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Peter Schiff: New Jobs Report Bombs, Along With Hope of Raising Interest Rates
Despite the fact that there has been no positive economic news of any kind in recent weeks that would remotely suggest the economy is in a recovery, let alone healthy enough for the Fed to raise rates, that hasn’t stopped all the chatter about the likelihood of a June rate hike. Some economists have even suggested the U.S. has not averaged the 1.5% growth rate we’re told Obama has averaged (the 4th worst in US history), but that we’ve been shrinking to the tune of about 4% annually. Regardless, like good little foot soldiers for Team Obama, everyone in the mainstream media has continued to talk about Obama’s “recovery,” all the facts be damned.
There are over 102 MILLION Americans out of work (in a population of around 320 million), 1 in 5 households do not have a single person earning an income, credit card debt is at an all time high, and student loan debt just surpassed credit card debt, so why Team Obama and his team of clapping seals in the mainstream media thought that by raising rates, people would magically believe the economy is doing well shows how truly insane the little bubble Obama lives in really is.
This week, the job numbers were God awful. The projection for new jobs was around 162,000 new jobs, and only 38,000 jobs were actually created. To fully grasp how bad that is, consider the fact that under Obama, even 162,000 jobs would have been slightly above God awful, because of the regulatory nightmare small businesses have been living through under Obama. It’s not like they would have been 162,000 full-time jobs with benefits. In recent months, service sector part-time jobs have made up around 75% of all job growth.
While companies like Microsoft, Intel, and IBM are all averaging layoffs of 15,000 full-time employees each, none of those families call it “economic success” after they find two or three jobs in the service sector to replace the one lost, and STILL can’t make what they were making. None of that concerns Obama though. That imbecile is out talking about 4.7% unemployment, and how under Trump we’d lose “all the progress we’ve made.”
In the video below, Peter goes into detail about what the devastating job numbers mean, and how at the very least now we can probably predict that there will be no rate hikes for the remainder of the year by the Fed. After all, even if Obama hasn’t faced reality, everyone else knows things are getting worse not better. For that reason, there is NO WAY the Fed would raise rates close to the election, and risk letting the whole house of cards come crashing down… not until they get Hillary in the White House first.
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Over the past few weeks we have spoken a lot on the Fed’s use of public announcements by its cadre of regional Fed Presidents to try to sway markets into believing that the central bank was sure to hike interest rates in either June or July. And of course, inside most of this rhetoric is the single key component that is normally ignored by the computer algorithms that make up 75% of all trades, and that being the concept of data dependency.
Well in June 3, data dependency just went bye bye.
May’s non-farm payroll report just came out a couple hours ago, and it sent a shock through the entire financial system. That is because the report printed a jobs number of just 38,000 new hires, which is the lowest single month since the height of the Great Recession back in 2010.
If anyone was “worried” about the Verizon strike taking away 35,000 jobs from the pro forma whisper number of 200,000 with consensus expecting 160,000 jobs, or worried about a rate hike by the Fed any time soon, you can sweep all worries away: moments ago the BLS reported that in May a paltry 38,000 jobs were added, a plunge from last month’s downward revised 123K (was 160K).The number was the lowest since September 2010!
The household survey was just as bad, with only 26,000 jobs added in May, bringing the total to 151,030K. This happened as the number of unemployed tumbled from 7,920K to 7,436K driven by a massive surge in people not in the labor force which soared to a record 94,7 million, a monthly increase of over 600,000 workers.
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As expected Verizon subtracted 35,000 workers however this was more than offset by a 36,000 drop in goods producing workers. Worse, there was no offsetting increase in temp workers (something we caution recently), and no growth in trade and transportation services.
What is striking is that while the deteriorationg in mining employment continued (-10,000), and since reaching a peak in September 2014, mining has lost 207,000 jobs, for the first time the BLS acknowledged that the tech bubble has also burst, reporting that employment in information declined by 34,000 in May.
