ADP Versus BLS: Which Jobs Number to Trust

Today is the Big Jobs Jamboree, and the cable news stations are spinning it quite nicely. So nicely put that stock jockeys are believing the spin and running stock futures higher. I’ve got that to talk about today, and more debt stuff… Believe me, dear reader, I wish I didn’t have to talk about this debt stuff, but I feel as though me and a few of my friends are the only ones doing so, and I don’t want you to become like the rest of the country and become “comfortably numb” with the deficit figures!

Well… The euro (EUR) lost the 1.22 figure yesterday, but has not dropped further, holding fast to the 1.21 handle. The commodity currencies of Aussie (AUD), kiwi (NZD), loonies (CAD), rand (ZAR), and even krone (NOK) are holding steady this morning to the gains they made yesterday. The Canadian dollar/loonie, is being underpinned by the rise in the price of oil… Yes, oil is back to $75 this morning.

I’m reading a special piece in the FT from the other day, and the point that needs to be made about commodities is that, although we had the HUGE sell off of commodities in 2008 (financial meltdown), the fall back in prices never went below pre-boom levels… Which means… The bull market for commodities is still “on”!

Well… Gold sure got caught in the crosswinds yesterday of a thought that a rebound in global stocks will curb investor demand.

I say… Sure… Go ahead and sell your gold and buy stocks… That just gives me and everyone else a chance to buy gold at cheaper prices! Thanks!

I love it when gold dips because the dips are selling it!

And as far as stocks go? I don’t know about globally, but here in the US, where the largest stock market resides, there are some people who I think everyone should listen to when it comes to stocks… Famous people like Richard Russell, one of the finest minds around. Mr. Russell has told his readers to get out of stocks NOW! If I were you, I would listen to Mr. Russell before I listen to Warren Buffett, who believes stocks here in the US are ready to take off! (According to a story on Bloomberg).

Naoto Kan, who is the frontrunner to become Japan’s new Prime Minister, said yesterday that he “has no instant fix to rein in the world’s largest public debt. I don’t think fiscal rehabilitation can be done overnight.”

Memo to Mr. Kan… NO DOOKIE! Shoot, your country hasn’t done anything to rein in their debts for two decades! Why start now?

You see, that’s how I think the US government goes about thinking about the deficit… “Hey! We haven’t done anything to date… Why start now?”

I was reading a story on the Bloomie last night about what “the bond king” Bill Gross thinks about our deficit… He believes that the President “is poised to increase the US debt to a level that exceeds the value of the nation’s annual economic output, a step toward a “debt super cycle”.

Yesterday, I told you that the IMF has forecast that our deficit would reach 100% of GDP in 2012… Well, I’m here to tell you that with the deficit now reaching $13 trillion, and the double dip I see coming, we could reach that unsustainable figure in 2011… That’s next year, folks!

And… Interest rates in the US will go up eventually… They have to! And when they do, all those Treasuries that people bought at these ridiculously low yields will go to hell in a hand basket… Who’s going to want to buy that debt then?

OK… I’ve got to go on to something else, as I almost got out of my chair to go yell at the wall! I don’t want to get all ticked off this early on a Friday, for crying out loud!

Let’s talk about one of the best performing currencies for the last year and half… The Brazilian real (BRL)… Brazilian central bank President Henrique Meirelles was in the news yesterday talking about how the central bank will address inflation pressures… Let’s listen in… “We are committed to keeping inflation on target,” Meirelles said today in a Bloomberg Television interview from Busan, South Korea. “We have exited from all the liquidity measures which were taken” during the financial crisis, and “we are taking the necessary steps to make sure the Brazilian economy is all balanced.”

Then he said something that caught my eye… Brazil “faced this kind of problem many times in the past,” including changes in currency valuations and balance of payments, as well as fiscal problems, he said. “We learned our lessons.”

Yes, let’s hope so! I wonder – and here I go again, just when I think I’ve escaped that thought pattern it pulls me back in – when the US will learn its lesson?

OK… The Jobs Jamboree for today… The BLS has split the payrolls data to: total, and private payrolls… So, we’ll want to only focus on the Private Payrolls, which are forecast to increase 180,000 for May… That’s a good figure… Of course it is the BLS so we’ll have to wait until it prints to see the “real numbers”… As if real numbers could come out of the BLS!

On this I have to say that yesterday, the ADP payroll report for May saw only 55,000 jobs added in May… Now, ADP provides payroll support to most companies in this country… Obviously they don’t have them all, but a good number of them for sure. However, they do miss the new start-ups for a month or so, and that’s where the BLS birth/death model comes in to play… If I were trying to get a “real” figure to hang my hat on, I would use the ADP print… Or… You can leave your hat on, with the BLS! HA!

The thing to look for that the media never mentions in the Jobs Jamboree is the Average Hourly Earnings and Average Weekly Hours Worked… These two will tell you if there are any wage inflation pressures… And from the forecasted number, there doesn’t seem to be any…

Then there was this… Well… You know the oil spill in the Gulf is getting to be a big disaster, all over the board. I could talk about the wildlife, the seafood, fish, birds, etc. or I could talk about the damage to our beaches, etc. But I’m going to focus on the loss to the economy… The Louisiana Governor said that the moratorium on drilling will cost Louisiana 20,000 jobs in the next 12 months. But, that’s just the tip of the iceberg here, folks… The oil and gas production business is going to suffer, and that will cause a slowdown in the economy, because, as we all know, from the very first oil embargo in the ’70s, oil moves the economy… And, in case you missed it, Hurricane Season began this week.

To recap… The risk takers are being quite fickle as they turn their noses up to euros, and instead opt for the commodity currencies, which are holding steady this morning… Commodities remain in the bull market, and the forecast for commodities is good. Gold is getting sold as people are opting for stocks… I say, let them sell, they’ll be sorry… And the Jobs Jamboree is today!

Chuck Butler
for The Daily Reckoning