Import Jobs: Easy Come, Easy Go

Imports created jobs. Easy come, easy go.

U.S. Manufacturing is Cratering

No U.S. manufacturing jobs. 

Non Farm Payrolls Smash Expectations

The market was expecting 7.25 million of job losses, but instead we gained 2.5 million jobs. This is a huge beat and should push stocks higher. We will see if these green shoots continue...

Jobs market is deteriorating

The latest ADP employment numbers are out and it doesn't look rosy.

In particular, jobs from productive segments all went down (construction, manufacturing and mining), while jobs from non-productive segments went up (education, finance, leisure).

This tells me that the U.S. GDP is losing its significance as a measure of productivity.

 

 

On the other hand though, the latest non farm payrolls report showed a huge increase in jobs. So we're seeing a large discrepancy here.

Nonfarm payrolls 130000 vs 160000 expected

The nonfarm payrolls were bad, adding less jobs in August than expected. Also July was revised down.

The unemployment rate will probably move up. We also see capacity utilization moving down.

  

Average hourly earnings were up, so that means inflation is going higher. 

The misery index (unemployment + inflation) should be moving higher together with gold.

Corporate Profits Vs. Employment

Corporate earnings are a leading indicator for jobs growth. We saw a gap in 1999 and 2016 between profits and jobs growth and the result was a quick deterioration in employment. So we expect sluggish employment in the years to come.

The real picture beneath the strong jobs numbers

We recently got news about the outstanding jobs numbers. The U.S. economy added 248000 jobs in September 2014 and the unemployment rate dropped to 5.9% (see chart below from FRED). The correlation between the unemployment rate and the Fed funds rate suggests that an interest rate hike will soon happen in 2015. But here is why that can't happen.

If we look deeper, we see that most of these added jobs are in the category of 55-69. This tells me more and more older people are applying for jobs because they are forced to do so due to a decrease in living standards. Moreover, the labor force participation rate has been falling. The correlation between the labor force participation rate and unemployment rate paints a different picture to me. Normally, when the labor force participation rate drops, the unemployment rate would go up, but this is not the case. So something fundamental must have happened after 2008. I believe it's due to discouraged workers giving up and leaving the labor force.

Wages aren't going up, which means there is no inflationary pressure yet. This tells me there is no reason for the Federal Reserve to increase interest rates soon, especially when the U.S. dollar index has soared almost 10% in 3 months.

On top of that, we got a lot of bad economic news this week, which suggests the Federal Reserve will be reluctant to step on the brakes.

Read all of it here.

Peter Schiff: The Effect of Obamacare

Listen to Peter explaining the jobs numbers released today.

I explained here that Obamacare will destroy full time workers.

When Obamacare rolls out in 2014, we will continue to see a shift to part-time employment as employers will fire full-time workers (>30 hours/week) and hire part-time workers (<30 hours/week) to avoid paying for Obamacare.

And you can witness that on this chart. See how the red chart edges upwards while the blue chart decreases in June 2014.

I also pointed out that this always coincides with a pending recession. We're still early, let's see how this trend will evolve later on.