- This morning the government released the most important, the most highly-anticipated economic release of the month
- At least that’s what everybody who trades in just about any market believes
- And that is the Non-Farm Payroll Report; the official scorecard on job creation and unemployment
- This time it was for the month of September, the final month of Q3
- We’re still waiting for the GDP estimate for Q3
- By the way the Atlanta Fed, which continues to do the interest rate limbo, lowered the bar again today on the Q3 GDP, which was 3.8% a month ago, when Janet Yellen talked about how the case for a rate hike had been strengthening
- As of today, the Atlanta Fed is down to 2.1%
- Politically, they are still trying to keep the estimate above 2%, although by the data, I expect it to be south of 2%
- The important news today was the jobs number;
- People were looking for a strong report, I think the consensus was around 170,000, but most people were talking 190 – 200,000, some people were looking for a number north of 200,000
- We got 156,000 jobs, which was below expectations, but a little better than the prior month
- Originally reported at 151,000 but was revised up to 167,000
- So now, based on the revised number, it’s actually worse than the prior month
- Even though they revised the prior month up, they revised the month prior to that down, so the net effect of the revision was a decline
- The unemployment rate, expected to hold steady at 4.9 actually ticked back up to 5%
- Average hourly earnings, expected to rise by .3, following a small increase of .1 the prior month came in at .2
- Not quite the gain everybody thought
- This is not a good report, and anybody who thought the Fed was going to hike rates in November, they clearly don’t think it anymore
- In fact, even WSJ reporter Jon Hilsenrath said that today’s jobs report took a November interest rate hike off the table
- I would suggest that a November rate hike was never on the table
- To the extent it was there, it was only in the imaginations of people like Hilsenrath
- Hilsenrath says now, if the Fed is going to move, it won’t be until December, but it’s not a sure thing
- The fact is, the Fed is more likely not to raise rates in December
- Once again, you need to know the rest of the story, as Paul Harvey used to say, when it comes to the jobs numbers
- Because the headline doesn’t really tell the story
- You always have to look beneath the surface, which nobody wants to do, except for myself, and a few guys over at Zero Hedge
- They always do a good job of pointing out what’s really going on in the jobs market
- Number one: The big news was the net creation of part-time-jobs
- I’ve been saying this for a long time that the big story is that we are replacing full-time jobs with part-time jobs
- Employers need more part-time workers than full-time workers because each one works fewer hours
- We’re always going to have net job creation when you are transforming the economy from full-time to part-time employment
- That was clearly the case this last month
- According to the Household Survey, we lost 5,000 full-time jobs in September and added 430,000 part-time jobs
- I would venture to guess that pretty much all of the net increase from August to September, 150,000 or so jobs, is in part-time work
- If you look at the large jump in employees holding down multiple jobs – the government reports that
- There was a big jump in September in the number of Americans who have more than one job
- So obviously what’s happening is that people with one job are getting a second job and people with 2 jobs are getting a third
- These will obviously be more part-time jobs
- Also look at the composition of the jobs, where were they created?
- Health care, education, retail trade, leisure and hospitality, temporary help
- We lost 13,000 manufacturing jobs
- We lost jobs in transportation and warehousing
- We were flat in mining
- Information technologies gained 1,000 jobs
- The only good news is that we lost 11,000 government jobs
- As far as jobs that you can raise a family on – we lost those
- That is the story and it is same story we’ve been getting all along and it shows me that nothing has changed
- To me, if the Fed has been reluctant to raise interest rates because of lack of participation in the labor force
- Because of the preponderance of part-time jobs and low-paying jobs
- If that is really the reason the Fed has not raised rates, that has not changed
- Based on this information, there’s no reason for the Fed to raise rates either in November or December
- This has not stopped pundits from pontificating about the certainty that the Fed is going to raise rates and it’s only a question of when and by how much
- And the markets continue to trade as if a rate hike is coming
- Certainly the dollar has been strong; today it was weak against the yen and the euro
- Although it did make multi-year high against the pound
- Gold was up today, only a few bucks, so it barely recovered losses occurred earlier in the week
- Silver only up .24 to 17.53
- Despite weaker than expected Non-Farm Payroll, despite another notch down in the Atlanta Fed GDP estimate
- People are still wedded to this narrative that the Fed is going to raise rates
- Why? Why should they raise in December
- Because they raised rates last December, like a Christmas present for people expecting a rate hike?
- Also, when we got the jobless claims numbers that came out yesterday and it was another drop
- The weekly claim was 249,000 – that was the lowest number in something like 45 years
- When that number came out, there was a spike in the dollar and gold dropped $10-12 bucks
- Because, “‘Ah this was proving that the Fed is going to raise rates!”
- The jobless claims number has been low for years
- If the Fed were going to raise rates because of low unemployment claims, why didn’t they raise rates years ago?
- Everybody looks at these numbers at face value, but how can it be?
- Does anybody really think that we have the strongest labor market in half a century?
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