Nonfarm Payrolls - "Fuhgeddabouit" !
It is that time again - Nonfarm Payrolls.
However, I really do not understand the Fed's nor the market's thinking.
I am now ignoring the jobs data nor will I use it as a benchmark on the
economy, no matter how much emphasis the Fed put on it. It doesn't
matter what the headline says, and unless there is a monumental
transformation in the detail, just "forget about it!"
Source: Panoramio
The U.S, economy
is VERY weak and the Fed will not recognize it and while they believe
the economy is getting better they will raise rates again at some time
this year. However, rate hikes will cause a recession and we will go
back to QE for a fourth time.
That is some shout - I know.
However, I admit, I might be wrong - in fact I am foolish to come up
with such a forecast - what am I saying? Let me retract that ... let's
start over...
The Fed will NOT raise rates at all - They will go straight to QE4 ...
What
I am looking forward to most of all is how the Fed will go about the
transformation. Will they simply cut rates or go straight to QE4 without
announcements or forward guidance where they will have to admit they
got it ALL wrong and by doing so, cut off their nose, despite their
face? Or, will they seek to preserve their trustworthiness and put their
hands up, saying, "We got it wrong and we are terribly sorry ... We have known for some time that, but we had hoped that ..." et cetera, et cetera!
Is
it not telling enough that if the Fed actually truly believed that the
economy was strong that they would already be raising rates? The fact
that they are not speaks volumes and action, or no action in this case,
speaks a thousand words. So, it is either that the Fed know and are
waiting for the right time to tell us that they got it wrong, or ...
... this is the Fed ...
Source: Snappy Pixels
Right, let's
get factual. First, can I please remind you that we had the GDP data for
the first quarter in the U.S. that has proven the economy is bad - and
in my opinion, it is already in recession and has been for some time.
The following revisions will prove that the U.S. is in recession.
The
first estimate arrived missing expectations. Gross domestic product
increased at just a 0.5 percent annual rate vs. just 0.7% expected. This
was the slowest since the first quarter of 2014, or the slowest pace in
two years. Some will blame consumer spending or a strong dollar that
has continued to undercut exports, but then they will quickly revert to
how buoyant labor market is. Well, looking back, the labour market's
headline has been steady now for about six years while GDP can fluctuate
on a massive scale. How is that possible?
Something is out of
whack here - one of these numbers is wrong, or are we just missing the
bigger picture - I think the latter.
Source: Botherer
Now where do we go from here?
Well,
we need to look at data for, say, the 2nd quarter, and guess what? The
U.S. manufacturing gauge fell to the lowest in more than six years. The
flash manufacturing purchasing managers index from Markit fell to a
reading of 50.8 in April from 51.5 in March, and a weaker gain in
employment was one of the main factors weighing on the index. Remember,
this is not about the first quarter anymore, we are looking at data
coming through about the current times and second quarter, and this
ain't handsome. The consensus was looking for an improvement on March
and most were calling for 52. The lowest estimate was 51.5 in fact, yet
what did we get? - A hop skip and a jump, not even ... from 50.
So,
while this will not affect the first quarter estimate, it certainly
gives us an idea of how bad things are. However, if you want to look at
more first quarter recessionary type inroads, just take the durable
goods data for example. We were looking for an increases of 1.6% for
March, but what did we get? We got a very ugly 0.8%, and the Y.Y? We got
-2.5%. That is recessionary if you ask me! However, the revisions were
even worse. For Feb, we got -2.8%, but we got a revision of -3.1% - So
you see where I am going with this?
Stagflation is all over the place and things are starting to look all out of whack.
Markets are decoupling
Look
at Oil - we get a big jump in the black stuff yet the stock market is
no longer being driven by it and it is decoupling in fact - stocks need
some serious support from somewhere. Stocks are tumbling this month led
by the NASDAQ with Apple reporting earnings well below estimates with
the first ever decline in iphone sales, There are many other big caps
coming out with earnings less than expected as well and meanwhile stocks
had been priced for perfection, but we are not seeing anything like
it.
Source: Clothesline
The economy is sicker than it was in 2008 and needs more medicine, (Forget about Fed hikes, the U.S. economy really wants more Cocaine), but no one really wants to acknowledge that - apart from the bond market perhaps?
Watch bonds
The
Federal Reserve needs to stay on hold, or cut, or print money in my
opinion and they had better do it soon if they wish to rescue the
economy from imploding, meanwhile by stealing the fate in the U.S.
dollar eventually. I think that the markets are finally starting to see
that, especially after the dovish Fed last week and they are poised for a
major turnaround - Watch gold and oil continue to rise and bonds
continue to drop - Look at yields, because they keep rising - and why?
Because bond markets smell stagflation and they are forecasting eventual
inflation with QE infinity or even negative rates.
As for non-farm payrolls - well, I will not be at my desk for that one:
Source: 123rf
I will pick up the
pieces on Monday, but I'm expecting the usual 200k rise in a jobs
market of part-time workers with weekly earnings continuing to fall.
