Non-Farm Friday – Is America Working and Do the Markets Care?


On the whole, job growth has been weaker than expected, especially since the US population grows by 2M people each year so we need 166,000 new jobs per month just to stay even.  That's just about been Trump's average since he was elected, a far cry from the 10.2M jobs (212,500 per month) Obama added in his second term.

In fact, we generally average 200,000 jobs per month under Democrats:  Clinton added 23.5M new jobs in two terms and even Carter added 10.3M jobs in a single term and Kennedy/Johnson put up 15.6M jobs in 8 years.  Even Ronald Reagan managed to add 15M jobs in his 8 years so Trump will be a real outlier if he continues at this anemic pace but, fortunately, he can always point to the Bushes, who added a total of 3.3M jobs in 12 combined years at the helm, leaving 32M new Americans with very little opportunity to work.  

It would seem amazing that Americans would want to return to those days yet they voted for a guy who espoused the same policies the Bushes used to run this country into the ground (S&L Crisis from Poppa, Great Recession from Junior) but that's where we are at the moment and now the question is whether we WANT a strong job number or not because a strong jobs number (over 200,000) could take the Fed off the table at the next meeting (18th) as this is the last major data-point before they make their decision.

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With China "fixed" and strong jobs and record-high market levels – what possible justification would the Fed have in two weeks to lower rates?  Inflation is clearly climbing and wages are rising – these are generally reasons the Fed would RAISE rates, not lower them so, if you are a big fan of FREE MONEY – you'd better hope this job report is another disaster – like last month was!  

8:30 Update:Disaster it is!  Only 130,000 jobs were added in August and July, which was already a weak 148,000, has been revised down to 131,000 so, even with that – we're worse than last month!  Hourly earnings, on the other hand, jumped 0.4% – double what was expected by leading Economorons and that simply means employers are paying the same workers more money for the same output – something we already knew from the Productivity and Payroll Reports earlier in the week – that can't possibly be good for Corporate Profits!3

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That shold take some steam out of the index runs and we're topping out at 26,850 on the Dow (/YM), 2,990 on the S&P (/ES), 7,900 on the Nasdaq (/NQ) and 1,525 on the Russell (/RTY) which would be a shame as we had predicted 27,000, 3,000 and 8,000 as the shortable tops (with the Russell too crazy to predict).  

Still, it's been a fantastic 2-week run and most likely we drift along up here, into the Fed, just like we did into the July 31st announcement, when they gave us a 0.25% rate cut and the markets promptly fell off a cliff.  Anything but another 0.25% cut on Sept 18th will send us right back to the lows and I'm not sure even a quarter-point cut will save us from another correction in any case. 

We had a good, technical week and I doubt today's number will do too much damage as it keeps the Fed on the table so we're back to waiting on the Fed – again.

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Have a great weekend, 

  • Phil