The change in total nonfarm payroll employment for March was revised from +208,000 to +186,000, and the change for April was revised from +160,000 to +123,000. With these revisions, employment gains in March and April combined were 59,000 less than previously reported. Over the past 3 months, job gains have averaged 116,000 per month.
There is no way to spin this number as anything but atrocious. – Zerohedge
But perhaps even more ludicrous was the fact that the unemployment rate fell to 4.7 because 664,000 workers are no longer being counted by the government in the labor force.
Since the Federal Reserve relies heavily on these manipulated government jobs numbers, the idea of data dependency being used to determine when to hike or drop interest rates shows the incompetency of a body that supposedly employs hundreds of economists dedicated towards finding out the true state of the economy and of economic data. Thus this in turn should provide Americans the final straw that not only does the central bank have no idea what they are doing, but more often than not their policy decisions are based on incorrect and outdated models that have only made things worse since the Credit Crisis of 2008.
While a single month should never be used as a baseline for ultimate decision making, the fact that new jobs have declined versus expectations over the last three months shows a trend that is unlikely to change in the near future. And couple this with the fact that once again most jobs created were either part-time or low wage service sector ones, and you can pretty much bank on the fact that the Fed is now more likely to lower rates than they are to raise them going forward.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.
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IF YOU READ NOTHING ELSE, THE FOLLOWING POSTS ARE ESSENTIAL:
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FOR MORE GREAT MATERIAL FROM PETER SCHIFF:
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Peter Schiff: “Can Donald Trump Really Make America Great Again?”
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Peter Schiff: Here Comes the Great, Great, Great, Great Recession!
Peter Schiff: “Whatever Obama Was Calling Recovery… is OVER!”
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Peter Schiff: Death of the US Dollar Is Imminent; Fed Out of Options
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The belief that interest rates will rise significantly is held by many market participants who think that the Federal Reserve is artificially depressing rates below what would be a “normal” level. I disagree. As I indicated in “The Federal Reserve is actually propping up Interest Rates and what that means for Mortgage REITS,” http://seekingalpha.com/article/1514632 one benchmark rate that he Federal Reserve has absolute control of is the rate paid on reserves deposited at the FED. That rate is now 50 basis points, and was 25 basis points in until December 2015 after being zero since the inception of the FED in 1913 and almost a hundred years after that.
At the biannual monetary policy hearings, required by law, congressmen were becoming upset about the billions of dollars that were being directly transferred to the banks from the American taxpayers as a result of paying banks interest on reserves. From the inception of the Federal Reserve in 1913 until a few years ago banks never were paid on reserves deposited at the Federal Reserve. This was true even when the prime rate reached 21% in 1981. Janet Yellen, Federal Reserve Chair, explained that Federal Reserve was paying banks on reserves because that was the only way to get market interest rates up. She asserted that the traditional Federal Reserve tools of raising the target rate on Federal Funds or raising the discount rate would not be effective in forcing banks to increase the interest rates they charged borrowers on loans or paid depositors. Congressmen from both parties were no completely satisfied by Yellen’s explanation.
I regard Yellen’s explanation as supportive of my assertion in the above mentioned article that absent the policy of paying banks on reserves, the rate on US treasury bills would be actually negative. Throughout the industrial world, in many countries their equivalent of treasury bills are actually negative. Among major developed countries only in the USA are the monetary authorities trying to increase interest rates. In Europe and Japan many central banks have allowed short-term rate to fall into negative territory. Japanese 10-year bonds now have negative interest rates.
More important than the issue of whether interest rates would be negative absent Federal Reserve policy, is the question of why interest rates have been so low for so long. The world is clearly not in the grip of 1930′s style unemployment or deflation. My view is that interest rates are low because of the tremendous imbalance between the amount that savers have to lend and invest as compared with opportunities such capital to be deployed…”
http://seekingalpha.com/article/3975627
jdp…Yes, Hillary will be in the white house only to mop floors for president Trump, as pennance for wrong doing, at 15 bucks /hr.