Markets Anticipate US Job Creation

OK… So, it’s a Jobs Jamboree Friday… We get to see just how many jobs were created in March… No wait, that would only be if there were no hedonic adjustments to the jobs figures… Or if we actually counted “real jobs that people wanted, and could afford to have to support their families”… But, don’t let those things get in the way of a Jobs Jamboree celebration today! Right now, the “experts” are forecasting an increase of jobs created of 190,000… That’s all fine and dandy, but, as I explain each month, as the government figure heads wave the flags of an economic revival led by job creation… 190,000 new jobs doesn’t come close to what the economy needs to show each month, as jobs created, to have a growing, sustaining economy…

So… What do I look at, in the report, each month, to see if there’s inflation stirring? Average Hourly Earnings and Average Weekly Hours… I have to say that this is where you’ll see wage inflation first… And it looks like wage inflation is remaining pretty low… 1.9%…

But… The markets get all lathered up about job creation, even if the job count is all trumped up… And it moves currencies… And so I have to make a Big Deal about it once a month!

Speaking of currencies… Yesterday morning, we had a currency rally going on, but as the day went along it faded a bit, but overnight the dollar is getting sold again, with the euro (EUR) climbing to 1.4160… Hopefully, most yen (JPY) holders have taken advantage of the lofty yen price, and gotten out of Dodge… Because things in Japan just aren’t good, and the repatriation of yen is over (in my eye)… The yen has lost ground to the dollar, and euro for a week straight now…

You know how I always refer to gold as the “uncertainty hedge”? Well, Chris and I discussed this yesterday… He mentioned that when Japan was getting hammered by mother nature, gold was getting sold… But think about that… The Japanese that had invested in gold, sold their gold to meet other demands during their problems, which were “uncertain” and which called for them to use their “uncertainty hedge”! That’s what it’s all about, you put your right hand in, and you shake it all about!

The global growth that continues to fuel Australia, Brazil, Norway, etc. is like the Energizer Bunny, eh? Think about that for a minute… In the past year, we’ve seen droughts, floods, and cyclones in Australia… An earthquake in New Zealand… An earthquake with tsunamis in Japan, and yet… Global growth just keeps going on, and on, and on… And for you non-youngsters… It takes a licking and keeps on ticking! Resilient? I would say so!

For instance, the latest retail sales figures from Australia indicate a strong domestic economy… The latest retail sales from Australia printed at 0.5%, which was stronger than expected. And the Reserve Bank of Australia (RBA) prints a Commodity Price Index each month, tracking the prices of commodities that are associated with Australia, (a great way to keep their finger on the pulse of commodity inflation, eh?) The RBA Commodity Price Index for March printed this morning at 101.6, up from a revised February index number of 100…

And don’t look now, but the price of oil is on a rampage again, gaining $2 yesterday, and $1 overnight, pushing the total price of oil to $107! And don’t for a minute think that currency traders don’t see this and think they should own petrol currencies, like Norway!

And don’t for a minute think that metals traders don’t see the rising oil price, and mark up gold and silver… Gold gained $13 yesterday, and silver is trading over $37… Remember back in December I did an interview that ended up in a NewsMax story about silver being the new gold? At that time, silver was less than $25… I told another interviewer for TheStreet.com that I thought silver was going to $50, which would be double what it was trading at when the interview took place… So, silver is half way to $50 now…

OK… Back to my “takes a licking and keeps on ticking” thought from above… Chinese manufacturing printed an index number in March that was higher than in February… 53.4 versus 52.2…. This is a good indication that manufacturing, despite what all the pundits, and the so-called “Mr. Know-it-alls” have been saying for over a year now… Remember? Those knuckleheads kept calling for a collapse of the Chinese economy… I kept saying, the Chinese economy would “moderate” but not collapse… Well, no sign of collapse and we’re well past one year on their forecasts!

I received a few emails yesterday, asking me to explain what I meant when I said, “And… Here’s one thing that could put a damper on Chinese renminbi gains versus the dollar, thus supporting the dollar… Chinese banks must cut their short dollar positions and also reduce their short-term foreign debt holdings, the currency regulator said on Wednesday.”

Basically, short dollar positions in China, for the most part, are long renminbi (CNY), thus pushing renminbi’s appreciation versus the dollar faster than the Chinese government cares to see… So, they issued a rule saying that these Chinese banks had to reduce their short dollar/long renminbi currency trades… It has nothing to do with Treasuries, or anything else… Just a slowing of the renminbi’s appreciation versus the dollar…

Yesterday, I told you about my thoughts for manufacturing here in the US and how I thought the problems in Japan were going to be a hickey for US manufacturing, because of a lack of parts from Japan. Well, I just saw this come across the screens… Honda and Toyota believe they lost production of 40,000 cars since the Tsunami.

I also had someone ask me yesterday why I rarely talked about the Russian ruble (RUB)… Good question, and I think I’ve explained this before, but for all of you new to class… First of all, the ruble is very illiquid, so that prevents us from offering the currency… But, we did include it in our BRIC (Brazil, Russia, India China) MarketSafe CD, so from time to time, it’s good to just touch on rubles and move along… Remember… The ruble is an “oil play” plain and simple, nothing more, nothing less… And with the price of oil moving higher and higher, the Russian ruble gains in value… And year-to-date the ruble is up 7.61% versus the dollar… Not too shabby, eh?

To recap… Today is a Jobs Jamboree, and much will be made of the fact that we created 190,000 jobs in March, although the number will be trumped up and still not enough to fuel a growing economy. The global growth around the world continues to push forward, even in the face of earthquakes, tsunamis, and so on… The price of oil has reached $107 this morning, and is getting notice from currency and metals traders…

Chuck Butler
for The Daily Reckoning

The Daily Reckoning