 10% of Company Shares
Rebecca Long-Bailey, the shadow business secretary, and John McDonnell, the shadow chancellor, want big companies to give employees a 10% stake in their business and a seat on their boards.
They plan to renationalize rail, water, energy and Royal Mail, increase corporation tax and the minimum wage, and extend workers’ rights.
Companies doing business with the government will

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More Green New Deal Ideas Suitable for the Ash Can

5 days ago

After a brief respite from green new deal nuttiness, ideas are cropping up again, this time from the UK.
Global Leader
The US is the global leader in Green New Deal nuttiness both on the number of advocates and the cost of the proposals.
We have AOC, Elizabeth Warren, Al Gore a a field of Democrat candidates all of whom have their eyes on your pocketbook with schemes to save the world.
For example, please consider AOC’s Green New Deal Pricetag of $51 to $93 Trillion vs. Cost of Doing Nothing.
UK Attempt to Catch Up
In the UK, the Labour Party, proposes being completely carbon free by 2030, in little more than 10 years.
Jeremy Warner rips the idea in Labour’s Green New Deal? No, Just Puerile, Delusional Nonsense Dressed Up as Industrial Strategy.
Warner asks "Have these people ever been to

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First Drone Delivery of Medicine to Residential Customer

5 days ago

UPS and CVS teamed up for the first medical deliveries via drone to residential customers.
UPS Teams Up With CVS
TechCrunch reports UPS and CVS Deliver Prescription Medicine Via Drone to US Residential Customers for the First Time.

UPS is rolling along with its drone delivery program, working with partner CVS Pharmacy to deliver prescription drugs to customer doorsteps via its newly deployed commercial drones. UPS delivered medications to two paying customers on November 1 using the Matternet M2 drone system that the logistics company is using in partnership with Matternet ..

UPS received approval last month from the FAA to fly its fleet of commercial drones in service of customers, and now it plans to iterate its drone delivery program “in the coming months,” with the aim of ensuring

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Labor Productivity Dives as Unit Labor Costs Soar

6 days ago

Worker productivity unexpectedly took a steep dive. As a result, production costs soared.
The BLS report on Productivity and Costs shows nonfarm business sector labor productivity decreased 0.3 percent in the third quarter of 2019.
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.
The BLS says output increased 2.1% and hours worked increased 2.4% in the third quarter.
Given the GM strike and huge problems at Boeing, I struggle to see output and hours worked are both up, but that is what the reports says.
Missing the Boat
Economists were well off the mark.
Economists in the Econoday poll expected a 1% rise in productivity in a range of +0.1% to

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Farage Tells Huge Pack of Lies About Johnson’s Brexit Deal

6 days ago

A debate rages over whether Johnson’s deal with the EU actually delivers Brexit.
Yesterday, I commented "Nigel Farage says Johnson’s deal is Not Brexit. I find that to be a joke."
A reader replied: "Farage made an interesting speech on Monday. He covered 10 points regarding why Johnson’s deal is not Brexit."
The UK keeps state aid under the EU rules.
The UK keeps social policy under the EU rules.
The UK keeps regulatory policies under the EU rules.
The UK keeps environmental law under the EU rules.
The UK keeps employment policies under the EU rules.
The UK keeps taxation policies under the EU rules.
The UK keeps fisheries under the EU rules.
The UK is likely prohibited from negotiating trade deals with the rest of the world.
The UK pays 65 Billion for the privilege of all this.
Even if

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Tale of Two Indexes: Non-Manufacturing ISM vs Markit PMI

6 days ago

The ISM Non-Manufacturing Index strengthened in October. Markit’s Service PMI weakened.
ISM Report on Business
The October 2019 Non-Manufacturing ISM® Index strengthened this month.
The overall NMI Index rose from 52.6% to 54.7%
Business Activity rose from 55.2% to 57.0%
New Orders rose from 53.7% to 55.6%
Employment rose from 50.4% to 53.7%
Markit Services PMI™ Slowest Since Feb 2016
Markit reports U.S. Services PMI™ Slowest Since Feb 2016
Key Findings
Marginal upturn in output
Fastest fall in employment for almost a decade
Renewed rise in input prices

The seasonally adjusted final IHS Markit US Services Business Activity Index registered 50.6 in October, dropping slightly from 50.9 in September and downwardly revised from the flash figure of 51.0. The rate of increase in business

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One Certainty in a World of Uncertainty

7 days ago

FRED, the St. Louis Fed data repository, has added 286 new indicators of uncertainty.
FRED Expands World Uncertainty Index Data
The St. Louis Fed announces FRED Expands World Uncertainty Index Data

FRED has added 286 new indicators of uncertainty, expanding the World Uncertainty Index portion of the Economic Policy Uncertainty release with indexes for individual countries. These indexes—developed by Hites Ahir (International Monetary Fund), Nicholas Bloom (Stanford University), and Davide Furceri (International Monetary Fund)—determine uncertainty using the frequency of the word “uncertainty” (and its variants) in the quarterly Economist Intelligence Unit country reports.

