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Ep. 165: Markets In Denial About Jobs As Trump Lets Truth Slip About Debt

  • Today we got the government’s Non-Farm Payroll report, otherwise known as the Jobs Report, for the month of April and pretty much all the mainstream Wall Street guys were looking for another strong report
  • In fact, earlier in the week Goldman Sachs was out saying that the 200,000 consensus estimate was too low!
  • The optimism was unfazed by the much weaker than expected ADP report I spoke about on my last podcast on Wednesday, which came in much lighter than expected
  • So, people didn’t care, they said, “That’s a one-off event, we’re still looking for a good number, and we got a weak report
  • Instead of 200,000 jobs we only got 160,000 jobs
  • And they actually revised down the last couple of months
  • But let’s get into some of the details, because it gets worse, the further beneath the surface you look
  • The unemployment rate held steady at 5%; they were expecting it to notch down to 4.9% – that did not happen
  • Private payrolls also much lighter than expected; they were looking for 195,000; they got 171,000 and they revised down last month’s from 195K to 184K
  • They did get the .3% increase in average hourly earnings, but they forgot to point out that they revised month’s .3% increase down to .2% so you can chalk that one up as a miss, despite the fact that nobody was talking about it
  • The bigger miss was in the Labor Force Participation Rate
  • Last month it was 63%, which was a move up, but in April it came back down to 62.8%
  • 562,000 people left the labor force during the month of April
  • A massive exodus led by young people
  • A breakdown in the Household Survey for ages 20-24 reported 155,000 job losses in April
  • For ages 25 – 54 –  284,000 jobs losses
  • For ages over the age of 55 – this is the highest it has ever been
  • Janet Yellen still wants to pretend that the reason the Labor Force Participation Rate is declining is because the Baby Boom is retiring – how much longer is she going to get away with that lie?
  • The Baby Boom is too broke to retire
  • The people leaving the workforce are young people in their 20’s and 30’s
  • A breakdown of job gains by sector shows the biggest sector is professional business and temporary services – 56,000 gains
  • Healthcare and education was high, and leisure and hospitality came in third
  • Manufacturing barely gained any jobs after a huge loss the prior month
  • Wholesale trade barely gained any
  • Construction, after a big jump last month – only 1,000 jobs
  • Retail trade lost 3,000 jobs
  • Mining and logging continues to lose jobs
  • On a good note, government actually lost jobs
  • That’s a good thing – we don’t need so many people working for government – they’re not productive
  • Rick Santelli made a very good point today on CNBC, talking about all the jobs created at the TSA
  • We’re not better off with those jobs – they decrease our productivity
  • As I mentioned on my last podcast, we’ve now had 2 consecutive quarters of losses in productivity
  • Despite this bad jobs report, the market shrugged it off
  • The stock market rallied because bad news is good news – the odds of a Fed rate hike are now the lowest they’ve ever been
  • If you look at the Foreign Exchange markets, the dollar was broadly higher today
  • It was up big against the Australian dollar because the Reserve Bank of Australia lowered their inflation forecast
  • They lowered it from 2-3% to 1-2%
  • You would think that’s good news, because it means the cost of living will rise only 1-2%
  • Back in the day, news of low inflation sent a currency higher, because it was not losing purchasing power
  • The news sent the Australian dollar tumbling because the market now expects the Australian Reserve will have to cut rates several times this year in order to protect Australians from a cost of living that is not rising fast enough
  • This is keeping pressure on other currencies
  • Even though we’re pushing the next U.S. rate hike further and further into the future, because every place else is cutting rates, the dollar is catching a bid on this relative differential
  • Although dollar’s downtrend still hasn’t changed
  • If the jobs report had printed a good number, the dollar index would have soared and gold would have sold off
  • Gold did rally – up about $10, closing about $1287 – still holding below the $1300 level
  • Gold stocks had a very good day, up just shy of 4% on the GDX index
  • Oil prices were up and down all day but managed to close positive
  • The dollar should have been much weaker, but people are still in denial, expecting the Fed to raise rates
  • A lot of people are dismissing this jobs data, some people are blaming it on the weather
  • The weather! What? There was weather? I don’t know what kind of weather would explain the weak jobs number