Jobs Report: Fake News

This morning the rah-rah men put out their tongues at the bears, placed their thumbs in their ears… and wiggled their fingers in mockery…

For the March jobs report came issuing from the Department of Labor.

And it trounced estimates.

The economy added 196,000 nonfarm jobs last month — economists expected a figure in the range of 175,000.

The March unemployment rate held steady at a lovely 3.8%, identical to February’s.

March — incidentally — was the 102nd consecutive month that the economy added payrolls.

The unemployment report gave the stock market a jolt — though limited.

The Dow Jones closed the day a modest 40 points higher. The S&P added 13, the Nasdaq 47.

The cheer section was nonetheless in full throat this morning…

Experts Celebrate Today’s Report

Chris Gaffney, president of world markets at TIAA Bank, for example:

The 196,000 jobs added in March shows the U.S. economy is not stalling out, something investors were worried about following February’s disappointing numbers. And other data in the report showed wages are rising but not at a rate which would spur inflation.

Added Martha Gimbel, director of economic research at employment website Indeed:

The labor market continues to shrug off head winds and chug along… What’s more surprising is that we’re still adding an average of 180,000 jobs at this point in a recovery.

Finally we come to Douglas Holtz-Eakin, former director of the Congressional Budget Office:

“The March report should put to rest the notion that the economy is doomed to falter in 2019.”

Just so.

But may we empty a bucket of freezing water upon these heads?

What the Mainstream Press Isn’t Reporting

Our agents inform us that the splendid March report owes largely to part-time employment.

Part-time jobs increased by 60,000 — while full-time positions plunged by 190,000.

That decline represents the largest monthly decline since last August… we mention in passing.

Meantime, over half of all added jobs were in relatively low-wage sectors such as hospitality and leisure.

But let us fill another bucket of frigid water…

First-quarter layoffs rose to 190,410 — a 10.3% increase from the fourth quarter — and a 35.6% swing above 2018’s first quarter.

And first-quarter layoffs, we are told, ranked highest for any first quarter since 2009.

Thus another ill omen forms on the horizon…

Andrew Challenger, vice president of placement firm Challenger, Gray & Christmas:

Several indications, such as the number of companies filing for bankruptcy or closing operations, suggest we’re heading for a downturn. 

Inflation Nears 10%!?

In addition, today’s report reveals that hourly wages increased only 3.2% year over year — below all credible estimates.

Official inflation runs below 2%. But if government number-torturers gauge inflation as they did in 1990, a far different number emerges…

According to ShadowStats, consumer price inflation runs at 5% or higher — if the rules of 1990 are enforced.

And if we tracked inflation by 1980’s exacting standards, the holy angels themselves would shriek in horror…

Consumer price inflation approaches 10% — if we accept the verdict of Mr. John Williams and ShadowStats.

If wages are increasing 3.2% while actual inflation nears 10%… we must conclude the American worker is being swindled vastly and grandly.

But we suspect the Federal Reserve is inwardly pleased with today’s numbers.

The official 196,000 suggests an economy going under a healthy barrel of steam. But soft wage growth indicates inflation presents no immediate menace.

The latest official core inflation figure — 1.8% year over year — remains beneath the Federal Reserve’s 2% beau ideal. 

Thus the ladies and gentlemen of the Open Market Committee can hold rates steady.

Confirms Subadra Rajappa, head of U.S. rates strategy at Société Générale SA:

This a perfect report for the Fed because it actually corroborates what they’ve been saying all along, which is there are no wage pressures. There’s very little risk of wage inflation.

President Trump Calls for More Quantitative Easing

But steady rates are not enough for President Trump — the confessed “low interest rate guy” was plumping for action today.

He raged this morning that Mr. Powell should not only cut rates — but resume quantitative easing.

And his chief yes man Larry Kudlow likewise affirmed this morning that the economy “could do with a rate cut.”

The market suggests they may have their way.

Fed funds futures are giving 39.7% odds that the Federal Reserve will cut rates by next January.

We would place them higher still.

All Signs Point to Global Slowdown

Here at The Daily Reckoning we have hauled forth abundant evidence that the economy is going the wrong way.

GDP trends steadily lower. The bond market warns of trouble ahead. And much of the industrialized world has caught a flu.

China, Germany and Japan all display worrying symptoms.

CNBC informs us, for example, that Chinese companies are defaulting on their debts at “unprecedented” levels.

Meantime, United States debt at all levels piles to preposterous heights.

The national debt crests above $22 trillion… and trillion-dollar deficits are in prospect for the decade ahead.

Corporate debt levels soar to 46% of GDP — a record high.

United States household debt rests likewise at record heights.

Credit card interest alone is projected to set Americans back $122 billion this year… 50% more than in 2014.

Will the Next Crisis Land in Time for the 2020 Election?

Soon or late the entire load will come toppling down… like a house built upon a shifting foundation of sand.

Our co-founder Bill Bonner’s “Doom Index” rapidly approaches 8 — “crash alert level.”

The crash alert flashed the identical reading early in 2007. The great crisis broke in September 2008.

A similar timetable would place the next financial crisis near the 2020 presidential election.

Perhaps the president has excellent cause to howl for rate cuts and quantitative easing.

And soon…


Brian Maher
Managing editor, The Daily Reckoning

The Daily Reckoning