Bad news is good: August new jobs down, oil, gold, stocks up
WASHINGTON, September 2, 2016 – For the entire current week, financial media across the country have been touting the expected great job creation numbers the Bureau of Labor Statistics (BLS) would be announcing Friday morning. The 180,000+ new jobs the financial geniuses were expecting would surely prove the Fed’s ongoing story of a greatly improving U.S. economy, prompting them to raise interest rates 0.25 percent at their upcoming September meeting.
Reality hit this morning, however, as that “great” jobs number came in at a dismal 151,000, a depressing number considerably lower than that original estimate—which in itself is a far cry from the 300,000+ new jobs per month we were told it would take to get employment back to normal after the initial effects of the Great Recession began to wane. Funny how we haven’t heard about that number in years. That’s Obamanation for you. Back to you, Fed.
The good news? Wall Street initially rejoiced at these horrible numbers, reverting back to its standard reaction when the Fed’s various QE stimulus packages were still in vogue: Bad news is good. The Dow Jones Industrials skyrocketed at the opening bell, up 100 points within the first half hour of trading. Stocks have pulled back somewhat as of the noon hour and the Dow has pulled back to around +41 points.
Given that it’s the Friday before the Labor Day holiday when markets are closed, we expect that a number of active traders, having executed their morning orders, are off to the Hamptons for the final weekend of summer, leaving sellers to have fun on increasingly low volume. Trading next week should give us more of a tell on market sentiment.
Back to those employment numbers, however. Worse news is available but rarely made available to the Great Unwashed by the media. Like hourly earnings, which “rose just 0.1%, also missing expectations of 0.2% increase, and down sharply from last month’s 0.3% rebound,” according to ZeroHedge, which also noted
“The labor force participation rate remained flat at 62.8% as the number of people not in the labor force rose by 58,000.”
In other words, as that tired old cliché used to proclaim, “The hurrieder I go, the behinder I get.” And the financial media still wonders why so many American voters would support “outsiders” like Bernie Sanders and Donald Trump for president. We’d ask—who exactly are the outliers, really?
Furthermore, the average workweek for workers on nonfarm payrolls was down 0.1 hours in August to stand currently at 34.3 hours. Since the traditional American workweek has been 40 hours since time immemorial, what, pray, might be the problem here?
At least part of the answer is simple: Obamacare continues to rip into personal income while also encouraging companies to trim their 40-hour per employee payroll by means of layoffs and working hour reductions. After all, workers logging less than 30 hours a week don’t need to be covered by company-sponsored health insurance thanks to those foresightful Obamacare regs.
We could go on, but you’re getting the picture. According to an article published Friday, September 2 by the website Viable Opposition, the Economic Policy Institute has poked any number of holes in the Fed’s argument that the central bank’s policies “are working.”
Using its own numbers as opposed to the even worse BLS U-6 unemployment numbers the Maven prefers—which still shows real unemployment persistently hovering around 10 percent—the Institute still paints a dismal employment picture, particularly for working class males and all unemployed workers between the ages of 55 and 64.
The chart below accounts, by demographic, for “missing workers” absent from the U-3 unemployment figures, with “missing” being defined as those persistently unemployed workers who’ve dropped out of the workforce and therefore are no longer counted in the U-3 number.
As Viable Opposition points out,
“It is sobering to note that the largest percentage of missing workers fall between the ages of 55 and 64; these are the years that many workers are doing their final saving for retirement. The missing workers that fall between the ages of 45 and 54 are also of great concern since these are the prime earning years for millions of Americans.
“While there is no doubt that the economy has improved, at least 2.3 million missing workers are feeling like the recovery since the Great Recession has passed them by. Despite the Federal Reserve and its comments on the strength of the job market in the United States as is telegraphed by the monthly U-3 unemployment number, it is quite apparent that the economy simply isn’t strong enough to put millions of discouraged unemployed Americans back to work.”
We could go on. But is it any wonder why the once-robust American economy has been trapped in a stall-zone since roughly 2010? If American voters finally recognize what’s going on, as they did not in 2012, Donald Trump will win the White House, continuous media onslaughts notwithstanding. If voters still can’t connect the dots, however, the numbers we’ve just discussed will continue to get worse, until only the truly blind will not see what’s happening here.
Today was a bit of a surprise for the Maven, who expected to skip his Friday column. We expected poor employment numbers today, despite the Fed’s optimism and the expected “Hallelujah Chorus” from the financial media whose September rate hike fears have killed markets all week. However, those numbers were so dismal that some re-thinking may be in order, even for Fed and administration cheerleaders eager to make Her Hillaryness look good prior to the November national elections.
We still don’t believe the Fed will jack up rates in September under most circumstances. The central bank, after all, while it’s supposed to be non-political, generally doesn’t want to torque off the party currently in the White House, although the Fed’s tardy rate reductions in the 1992 election year helped assure that George H. W. Bush would be a one-term president.
On the other hand, as everyone on Wall Street gets back from his, her or their last round of yachts and barbecues, we’ll begin next week to get a firmer fix on where markets will really be headed in Q3. In reaction to today’s employment numbers, most of this week’s laggards—oil, precious metals, consumer durables and utilities come to mind—finally caught a bid, which is good because we’re in them.
Meanwhile, we’ll keep our powder dry and get some chicken ready for the barbie this evening. It will be more productive and more fun than trying to game this market while the big cats are away.
Have a great Labor Day weekend, and we’ll likely see you again on Tuesday.