One Certainty
There is one amusing certainty in the World Uncertainty Index.
It’s useless.
And of course it is not

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Squeezed Out of House and Home

7 days ago

I compared apartment prices as determined by the Rent Cafe to shelter indexes in the CPI.
On October 19, I noted the National Average Rent Declined for the First Time in Two Years.
Key Findings
The national average rent went up by 3.2% in the past year but dipped by 0.1% month-over-month, reaching $1,471 in September according to data from Yardi Matrix.
Apartment rates in a majority of small and large cities registered either minor decreases or stagnated.
In more than half of the nation’s largest renter hubs rent prices waned since August.
Year-Over-Year Rent Cafe

I thought it might be instructive to compare Rent Cafe to the CPI measures, Owners Equivalent Rent, and Rent of Primary Residence.
The Rent Cafe provided me with a year-over-year spreadsheet and I downloaded the CPI data from

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UK Polls Increasingly Favorable for Boris Johnson

7 days ago

Both the Tories and Labour are picking up votes. Who is winning in the exchange?
Labour Push
Three of the last six polls have the Tory lead in single digits. The latest spread is only 7 percentage points.
Between October 21 and October 28, the lowest lead for the Tories was 13%.
Appearances Deceive
That is the wrong way of looking at things.
The Tory lead has actually risen when one compares the current poll to the previous one by the same pollster.
Let’s analyze the latest 7 pols, interestingly, each by a different polling organization.
Percentage Point Tory Lead by Pollster
ICM Current 7 PP vs ICM Prior 6 PP : Net +1
Deltapoll Current 12 vs Deltapoll Prior 13: Net -1
Datapoll Current 12 vs Datapoll Prior 13 PP: Net -1
Opinium Current 16 vs Opinium Prior 16 PP: Net 0
YouGov Current 12 vs

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Car Sales Dip 3.5% in October, Domestic Down 5.2%

7 days ago

Car sales in October were unexpectedly weak. Domestic car sales were even worse.
Economists polled by Econoday expected October car sales to fall to 17.0 million unit at a seasonally-adjusted annualized rate (SAAR).
Instead, sales dropped to 16.5 million units from a revised lower 17.1 million (originally 17.2 million) September reading.
Domestic sales fell to 12.7 million units SAAR from 13.4 million units.
Highlights

Unit vehicle sales, at a much lower-than-expected annual rate of 16.5 million, proved very soft in October and will lower expectations for next week’s retail sales report. October’s pace is the slowest since April reflecting sharp slowing in light truck sales. Vehicle sales have been soft this year, averaging a 16.9 million pace versus 17.2 million and 17.1 million in the

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Commercial Driverless Taxis Have Arrived

8 days ago

After more than a decade, Waymo’s driverless ride-hailing service is open to customers. For now, it’s free.
TechCrunch discusses Hailing a Waymo Driverless Taxi.

"Congrats! This car is all yours, with no one up front,” the pop-up notification from the Waymo app reads. “This ride will be different. With no one else in the car, Waymo will do all the driving. Enjoy this free ride on us!”

It marks the beginning of a driverless ride-hailing service that is now being used by members of its early rider program and eventually the public.

Limitations
The company’s driverless rides are currently free and only taking place in a geofenced area that includes parts of Chandler, Mesa and Tempe.
Even Waymo vehicles with safety drivers don’t yet take riders to one of the most popular ride-hailing

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Chicago Headed for Insolvency, Get the Hell Out Now

8 days ago

Chicago Mayor Lori Lightfoot and the Teachers Union reached agreement on a deal sure to send Chicago over the cliff.
The Wall Street Jounal Editorial Board blasts Chicago Mayor Lori Lightfoot for her deal with the Chicago Teachers Union (CTU). The deal will further wreak havoc on the already insolvent school system.
Who will be hurt most?
The WSJ answers the question this way: Union Routs Students in Chicago.
Contract Details
16% raise over five years (not including raises based on longevity)
Three-year freeze on health insurance premiums
Lower insurance copays
Caps on class sizes
More than 450 new social workers and nurses.
New job protections for substitute teachers who going forward may only be removed after conferring with the union about “performance deficiencies.”
Chicago Public

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Good Reason to Expect Recession: Greenspan Doesn’t

10 days ago

Former Fed Chairman Alan Greenspan just provided a sound reason to expect a recession sooner rather than later.
Wrong Way Greenspan
If you weren’t worrying about recession before, former Fed Chair "Wrong Way" maestro Alan Greenspan just provided one: Greenspan Sees No Recession as Post-Crisis Deleveraging Endures.

