Weathering Wheat Prices and Unemployment Numbers

We detect a pattern in this morning’s media. Whatever’s going wrong in the economy, blame it on…the weather.

“Payrolls rose less than forecast, depressed by winter storms,” says Bloomberg of the January employment report out this morning from the Bureau of Labor Statistics (BLS).

Traders were counting on 140,000 new jobs. BLS statisticians could conjure up only 36,000 – less than a third of what it takes to keep up with the natural growth of the “labor” force. Ho-hum.

The percentage of the working-age population in the labor force sank to its lowest level since the early ’80s – down to 64.2%. Again. For perspective, this figure stood above 65%, and as high as 67%, every year between 1986-2009.

Still, because so many people gave up looking for work – so long ago they no longer get counted by BLS quants – the unemployment rate actually fell from 9.4% to 9.0%.

For perspective, we turn once again to the chart that tracks the percentage of job losses during every postwar recession…and the number of months it took to get back to par.

Percent Job Losses in Post WWII Recessions

The BLS also issued what it calls “benchmark revisions” – or, revised figures from last year that account for all the missed guesses they made at the time.

Unfortunately for all the clamoring you hear on TV about “jobs, jobs, jobs”… 483,000 jobs that were thought to have existed two months ago turn out to have been a chimera.

“The freeze gripping a swath of the US threatens winter wheat planted in the fall,” says The Wall Street Journal, catching the drift. As such, we’re told wheat prices are up 13% in two months.

Never mind that the run-up in wheat – and everything else – has a rather longer history. Wheat’s lows came last June.

Global Food Prices 2003-Present

“Are we to believe,” asks GoldMoney’s James Turk, “that the market knew seven months ago that weather around the world today would be so bad that it would impact global wheat output?

“Obviously, given that commodity prices are rising across the board, we have to look for other factors that are causing this surge in prices. Just consider the money printing – aka quantitative easing (QE) – by central banks going on all around the world.

“QE is building up tremendous inflationary pressures in the pipeline of goods and services, which for months now has been showing up in the area most sensitive to monetary debasement, namely, commodity prices.

“The gathering monetary storm is far more important than the weather,” James says, “and there is one easy way to seek shelter – buy physical gold.”

Addison Wiggin
for The Daily Reckoning

The Daily Reckoning