Jobs number shows America First trumps China tariff fears

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The 312,000 new jobs reported for December is a huge green flag for the Trump administration.

To reach that level — almost double the Wall Street estimates — this late in the economic cycle is off the charts. Firms added 2.64 million employees in 2018 with wages climbing 3.2% for the year.

Fed chair Jay Powell blinked yesterday in a speech in Atlanta by making a more dovish statement on 2019 rate rise. As well he should. Powell should take a look at the carnage his December rate rise caused in the stock market.

His talking about the hike in the fall and his press conference comments after the rise took markets took the Dow Jones index the woodshed during the last quarter of 2018.

I have often said that Powell is tilting to windmills searching for inflation in this economy, which at 1.8% is below the Fed’s 2% target. He has pricked the asset bubble of stocks to take away the middle class wealth effect and also hurt them with cheapening home values as mortgage rates rise.

The Fed needs to understand that most of the wage increases in 2018 — while healthy — are more a mechanism of raising minimum wage in many states than overall salary increases for the US workers.

So the inflationary value of the 3.2% is muted at best due to the expendable income these households have.

While the naysayers on Wall Street are still predicting an economic slowdown here in 2019 due to tariff tiffs, Trump’s nationalistic agenda of bringing jobs back to the US is resonating with US companies.

Certainly the employment gains are testament that US companies don’t see China and a trade war as a detriment, in fact it may be creating a boost as more manufacturing jobs are being created here.

I’m sure Powell took notice of the stock market’s explosion higher on his more dovish stance. The 747-point rise erased all of the bad Apple news on Thursday and perhaps set up a new takeoff for shares to soar.

Listen we need to go back to the days when three percent of the US population knew who the Fed chairman was and take ego and hubris out of the monetary equation.


There shall be pain in 2016

There’s plenty of pain coming down the pike for corporate America. I can see a dirt cloud rising on the horizon of companies charging towards bankruptcy courts.

You can’t have the type of economy we’ve had for the last 6 months and not expect it. Crude oil prices have been nearly cut half, with plenty of drillers and such using oil in the ground as collateral to fund operations, with the price cut loans will be called in as collateral dries up. Retailers cutting jobs, closing stores and slashing sales estimates.

The US outlook, per the Fed, sees a growing economy with perhaps 4 rate hikes this year taking the Fed funds rate up to 1%. The bond market does not see this at all, and they usually win these battles. I believe we will see zero rates before we see 1% rate this year.

The raw data from the Labor Dept. on December jobs showed 11k new jobs created. The remainder of the 292K were statistical noise. The number of jobs created in 2015 was 2.4 million and wages  grew less than 2% for the third year in a row as food service, health care workers and profession services independent contractors were the top job categories for the year.

Most of these jobs carry no medical or any other type of benefits since the positions are either part-time or an outsourced job. In December the number of people holding two or more jobs climbed to the highest level since 2008.

None of those statistics lead me to believe there will be much in the way of discretionary spending by consumers this year to reverse the trend for increased spending. Consumer spending makes up  70% of GDP.

The Atlanta Fed seems to believe the same thing as it says growth in the last quarter of 2015 will be 0.8% GDP. We will get the first estimate of that number at the end of January.

I want to thank all the Gray’s Economy readers for one of the biggest days ever for visits Monday on the topic of the Great Fleecing.

The greatest transfer of wealth where trillions were placed with the banks and the debt was placed with the American people.

Chinese takeout is not the only problem facing the markets

Well, what a first week of trading. Globally, stocks lost $2.3 trillion in market cap, while yields on bonds fell as money flowed in for safe keeping during the rout.

While China is thought to be the cause that lit the fuse behind the equity bomb, but there’s far more to it than that.

A global recession has gripped the planet, creating the economic slowdown in China, forcing Beijing to slash the value of the yuan in order to keep factories open.

Chinese investors are struggling to keep their wealth, while the government slashes its value by 10 percent through currency devaluation.

While the US added 292K jobs in December, wages have not risen with the thought that there is full-employment.

Digging into the numbers, we see that Americans holding more than 1 job is now at its highest level since 2008.

What this tells us that part-time workers are peaking, meaning they are working in jobs that get no benefits and low wages in service industry jobs.

Bartenders, waiters and waitresses, fast food employees are all categories that grew over the last year. So the jobs numbers look big, but the quality of those jobs are certainly lacking.

This is the reason behind the lack of inflation in the US. There is no wage growth, there is no job security and there are no benefits. So where will economic growth come from?

That’s why there is slowing growth across the globe. The US phenomenon of weak job growth in classical middle class positions such as manufacturing, engineering and business are vanishing and along with the higher compensation to afford non-discretionary spending is happening across the globe. Europe, South America, India are all seeing the same conditions.

The Atlanta Federal Reserve bank monitors in real time the projected US GDP through its GDPNow stat on its website. On the back of the 292K jobs created in December it ticked up Q4 US GDP to 0.8% from 0.7%.

That tells you what they are seeing as far as quality of the jobs created.

Fry cooks don’t buy homes. And that is where the US economy is right now. I’ll have more next week on how overvalued stocks are in this environment and how we could be 12K on the Dow before Valentine’s Day.