Creating Lots Of Jobs?

Good day… I hope your weekend was grand… It’s Easter Monday, and most of Europe is closed once again. But things here in the United States return to normal, albeit with thin volume as Europe is still hunting for eggs.

The dollar received a lot of love in the thin markets on Friday, after a strong showing in the Jobs Jamboree. The Bureau of Labor Statistics said that we created 180K jobs during March, and that the jobless rate fell 0.1%. The markets took the report hook, line and sinker, and the dollar rallied, along with stocks, while bonds got sold.

While the 180K jobs created looks good on the outside, you know that I would look further into the numbers to see the devil in the details, right? Of course! So… First of all, the manufacturing sector took another hit and lost 16K jobs in March. OK… So, where did the 196K jobs come from?

Well…  A simple check of the BLS website tells us that of the 180K so-called jobs created, 128K were added via the birth/death model… What I call “ghost jobs”.

My trusty calculator tells me that 128K is 71% of the total. No wonder the media keeps asking the question, “Why isn’t the economy growing when the jobs market seems so tight?” BECAUSE IT ISN’T! I truly wish someone in the media would get their head out of the “feel-good sand” and talk about this discrepancy!

Anyway… The markets ate it up too, and as I forecast on Friday, if the total number of jobs created was greater than the 130K expected… The dollar would receive some love.

Of course, I said the report would be disappointing, and on the outside it wasn’t… But on the inside… Well… You decide.

The euro fell back below the 1.34 level, and the yen dropped to well within the 119 handle. All the other currencies fell in line with the euro and yen and lost ground to the dollar too. It was not a pretty sight for non-dollar traders. The euro continues to hold value and in my opinion will recover from this mini-sell off quickly. There are just too many good things going on with the Eurozone’s economy that will lead to at least two more rate hikes from the European Central Bank. (ECB)

As long as the ECB remains hawkish, and the economy can continue to grow, the euro will be the King of the Road… Trailer for sale or rent… You get the picture. However, if you own euros already and don’t want to be like an Asian Central Bank and own too much of a currency (the dollar), then you’ll want to look at the euro alternatives that I’ve talked about for over a year and half now – Norway, Sweden, sterling, and francs. Of those, sterling seems to be at the head of the class, but Norway and Sweden’s currencies outperformed last year.

The dollar rally on Friday didn’t spill over to gold, as base metals continue to make positive moves. The shiny metal is off $2 in overnight trading, but still remains above the $670 level. I would like to see it trade here for sometime, forming a strong base before moving higher… But the markets will decide that.

The U.S. data cupboard is empty today, but will be restocked tomorrow with the minutes of the last FOMC meeting. These minutes normally give us a better indication of what the Fed is thinking about. Of course they always take out the play-by-play of their games of battleship; no one wants to read about how Bernanke cries when he says, “You’ve sunk my battleship” HAHAHAHA. I kid, but what else do these guys talk about for hours on end?

It’s pretty clear…inflation is kicking and screaming higher, and the housing sector is causing the economy to slow down. They can’t raise rates, and they can’t cut them. OK… That’s all taken care of, now where’s my Game Boy!

Later this week, we’ll see the color of the trade balance/deficit, PPI, U. of Michigan consumer confidence and retail sales. So… Lots to deal with as the week goes on, eh?

OK… Have you seen all the stories going around about Iran now requiring countries that buy oil from them to pay in euros? According to one of the stories I read on this, China has already begun to pay in euros. Of course, this change would be manna from heaven for the Eurozone as they wouldn’t have to sell euros and buy dollars to pay for their oil.

Remember all the noise of a year ago, that Iran was going to start an oil bourse that only traded oil in euros? Could this be that oil bourse rising from the ashes? I don’t know for sure, but one of the stories I read was on a Middle East news website… Hmmm…

Well… If this is all happening, it’s no wonder the euro seems to have a floor under it that didn’t give way with Friday’s dollar rally.

More bad news for lawmakers like Schumer and Graham… It looks like China’s trade surplus, which last year rose to $177.5 billion (a new record), and pushed their overall reserves to over one trillion dollars, isn’t slowing down. Preliminary reports show China’s March trade surplus almost doubling February’s $11.2 billion, with a $20 billion printing. WOW! That’s huge. We’ll see the actual report printed later this week, but I would bet the preliminary report is bang on!

Yes… China needs more flexibility in their currency, but placing tariffs on their goods isn’t the answer… Patience is needed here.

Currencies today: A$ .8175, kiwi .7225, C$ .8690, euro 1.3375, sterling 1.9650, Swiss .8280, ISK 66.90, rand 7.1150, krone 6.0925, SEK 6.9325, forint 183.80, zloty 2.87, koruna 20.87, yen 119.20, baht 32.70, sing 1.5110, HKD 7.8170, INR 42.89, China 7.7340, pesos 10.9680, dollar index 83, Silver $13.78, and Gold… $674.40

That’s it for today… A very cold Easter weekend for us here in St. Louis. We froze at my little buddy’s football game on Saturday. My little buddy, Alex, and I rooted hard for the Boston College Eagles in the final of the Frozen Four on Saturday night, but to no avail, as Michigan State won with two very late goals. Next Monday I head to Jacksonville for a day, and the following week I head to Las Vegas for a couple of days… Hopefully it will warmer in those places! Time to hit the send button… So, have a great Monday and week!

Chuck Butler — April 09, 2007

Chuck Butler is the senior vice president of EverBank World Markets. He oversees the trading desk and operations for over 12,000 individual and corporate clients, both in the United States and abroad, who look to EverBank for FDIC-insured World Currency Deposit Accounts, and Single-Currency and Index CDs .

Chuck is the author of The Daily Pfennig, which is reposted here at The Daily Reckoning. His respected analysis is frequently quoted in or referenced by: the Wall Street Journal, U.S. News and World Report, CBS Market Watch, USA Today, CNNfn, the Chicago Tribune and many other publications.