Oh Lordy, if anyone had ever told me that we would get a non-farm payroll number that increased by 228,000 and interest rates wouldn't immediately shoot up, I would say "you are out of your mind."
Yet that's exactly what happened Friday. We had a spectacular report with new jobs being created pretty much in a record pace, particularly in manufacturing which added 31,000. The manufacturing jobs are in diverse industries like fabricating metal products, plastic and rubber and electronic products, just the kind of higher skilled blue collar jobs you want an economy to create but you would fear would trigger an immediate selloff in bonds and a concomitant jack up in rates.
But it didn't in large part because while there are plenty of jobs there's not plenty of wage growth -- average hourly pay inched up 5 cents to $26.55 and over the year wages increased by 64 cents.
That's only a 2.5% wage increase for the year and it holds the key to why interest rates didn't soar. We literally have not just growth, but growth without any real inflation, which is something we were taught in college couldn't happen and I was taught at Goldman Sachs would produce an instantaneously huge jump in rates.
I am so conditioned, still, years after working at Goldman or my old hedge fund, to looking at bonds at 8:31, a minute after the number came out, and expecting banks to raise their prime rate on that kind of strength and instead we had no reaction at all.
Now how is this possible? I think some of it is technology keeping a lid on wages, because as people become too expensive, companies automate. Some of it is, as Gary Cohn told us on "Squawk on the Street", deregulation which has created a level of optimism from business people and some of it is, he said, the prospect of gigantic tax reform that's very pro business.
I can't disagree with any of that. I think that much of the manufacturing growth comes from the newly found energy sources that make our country much cheaper to make things like plastics that might have gone overseas by now if we didn't have such a competitive advantage. A lot of it could be related to the rebound from the terrible storms we had. There are multiple reasons for the growth that we are enjoying.
Now, I know that things might not last. Autonomous driving might lead to a big decrease in employment. New ways of checking out after shopping that include no checkers could produce real disruption. Both are on the way. There are countless other inventions that could limit wage growth.
But the simple fact is that these are fantastic numbers for our country and buttress the notion that the stock market's run isn't all that crazy. In fact, it might be very sane. Remember in the old days strength sowed its own seeds of job destruction. That's no longer the case and we should celebrate it no matter what your party affiliation.
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