Disappointing US Jobs Report Affects Currencies

Well… The Jobs Jamboree was very disappointing last Friday for January… But, let’s stop to think about just 39,000 jobs being created during the month, when 122,000 were created in December. I know, I like to laugh at the excuses that the government gives whenever there is a hiccup in the numbers, but this time, I think they may be on to something. The weather in January was awful all around the country… Construction was halted, and so on… So, I would expect February’s numbers to be much, much better… But still on a two-month average, behind what’s needed to grow the economy and sustain that growth.

After the numbers were released, the stocks were sent to the woodshed, along with the euro (EUR)… The euro fell throughout the morning, but by noon time, it was recovering… The sell off had been overdone… I mean, why would the euro get sold because the US jobs data was awful? An awful jobs data would mean US rates are staying near zero, (not like they would really be moving higher, but the markets would think so), but… You never know with the finicky currency traders… They have their own agendas, and programs. We simply get to keep score at home! And the stocks? They rebounded and are setting up for a nice move higher today… But that’s not my bag, baby…

Here are some numbers that you won’t see the media discuss… A reader, Scott, sent this to me from Zerohedge.com

At 64.2%, the labor force participation rate (as a percentage of the total civilian non-institutional population) is now at a fresh 26 year low, the lowest since March 1984, and is the only reason why the unemployment rate dropped to 9% (labor force declined from 153,690 to 153,186). Those not in the Labor Force has increased from 83.9 million to 86.2 million, or 2.2 million in one year! As for the numerator in the fraction, the number of unemployed, it has plunged from 15 million to 13.9 million in two months! The only reason for this is due to the increasing disenchantment of those who completely fall off the BLS rolls and no longer even try to look for a job. Lastly, we won’t even show what the labor force is as a percentage of total population. It is a vertical plunge.

And then there was a video from the talking heads on the cable news networks who were rambling on about something, when David Stockman the former head of the Budget Office showed up and explained the rot on the vine with jobs…

I tell you all the time that the Bureau of Labor Statistics pads the numbers, and then they pull them out… But the pulling out doesn’t get reported like the adding on does! The bottom line, folks, is that there is no job growth in the US. I don’t care what kind of smoke the government wants to blow… I had better stop there…

OK… So enough of all that jobs stuff! I guess, as long as bad reporting is going to affect the markets one way or another, we have to go through these exercises, eh?

So… The risk assets sold off on Friday, and looked as though they were recovering by noon, but as I turn on the currency screens this morning, I see that the recovery faded in the overnight markets. I’ll tell you another asset that really sold off in a reaction to the jobs number… Treasuries… The bond vigilantes didn’t believe the drop in the unemployment rate was all that it was cracked up to be, and the yields soared… Don’t look now, but the 10-year yield is 3.67%… Remember, folks, it was 2.63% on November 8th … That’s over 100 basis points or 1% of yield that’s been added in two months time… Which is pretty amazing given the buying by the billion that the CABAL (Fed) has been doing… But I have a question for the CABAL, the Treasury, Congress, or whoever wants to handle the question… When the CABAL’s buying ends in June (remember, Big Ben gave us an end date, and I said at that time that he would be sorry for doing so)… When the buying by the CABAL ends in June, who’s going to step up to buy the bonds that are being issued to finance our ever growing deficit spending? I’ll bet you a dollar to a Krispy Kreme that the “powers that be in DC” are ignoring this right now, and thinking that they’ll “cross that bridge when they get there”…

We’ve seen some data prints overnight that are not helping the currencies any… In Germany, December Factory Orders fell more than forecast, falling 3.4% from November… And In Australia, December Retail Sales only grew 0.2% from November, after posting a 0.4% rise in November. I would think that the markets would give the Aussie dollar (AUD) a “get out of Jail free card” on data, given the floods, and then the cyclone…

Canada posted a nice increase in Jobs for January, last Friday… The results blew away the consensus forecasts by nearly four times! Canada posted 69,200 jobs in January… This data got swept under the rug after the US Jobs Jamboree hogged all the air time… But, that doesn’t negate the fact that Canada’s job data was very strong!

The data cupboard here in the US doesn’t have much to offer us this week… We will end the week with some deficit data, as both the trade deficit and monthly budget deficit will print. I have to say, right here, right now, that I’m not buying what the government is telling us about the monthly budget deficit… The CBO said our deficit would be $1.5 trillion this year, which calculates out to an average of $125 billion each month… And, the last month was about $80 billion, and this report is forecast to be $60 billion… So something’s not working out here with the numbers, folks… But what else is new?

The price of oil really fell out of bed on Friday…and hasn’t shown any sign of recovering, which just shows to go you that the move up to $91 last week was nothing but a knee-jerk reaction to the unrest in Egypt… Of course, I would say this… If I were a gas station owner, and I had to buy gas this week, I would demand delivery today, and buy as much as I could at the price today, which is $3 cheaper than last week, for I just don’t see this continuing to fall out of bed… Of course I would prefer it continue to fall, but I just don’t see how that will happen, given what’s going on in the Middle East…

The falling oil price has thrown a spanner in the works for the Norwegian krone (NOK)… The krone is much weaker this morning than it was almost all of last week… The Canadian dollar/loonie (CAD) is a bit weaker too on the oil price fall, while the Mexican peso (MXN) remains stronger than it has been in quite some time.

Commodities continue to indicate that those buying them and running the prices higher believe inflation is among us and it will continue to get worse. Big Ben Bernanke can continue to tell anyone who will listen (and those that will listen are dropping like flies) that there is no inflation… But the numbers aren’t agreeing with him… And how does it affect you? Well, I can tell you that the people sending their kids to the University of Missouri will be feeling a 5% increase in tuition next fall.

I had one reader send me this note…. “Every time I go to the grocery store, prices are up. The CABAL said that there will be no inflation until jobs and wages go up. Is he nuts or just trying to convince those of us who cannot think for ourselves?”

I’ll have to hold my thoughts on that question for I’ll just get in trouble by answering the question… But I’m sure you dear readers know how I would answer!

Then there was this… I saw this and about fell out of my chair…

Chrysler CEO Sergio Marchionne said he shouldn’t have characterized the company’s bailout from the US and Canadian governments as “shyster loans.” He made the offhand remark after saying that Chrysler and Fiat should eventually be combined, with headquarters in Detroit. “I want to pay back the shyster loans first,” he said.

I think he got it right the first time…

To recap… The Jobs Jamboree was quite disappointing on Friday and even that wasn’t as disappointing as the “real numbers”… Risk assets got sold on the data, but stocks recovered, while the currencies and metals didn’t. German Factory Orders fell in January and has added some burden on the euro this morning. Aussie retail sales weren’t as strong as the previous month, but still quite impressive given the floods and cyclone…

Chuck Butler
for The Daily Reckoning

The Daily Reckoning