The latest US employment numbers were a major positive surprise. The non-farm payrolls rising 312 thousand after a 176 thousand increase in November must be just what the President wanted to see. The US stock market certainly liked the figures. With hourly earnings and average weekly hours worked up a mere one tenth of a percent higher will these employment figures be sustainable? And, will we now see a wave of inflation? It is impossible to make a good forecast, especially with the President and the Fed chairman sparring over the right monetary policy.

It must be kept in mind that US economic activity is soft. Manufacturing activity in December was down and building activity is weak. Reflecting these weak growth areas, inflation remains subdued. Global inflation is negligible and crude prices have continued to be weak. Is that because global economic activity is showing some slack? Or, is that because there is a general economic downturn?

Now comes the next chapter for the US and the world economy. It is primarily based on political developments. The US president is faced with a congress ill disposed towards him and the world is battling populist movements everywhere. Neither can be good for the world’s economies. We probably are on the cusp of facing a wide ranging recession and a turn toward inflation. It will take some time for these developments to come fully into focus.