How Will Census Workers Affect the Jobs Report?

It was a ping-pong day for the currencies, back and forth over the net… The net being the “level of the day”… For instance, the Aussie dollar (AUD) played over the 91-cent net all day, and the euro played over the 1.2820 level all day.

The data on Thursday was all over the board, which may have acted as the paddles for the ping-pong day… The big news was that the European Central Bank (ECB) kept their stimulus in place and did not even mention any “exit plans” for that stimulus. You may recall that the last time the ECB began to remove stimulus, it just happened to run into the exposure of the deficit dilemma in the Eurozone… Obviously, that stimulus removal was stopped at that time.

The ECB did revise upwards their growth forecasts for the second half of the year… That’s kind of cheating don’t you think? I mean, two of the six months in the second half have already posted their growth figures! But, they did revise them upwards, which is more than I can say for… Oh, never mind, I’m not going to open that wound on a Friday!

So… I’ve been in the saddle at my desk for about 40 minutes right now, and from what I’ve seen in the currencies is that the game of ping-pong will continue to be played today… That is, of course, unless we get a Big Surprise in the Jobs Jamboree this morning…

Yes, it’s a Jobs Jamboree Friday, and here’s the skinny on what I see happening today… First of all, you’ve just gotta love the way the Bureau of Labor Statistics (BLS) now breaks out the “private payrolls” from the overall figure, so that people can see the census workers getting cut… Just think back when all those census workers were being added, there was no “breaking out” of those numbers… No way! The BLS, government and media happily talked about all the “jobs that were being created”… Disgusting I know, but it’s a Friday before a Holiday Weekend, so I’m going to leave that laying right there.

So… Here’s what I see… The overall number of jobs lost in August will total -100,000… But when the “private payrolls” are broken out, we see that the US probably created around 40,000 jobs… And the unemployment rate will probably tick up 0.1 to 9.6%…

Let’s accentuate the positive here… And say, YAHOO for the 40,000 jobs created, right? Yes, we should… However, 40,000 isn’t anywhere close to the number of jobs that need to be created to sustain a strong or recovering economy… So… How will the markets view this report? That, my friends is the rubber hitting the road, this morning.

All I keep seeing on the TV this morning are rumors that the White House is thinking about new ways to stimulate the economy… Can you say Japan circa 1997? I can, because I was there, trading currencies and remember it very clearly… Japan suffered a bubble popping in the early ’90s, their stock market basically crashed, and their economy stumbled, fumbled, and ended up on its face… The Japanese government tried everything… They did multiple stimulus packages… They cut interest rates to the bone… They implemented quantitative easing…

This went on for a decade, and still no gains in their economic growth, deflation had settled in all around them, and as the Japanese turned the calendar on a new millennium, all they had to show for all they tried to implement was a national debt to beat all national debts, ever!

Now… Hopefully, you see why I’ve said for almost eight years now that the US was turning Japanese… Yes, I really think so!

Just want to be perfectly clear on that, for someone told me yesterday that the Pfennig was “totally incomprehensible” … I had a good laugh at that one!

So… Don’t be surprised if in the next couple of weeks you hear about a “new and improved” stimulus package… Of course, if the stimulus money that’s already been spent had been put to work properly, and not on pork projects, we might have seen some results, but even then I doubt it, for the government has to get its hands out of the cookie jar! The government needs to cut spending, stop manipulating the markets, and shrink… Now, those would be worthy things to do to help the economy… That, and taking the governor off small businesses.

OK… Of course that’s what I would do if I were “king for a day”… Along with many other things…

Gold has had a good week overall, but the last two days have been very choppy… Up $5 one minute, and down $3 the next… I would have to think that today’s Jobs Jamboree outcome will give gold a boost… That is, unless there is a surprise. But as soon as the jobs data is printed, I can see the NY trading desks clearing out, with the boys and girls heading to the Hamptons… And then the volume in markets gets thinned out, and by early this afternoon, the activity in the markets will be null and void of anything!

So… Any follow-through on the morning’s trading will not happen today… So be careful out there today, when you have thin markets, the volatility can be wild and crazy.

Like I said at the top… The Aussie dollar went back and forth over the 91-cent net yesterday, and that’s all I’ve seen it do this morning, since I came in. Notice how all the talk about the election outcome that filled the news from Australia a couple of weeks ago – and weighed on the Aussie dollar – has faded, and allowed it to recover… This is what I was talking about last week when I said that the markets lose their focus too quickly these days… But in the case of the Aussie dollar and the elections, this was a good thing!

The Canadian dollar/loonie (CAD) has lost its mojo for now, but it might find it next week when the Bank of Canada (BOC) meets on September 8th… Recall that the markets have given up on a rate hike from the BOC, while I went out on the fat limb and said I was keeping the light on for a rate hike from the BOC at their 9/8 meeting.

Should the BOC go ahead and hike rates, as I expect them to do, and not see the BOC talk down the rate hike, then the loonie could very well get is mojo back… Yeah, baby! (In my best Austin Powers voice)

The Brazilian real (BRL) took off yesterday, and never looked back! The real began to rally in the morning with the other currencies, but as the other currencies began to back off and play ping-pong, the real continued to gain ground versus the dollar. Now… The question is this… Can the real hold onto these gains and not give them up, like they’ve done all year… Have a good month, and then sell off… Have a good month, and then sell off…

Overall, year-to-date, the real is only up 1%, but then add in their high interest rate, and the overall return isn’t anything to throw out with the bathwater. The Japanese yen (JPY), has gained 10% year-to-date, but has no yield, but again… Not to be thrown out with the bathwater!

Then there was this… The Economist ran a story that caught my eye… The magazine notes that “a return to recession is possible for the US, especially if Congress won’t act to prevent reduced government spending and the Federal Reserve can’t bring itself to offset contractionary forces in the economy. Another way of putting this is… That the risk of a double dip is entirely political in nature.”

Hmmm… This is one of those times that I’m going to disagree with The Economist… The cards have already been played, so anything the government does now, is too little too late… And… The government needs to get out of the markets and stay out! Oh! And what’s up with The Economist not wanting the government to cut spending? Makes no sense to me… But, now you see that even The Economist can be on the other side of the fence from me!

To recap… It was a day of tight ranges for the currencies ahead of the Jobs Jamboree this morning. Chuck thinks that 40,000 jobs will have been created but overall 100,000 jobs will have been lost, when taking in the Census workers. This is not the kind of jobs report that a recovering economy wants to see… And it’s up in the air as to how the markets will react to this report… There was a day, long ago, when I could say without a doubt, that job creation would be good for the dollar, and job losses would be bad for the dollar… Not any longer… The mental giants in the markets have seen to that!

Chuck Butler
for The Daily Reckoning