Jobs Disappoint…Again!
"Yes, grasshopper, recall that once the unemployment benefits run out, the U.S. no longer counts them as 'unemployed.' So, you can have jobs still below the level they were before the last recession, and the unemployment rate falling. Unbelievable, eh?"
by Chuck Butler In This Issue… - NY Traders weren't impressed…
- Interest rate differentials…
- The U.S. economy….
- Aussie job creation soars!
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Mine was low-key, as I was hoping. This coming weekend though, I'll be in Los Angeles to speak to the American Association of Individual Investors. A good crowd is expected, so I've got that going for me, eh? The Jobs Jamboree disappointed once more last Friday, only coming in at 146K. And the birth/death model added about 180K. So the actual jobs created number would have been negative. But, there aren't many out there in the media reporting that number. Instead, they focused on the fact that the jobless rate dropped from 5.1% to 5%. Huh? Yes, grasshopper, recall that once the unemployment benefits run out, the U.S. no longer counts them as "unemployed." So, you can have jobs still below the level they were before the last recession, and the unemployment rate falling. Unbelievable, eh? The dollar rallied at first on the jobs data, but then cooler, calmer heads prevailed and we finished the day with the euro back above 1.20. When the euro fell to 1.1880 after the jobs data, I was ready to walk out of here, and go home for the day, I was that frustrated with the markets. Then it turned around, and I decided to stay! I came across this wonderfully written piece by Nouriel Roubini. You might recall that Roubini co-authored a very nice white paper on the unraveling of the Bretton Woods 2 currency regime, last spring. Anyway, for those of you unaware of Roubini… He's currently a professor at the Stern School of Business at New York University. He has also held teaching positions at Yale University. Here's the snippet I found on his web page on June 30th… "The U.S. dollar has been strengthening this year based on rising U.S. short term interest rates and relative growth rates of the U.S. compared to Europe and Japan. But this recent strength of the U.S. dollar - as well as low long term interest rates in the U.S. - will increase the U.S. current account deficit rather than shrink it as it would be needed to reduce global imbalances. So, the global current account imbalances will become worse and, on top of it, the balance sheet losses of U.S. residents on their foreign assets will be large and leading to a ballooning of the U.S. net foreign liabilities by the end of 2005. Once the scale of the potential current account and net foreign debt increase of the U.S. sink in the markets you can expect the dollar to start falling again. With such a large and growing current account deficit and increase in net foreign liabilities the dollar can head only in one direction: south! The same pattern occurred in 2004 when the US dollar held up until the summer and started sinking again when the awareness of the staggering scale of the U.S. external balance started to sink in the mind of investors. And once China moves its currency some time in the fall, a snowball effect on the dollar can be expected: other Asian currencies that were effectively fixed via forex intervention (as long as the Chinese peg held) will also be allowed to appreciate once China moves. Then, the U.S. dollar weakening will be exacerbated as, on top of reduced central banks intervention in Asia, private Asian investors who invested in U.S. dollar assets - based on positive carry trades and low risk of capital losses from movements of their pegged currencies - will also have a huge incentive to dump dollar assets to avoid such capital losses." As you can see, I'm not the only one talking about this stuff! We've got a big week of data ahead of us this week, starting on Wednesday, with the Trade Deficit for May. It is expected to remain around the $57 billion range. We'll also see the Monthly Budget Statement, which I'll tell you the Congressional Budget Office (CBO) has moved down their target for the Budget Deficit. Yeah, I'll believe that one when I see it! Then on Thursday, we'll see CPI and Retail Sales, which I can tell you right now; the BHI (Butler Household Index) says Retail Sales should be stronger! Then end up on Friday with PPI, Industrial Production, and Capacity Utilization. Oh, and I can't forget the U of Michigan Consumer Confidence report. So, a bag full of data for us to dig through this week! Currencies today: A$ .7450, kiwi .6770, C$ .8240, (how about that loonie?), euro 1.2010, sterling 1.7450, Swiss .7715, rand 6.84, krone 6.60, forint 205.88, zloty 3.40, koruna 25.14, yen 111.90, baht 42.06, sing 1.6975, pesos 10.73, and gold… $425.30 That's it for today. Hope you enjoyed the Roubini snippet. Thanks for all the notes regarding my stiff aching back…always appreciated! Since my back surgery 14 years ago, I have these periods where it just acts up. So, things are better today! You just never know when it will decide to make walking difficult for me! No data till Wednesday but then watch out! Have a great Monday, and week! |
