The November employment data points to a strong economy running at a uniform pace. Strong gains in the private sector boosted non-farm payroll jobs 400,000 in November. Civilian unemployment fell to 4.6%. Increasing wage pressures were also reported. Average hourly earnings rose .07%, which brought the year-over-year increase to 4.1%. Indeed, the November Employment report was considerably stronger than expectations.

As we see it, the strong Employment report was in part due to seasonal factors, and we look for the November data to be revised downwards. In our annual outlook report, “Our View In 1998,” we said, the Asian crisis will shave 1/2% of U.S. GDP in 1998. We look for a less robust jobs market as the U.S. economy slows. We continue to look for lower inflation and falling interest rates.

EQUITIES: The stock market's strong start from the beginning of December is being temporarily derailed. Renewed concerns over earnings, and the impact from the Asian crisis, have set the stage for another round of technology bashing. The stock market never likes uncertainties; the unknown is always a problem for the stock market, and this time is no different. We believe this decline will be short lived. We see the market resuming the year-end rally, approaching its old high.

GOLD: The bear market in gold continues with some light at the end of the tunnel. We believe the yellow metal will weaken further towards the 275 level. We think the market may establish a major bottom around $275. We see little reason for gold to move much above $300 after establishing a bottom.

DOLLAR: No change, yen oversold versus dollar.

BONDS: No change, long-term rates to stay at the low end of the trading range for the balance of the year.

December 11, 1997Peter Cardillo, Director of Research

Westfalia Investments, Inc.

90 West Street, New York, New York

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