April’s a cruel month for job market

Where have all the workers gone?

On Friday the Labor Department said that the unemployment rate fell to 3.9% in April, which is the lowest rate since Bill Clinton was in the white House.

Now if this number had any relevance to the workforce, I would have written about it when it was released. But it doesn’t mean anything really.

To say there were only 3.9% of the potential workers still looking for a job is preposterous.

The people who are not counted in that number are in the millions.

  • College graduates
  • Those who are jobless, but no longer collecting unemployment benefits
  • Part-time workers
  • Retirees looking for part-time work

The U6 jobless rate, which includes people who can only find part-time work and those who’ve gotten so discouraged they recently stopped looking, fell to 7.8.% in April — the first time it has been below 8% since 2006.

A better barometer of the workforce is wages. If you can’t find workers, then you need to raise the wage to entice job seekers to apply. Or if you wish to keep good employees you give them a raise or bonus, or so goes the narrative.

Now we saw companies as a result of Trumps new tax law give one-time bonuses to employees, but that is not reflected in this data also released Friday by the Bureau of Labor Statistics.

The average wage growth for April was a startling 4 cents to $26.84 an hour with average work week at 34.5 hours.

So what do these two numbers say about the job market?

There is little premium being offered by employers broadly to find or retain workers and two, there are many, many jobs not offering any additional benefits since they are not working full-time.

This is not a new phenomenon, the hourly pay rate has increased 67 cents over the last year. So in simplest of economic theory there is plenty of supply and little demand in the job market.

Now, the Street takes all this information into account, and we see why The Fed did not raise rates recently.  As I wrote in January, we will get one rate increase in 2018.

You cannot have inflation, without wage increases and a 67 cent rise over the last year is far more important than 3.9% jobless rate.


Fed stays pat, markets go flat

As I wrote yesterday the Fed was going to be stubborn and not recognize the weakness in the global economy, so the market reacted with a selloff.

In their statement the Fed did not see a reason to mention crude oil pricing as anything more than a transitory blip on the screen. It still maintained its thoughts that inflation developing.

In the Feds jabberwocky world, it believes as rates rise — by restricting capital — inflation will rise. In my economic text books it states that rising rates combat inflation.

But that was written before QE and its subsequent Fed actions perverted the markets.

The dollar strength/stocks weak model has been working well in 2016, with the correlation moving in equal but opposite directions.

As a result of this equation, gold prices have also benefited. Don’t tell the Fed but gold has quietly risen $60 this year.

I say don’t tell the Fed because rising gold is the bane of central bankers. It’s the barometer by way you can measure their effectiveness.

High gold prices mean the currency is less valued and if you see what gold goes for in some countries with double-digit inflation you would understand.

So the gold price is telling Yellen & Co. that they were off quite a bit with the Dec. rate rise.


Anemic growth shackles Fed

The US Q3 GDP came out at 1.5% yesterday, inline with what I predicted here. And that was the only good thing about it.

Q2 GDP was 3.9%, which was an outlier for the last 7 years of sub 3% growth, and was based on huge inventory build. That growth appears to be not sustainable now.

The fact that the largest economy in the world yo-yos back and forth on growth speaks volumes on the state of the global economy. There is no sustainability.

Also almost a third of the growth of last quarter came from people paying more for health care. A little over 30% can be attributed to increased ObamaCare premiums.

If we could put all the extra fees and charges we are hit with into the GDP number, then The US would be growing at an 8% clip, LOL.

So Janet Yellen & Co. certainly knew the paltry GDP number on Wednesday when they said rates would remain at zero bound, but suggested that December’s meeting was in play.

By posting a 1.5% growth, how in the world can you fathom raising rates anytime soon? Especially just prior to the holidays and year-end window dressing by traders?

It can’t and it won’t happen. I guarantee it.

As I have said prior, we have an all-clear on rates staying low until June of 2016. And perhaps further but my crystal ball gets a little foggy after that.

It's all Greek to me

Wednesday the Fed will end its two-day meeting without a scheduled press conference to follow.

Markets should not expect and movement in rates, since Fed chief Janet Yellen already tipped of the bond pits that no rate hike will happen after a meeting without a press conference.

That’s why the September meeting is the one where markets believe a rate rise will occur, but it won’t.

I say that because traditionally the Fed raises rates in 0.25% jumps as the smallest increment. The Fed can’t move that much because of the fragile state of the US economy.

Now could the Fed raise 0.1% or 0.15% as a more symbolic gesture that it wants to move higher? More likely in my opinion in order to beat back the bond market vigilantes, but I still only put that move at 20% chance.

This will mark the 53rd meeting where the Fed will have no change in interest rates, which means the US economy has done little growth for the last 4.5 years. Nice work, more than $4 trillion created and spent to prop up the Wall Street banks’ balance sheets, while giving the US citizens nothing on savings and little in wage increases.

If you were not in the stock market the last 4.5 years, you have little to show for the trillions we need to pay back.

Sounds a little like Greece doesn’t it? It’s all Greek to me.

Markets suffer terminal trading with Bloomberg outage

Well anyone reading here already knew this, but WSJ’s Jon Hilsenrath — often referred to as the Fed’s mouthpiece — writes that the Fed may not be able to raise rates at June meeting.

As Hilsenrath writes, recent data has been soft. As I have written, data has been soft all year going back to holiday retail sales in Dec.

I have said and still hold true that there will be no rate increase in 2015 at all. I won’t go as far to say the Fed will begin new QE, I think that is early 2016 as deflation gathers steam.

As an aside, the reason I say Hilsenrath is the Fed’s mouthpiece is that he puts up a 700-word story 2 minutes after a Fed announcement. Seems someone had the information prior or he is the world’s fastest typist who can distill arcane data at record pace.

So Bloomberg terminals crashed globally early Friday morning here, just as Europe was beginning trading. The Brits cancelled a multi-million bond buyback figuring if traders could not chat with each on price then the market might get true price discovery and no one wants that. lol

Equities across the open global market cratered with Dow futures falling 150 points.

“We are currently restoring service to those customers who were affected by today’s network issue and are investigating the cause,” a Bloomberg spokesman said.

No word if the system was hacked.