The fans and dehumidifiers are gone and the office is dry, quiet, and empty.  We hope to have the walls and trim and paint restored this weekend, with our furniture soon to follow.  We are very thankful for the quick response of the building management and their contractors.  We are also delighted that our network has continued to run throughout the event without skipping a beat.  In the midst of the ruckus we installed our new website.  Please take a look –

As I write this Brief there are about five men in my office cutting sheetrock and removing insulation.  It has been a dusty and noisy week spent in the drone of high speed drying fans and dehumidifiers.  Last weekend our offices were flooded.  Patty’s and my Monday holiday plans were subordinated when we received word from our building’s manager that our office was filled with about an inch and a half of water.  It seems a refrigerator icemaker line in the office above us burst (the night of Friday the 13th maybe?) and ran undiscovered through the weekend.

The economy continues to grow, creating new jobs even as companies produce more with fewer workers.  Non-farm payrolls increased by 108,000 in December and the unemployment rate dropped form 5.0% to 4.9%.  While the December growth in jobs was about 100,000 less than expected by economists, the number of jobs created in November was increased by the same amount, as reported by the government.  Manufacturing payrolls increased by 18,000 for the month.  Following sufficient economic growth, the continued high productivity rate no longer stifles hiring.  In other words, despite increased output from workers, companies are still forced to hire new ones to keep pace with demand.

In a huge turnout, 11 million Iraqis cast their ballots yesterday in their parliamentary elections, which, if the estimate holds, would put the overall turnout at more than 70%.  The main story was the lack of violence.  The Wall Street Journal notes that the election marks a significant milestone in Iraqi politics since the fall of Saddam Hussein's regime.  It is the first political event deemed legitimate by a large swath of Iraqis, including Sunni Arabs who had shunned the political process, the Journal notes.

The asset category leader for the fourth quarter so far, aside from Internet stocks, is gold.  The metal is up almost 13%, quarter to date.  Traditionally a move like this signaled bad news – too much liquidity leading to inflation, or falling currencies, or recession.  But, not this time.  Inflation remains tame, the dollar is actually rising with gold, and the economy continues strong. 

The economy continues to expand, in spite of hurricanes, high energy costs, and Fed Funds rate increases.  The weeks’s crowded raft of economic reports was kicked off by housing.  The reports were mixed, but generally point to a slight cooling.  The National Association of Realtors reported Monday that sales of existing homes fell 2.7% in October to a seasonally adjusted annual rate of 7.09 million.  Houses stay on the market longer as the inventory of homes on the market rose to a 4.9 months' supply in October, from September's 4.6 months' supply.  Meanwhile, housing affordability dropped as the median sales price rose 16.6% on an annual basis to $218,000.  That was the biggest jump in 26 years. 

There’s a great deal of talk these days about a lack of trends and market leadership.  Most recently, homebuilding and real estate have driven the market, along with energy.  With interest rates rising and energy prices declining, the likelihood of these industries continuing their out-performance near-term is doubtful.  Additional leadership has come from investment banks and brokers as their earnings have increased on the rise of mergers and acquisitions.  But this activity is a bi-product of excessive capital and compelling market values.  Better allocation of capital and increased productivity will improve profits to a degree, but it will not significantly drive GDP.  Where’s the next big wave of real growth coming from?

November 11, is the anniversary of the Armistice which was signed in theForest of Compiegne, in Île-de-France by the Allies and the Germans in 1918, ending the four-year conflict of World War I.  The War officially ended on June 28, 1919, with the signing of the Treaty of Versailles, but the actual fighting between the Allies and the Germans ended seven months earlier with an armistice, which went into effect on the eleventh hour of the eleventh day of the eleventh month in 1918.  In November of 1919, President Woodrow Wilson issued his Armistice Day proclamation. 

Indications are that a slowdown is in the cards for this quarter and for the first quarter of next year, but that does not mean recession must follow, as some more pessimistic economists suggest.  Indeed there are many reasons to expect a significant pickup.  Productivity, the driver of this powerful economy remains alive and well.  Productivity not only keeps our economy growing without inflation, it is vital for the remain competitive in an increasingly competitive global economy.  Yesterday, the government reported that Non-farm Productivity was up a whopping 4.1% for the third quarter and well ahead of last quarter’s 2.1%.  The increase more than offset the 3.6% increase in hourly compensation, so unit labor costs fell 0.5% during the quarter.