BLS to Print Another Skewed Jobs Number?

So… Today is a Jobs Jamboree… I sure like these days more when the Bureau of Labor Statistics (BLS) didn’t see it necessary to add “ghost jobs” each and every month… For instance, last month, the majority of the 244,000 jobs that were “added”, were made up by the birth/death model of the BLS… Maybe those new companies were started, and maybe new jobs were created… Maybe… But probably not! Not in today’s environment of having to sign away your first born male to the government to start a business!

So… The forecast for today’s Jobs Jamboree is a job creation in May of 165,000… In recent months, the reaction by the currencies to the Jobs numbers has returned to “normal”, in that they reward the dollar for strong job creation, and sell it with weak job creation… I would have to think that given the ADP jobs data earlier this week that the risks on the report are for a downward or disappointing number, which will not be good for the dollar, and probably push the euro (EUR) over 1.45 to end the week.

Speaking of the euro… There have been few developments in the Greek situation, so the focus this morning is all about Jobs in the US. I will say this, though, there could be some sawdust left on the floor when Luxembourg’s PM (Juncker) meets with the Greek PM (Papandreou) today… But I doubt it… Those two knuckleheads aren’t going to solve anything!

So, that leads us right back to the Jobs Jamboree… OK, so I’ve gone out on the limb, and said that I thought the number would be disappointing… But let me say that I have no idea what the BLS will pull out of their hat (ala Bullwinkle)… But you know me; I’ll tell you on Monday what they did! I’m thinking the number comes in around 130,000… The forecast is for 165,000… So, let’s say that the disappointment meter kicks in around 150,000… Anything below that could spell trouble for the dollar today… 150,000 to 165,000 leaves the dollar neutral, and anything greater than 165,000 sends some love to the dollar… today.

So… With no Greek hammer banging on the euro this morning, the single unit has moved closer to 1.45, and was even touching the figure for a moment as I was typing out my epistle on the Jobs Jamboree… However, as I look at the currencies this morning, I don’t see much movement from any other currencies, except… Swiss francs (CHF) and Japanese yen (JPY)… A strange pair to be moving alongside the euro, but that’s what’s happening this morning. The Aussie dollar (AUD) remains pretty flat, along with the Canadian dollar/loonie (CAD), and the Norwegian krone (NOK). I guess everyone is holding back until they see the color of the Jobs Jamboree…

The Swiss franc could be receiving some action from the news I saw on Reuters this morning, that Moody’s is warning the US lawmakers that if they default, due to inaction on the debt ceiling, that the US credit rating would be downgraded… Interesting, eh? It’s as if someone in the government (not naming names, you fill them in) called Moody’s and said, “Hey, see what you can do to get the lawmakers to raise the debt ceiling, or else!”

The Japanese yen? Who knows? Could be the Moody’s thing, could be the Eurozone/Greek thing, could be that investors just don’t understand that Japan is the largest debtor nation on the planet! But the yen is right back to where it was, before the coordinated intervention to sell yen a month or so ago… So, that has to give the Japanese government a warm and fuzzy (NOT!) that they wasted people’s time and money attempting to weaken the yen… Actually, it cracks me up, because once again it proves that the markets have deeper pockets than central banks, and while the central bank intervention will work temporarily, it does not work in the long run… When will they ever learn… When will they ever learn?

OK… The ratings agency, S&P (Standard & Poor’s) was feeling a little “left out” with Moody’s getting all the headlines, and so S&P decided to throw a cat among the pigeons with a statement that commodity prices could fall as much as 75% if China’s economic slowdown worsens… Talk about deep-sixing the commodities! We’ve seen these claims before, haven’t we? I believe that I first wrote about this when I was in Phoenix for a speaking engagement, in 2003! USA Today ran front page stories on China’s (forecast) economic slowdown that sent commodities to the woodshed… Until it was proven that China wasn’t slowing down! And it’s happened quite a few times since… Shoot Rudy, remember a year ago, people were saying that China’s economy would collapse…and it didn’t!

So… For those of you keeping score at home… In the past month China has reported: retail sales at 17.1%, Manufacturing index at 52 (down from 52.9), and their leading index at 102.11, (up from 101.76)… Does it look like the Chinese economy is as bad as S&P would make it “sound “ to be? The Commodity selling was overdone based on this story… So, it gives you the opportunity today to buy at cheaper levels, eh?

Did you see where Grupo Modelo and Molson Coors are exploring a joint bid for Australia’s biggest brewer, Fosters? This news could very well underpin the Aussie dollar for the next couple of weeks or until the talks end or continue… Basically, those companies would have to convert their currencies to Aussie dollar to make the purchase of Fosters… I doubt this will happen, but it’s good for the Aussie dollar right now… So we’ll go with it!

And before I go to the Big Finish, I just wanted to make one more point about the Moody’s announcement yesterday… It has taken the spotlight off of Greece for now, and placed it on the US, and so, the euro is free to move higher versus the dollar…

Then there was this… From Accounting Today

A dozen multinational corporations paid an effective tax rate of negative 1.5 percent on billions of dollars in profits while reaping billions in taxpayer subsidies.

A new study by the advocacy group Citizens for Tax Justice identified the 12 companies as American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo. Together they reported $171 billion in profits over the 2008 to 2010 period, while getting $62.4 billion in tax subsidies.

Now doesn’t that just tick you off? I had to write a check to the government and I didn’t get any subsidies!

To recap… Today is a Jobs Jamboree Friday, with the data holding all the cards for today’s direction in currencies. Chuck believes the number will be disappointing (130,000), but who knows what the BLS will add in the way of ghost jobs to the total… No new news from Greece overnight, so the focus shifted to the US with Moody’s warning lawmakers in the US that the credit rating will be downgraded if they allow the debt ceiling impasse to create a default. And S&P threw a cat among the pigeons with some unfounded remarks about China’s slowdown…

Chuck Butler
for The Daily Reckoning