“The economy has been weakening, but we’re still in a period of deleveraging,” Greenspan said in a recent interview. His office reaffirmed his outlook on Wednesday. “No recession in the last half century, at least, began from a period of deleveraging.”
Spectacular Contrarian History
Greenspan has a spectacular history of being wrong.
Interest Rate Flashback July 31, 2017
Alan Greenspan told Bloomberg TV : "By any measure, real long-term interest rates are much too low and

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Don’t Watch the Latest Polls, Instead Watch the Trends

10 days ago

Here’s the 6 most recent Tory poll results: 40, 36, 34, 36, 41, 36. Is there a trend? Yes, you have to dig to find it.
It’s easy to see that Boris Johnson and the Tories have a lead. But is it 4% or 17%?
Is YouGov right or Opinium? What about Survation?
This is not the right way of looking at things. You can go mad watching these results seemingly jump all over the place.
Some of these pollsters are going to be way off the mark.
Theresa May was supposed to win in a blowout but she barely hung on.
Missing the Picture
In regards to Theresa May, nearly what everyone missed was the trend heading into election day.
While most of the polls had the Tories winning, the trends were decidedly moving towards Labour in the last couple weeks before the election.
That was a very ominous sign for the

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Farage Makes Preposterous Brexit Alliance Demand

11 days ago

After suggesting he would stand aside in hundreds of localities, Nigel Farage seemingly reversed course today.
Today, Farage reversed course. Farage tells Boris Johnson to ‘drop the deal’ or face Brexit party challenge. This is both preposterous and idiotic (assuming it is not a bluff or part of a collusion strategy). It could be either, easily.

Mark Francois, the MP and deputy chairman of the European Research Group, which represents hardline Tory Brexiters, told the BBC’s World at One that he thought Nigel Farage had “screwed up” this morning because his rejection of Boris Johnson’s Brexit deal was unreasonable. Francois explained:

"I think Nigel screwed it up. If you genuinely want to work with another political party, you don’t go on live national television and call them liars,

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Manufacturing ISM Contracts Third Month, Production Down Sharper

11 days ago

The manufacturing sector entered its third month of contraction with production falling faster.
The October 2019 Manufacturing ISM® Report On Business® shows the manufacturing PMI as 48.3.

Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic. October was the third consecutive month of PMI® contraction, at a slower rate compared to September. Demand contracted, with the New Orders Index contracting marginally, the Customers’ Inventories Index moving into ‘about right’ territory and the Backlog of Orders Index contracting for the sixth straight month (and at a faster rate). The New Export Orders Index surged into expansion territory, likely contributing to the slowing contraction of the New Orders Index. Consumption

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Job Report: Weak Earnings, Unemployment Rate Up, Upward Revisions

11 days ago

Job growth was a modest 128,000. The unemployment rate ticked up to 3.6%. Revisions added 95,000.
​Initial Reaction
The core reading was a bit better than expected. The Econoday consensus was 90,000 in a range of 50,000 to 155,000.
Manufacturing lost 36,000 jobs vs a consensus of 50,000.
Job revisions were positive.
Hourly earnings were weak .
This was a mixed bag that can be spun in numerous ways.
Job Revisions
The change in total nonfarm payroll employment for August was revised up by 51,000 from +168,000 to +219,000, and the change for September was revised up by 44,000 from +136,000 to +180,000. With these revisions, employment gains in August and September combined were 95,000 more than previously reported. After revisions, job gains have averaged 176,000 over the last 3 months.
Also

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Video: Trump Tells Nigel Farage “Corbyn Would Be So Bad”

11 days ago

Brexit Party leader Nigel Farage interviews trump. Let’s tune in.
President Trump Video Interview with Brexit Party Leader

Trump says Farage is a "Great Tea Leaf Reader"
Trump tell Farage "I would like to see you and Boris get together. You would really have some numbers."
Trump says "Boris is the exact right guy for the times"
"Unstoppable force" if Farage and Johnson get together.
"Corbyn would be do bad for the country. He would take you into such bad places."
Johnson Disputes Trump Claim
"The PM negotiated a new deal which ensures that we take back control of our laws, trade, borders and money; a deal which people said he would never negotiate. Under this new deal, the whole of the UK will leave the EU customs union, which means we can strike our own free trade deals around the world

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