• It is the first Friday of the month, and that means that this morning we got the September Non-Farm Payroll number
  • Anyone who has listened to my podcasts and video blogs knows that for months I have criticized these so-called strong jobs reports
  • I think what’s going on is a transformation of the economy from full-time jobs to part-time jobs and that necessitates creating more jobs that you destroy, but the real story is beneath the surface
  • The report we got today was one of the weakest reports relative to expectations than we’ve had in years
  • This may be the final missing piece to the economic puzzle that shows that the economy is not as strong as everybody, including the Fed pretends it to be
  • And that the rate hikes expected to be around the corner are a distant blur on the horizon
  • Soon more will join me in recognizing the more QE is coming
  • Of course QE is not medicine; it is toxic
  • Let’s get down to the tale of the tape with the jobs numbers
  • First, the bigger number is the August number, which was expected to be revised up, was revised down to 136,000 jobs
  • July was also revised down
  • The September number was expected to be 203,000 and actually came in at 142,000
  • This is an average of 163,000 jobs for the last 3 months
  • Six of the last 8 jobs numbers have been revised downward
  • The August labor force participation rate was 62.6, which was the lowest of the “recovery”
  • The September rate dropped another .2 to 62.4, which is the lowest since 1977
  • Another 579,000 left the labor force in September – now there are 94.6 million Americans not working
  • Average hourly earnings, expected to rise .2, remained flat
  • In fact, the average work week declined from 34.6 to 34.5
  • If you remember, what has Janet Yellen stated as a requirement for a Fed rate hike? – An improvement in the labor market.
  • The labor market was singled out as a reason why rates remained at zero in September
  • While others speculated that rates might hike in October or December, I said the labor market is not going to improve, so the Fed will not raise rates
  • Janet Yellen is looking at labor force participation, which has declined to a new low
  • Yellen is also looking for an improvement in wages – that is going the other way
  • If you also look at the details of this jobs report, you’ll see that jobs created are low-paying jobs and jobs lost are higher-paying jobs
  • For example, we lost jobs in wholesale trade, manufacturing and logging – those are good-paying blue collar jobs
  • We gained jobs in leisure and hospitality, education and healthcare, retail trade – and a lot of these jobs are temporary or part time
  • This is why there is not real recovery, why people can’t save or buy houses
  • This weak jobs number is another excuse for the Fed not to raise rates
  • Some are pointing to this jobs number as proof of the Fed’s wisdom in not raising rates in September
  • However, Yellen stated that rates would go up if the economy continues to improve as the Fed expects – but the economy is getting worse
  • I’ve always said that the Fed does not want to raise rates because it does not want to look foolish if it has to back down from a rate hike
  • We got more economic data today: factory orders wer down 1.7% worse than the expected number of -1.3%
  • Also, last month’s number was revised down, making this the tenth month in a row that factory orders have been down, year over year
  • This only happens in a recession
  • Maybe we are in a recession
  • We don’t have Q3 GDP numbers yet, but yesterday the Atlanta Fed reduced its Q3 estimate to .9
  • The consensus on Wall Street and at the Fed is still 2.5
  • I think that given this jobs number, the downward revision of the previous month and the factory orders number in addition to economic data we’re likely to get next week, the Atlanta Fed may reflect a negative estimate for Q3 GDP
  • If we get a negative number for Q3, I think we’ll get an even larger negative number for Q4
  • If you look at the trend, the 4th quarter is always weaker than the 3rd
  • If we get a negative third quarter and a negative 4th quarter, technically that will be a recession
  • What is the Fed going to do? They can’t raise rates
  • I did not need to see today’s data in order to know that the Fed was not going to move
  • The Fed can’t move and they know it
  • The Fed will blame this weakness on a spillover from overseas markets
  • The first ease will be a change in rhetoric from the Fed
  • Rate hike expectation has fueled the dollar rally and the sell-off in gold and emerging markets
  • I think the Fed’s first step is will be to switch to a more dovish rhetoric, citing the downside risks to the economy
  • Expected lift-off date will be shifted to 2016, however it is an election year and may not happen even then
  • The second step is the admission that the economy is much weaker, and that might be after we are in a recession
  • I think this weak jobs number with downward revisions is just the beginning
  • Look at the Challenger, Gray layoff announced layoffs reports:
  • for the third quarter of this year, announced layoffs are the highest in 6 years
  • These are layoffs that are coming… jobs that disappeared when the hype failed to materialize
  • I think this year we will have the worse Christmas shopping season of the recovery
  • If you live by part-time employment, you die by it as well
  • By next year, I believe the number of Americans not in the workforce will hit 100 million
  • I want to also talk about the today’s market reaction
  • The Dow Jones initially sold off on the bad news
  • Buyers came in, however on the expectation that the Fed will not raise rates and the party will continue
  • The Dow had a 450-point move
  • I think this is a significant reversal and I expect further strength in the U.S. stock market, but even more strength in the overseas stock market
  • Foreign stocks had a huge up day today and I think there’s a lot more where that’s coming from, especially when we see more movement in the dollar
  • Currency traders have not connected the dots but I think they will
  • Oil was strong today, silver was up, gold was up about $25 – still has not broken out of its range
  • People still have not acknowledged that the Fed is not going to raise rates
  • Talk about “Buy the rumor, sell the fact”:
  • Normally, in past rate-tightening cycles, the U.S. dollar has risen on the anticipation of rate hikes; then the dollar sells off when the hikes arrive
  • This time, if the dollar rises based on an anticipation of rate hikes, and the hikes dont even come, can you imagine the sell-off?
  • That will work in reverse for gold; people have been selling gold for the same reason
  • Imagine how good it will be for gold when everyone who expected a rate hike gets QE4, instead
  • I think this is going to be the biggest up-leg of the gold bull market and gold stocks are going to take off if I am right
  • Gold stocks are cheaper today than they were when the last bull market began when gold was under $300 and ounce
  • You’ve got some tremendous opportunities because so many traders and speculators have got it completely wrong
  • The data is just starting to reveal that the Fed’s monetary policy did not work
  • The next crisis will not be a financial crisis, however; it will be a currency crisis
  • The foundation of the dollar rally is going to crumble
  • All the emerging market who loaded up on dollars during QE1 and QE2 while fighting the currency wars now are going to let the dollar tank
  • A lower dollar will support their currencies and allow commodities to rise
  • When the dollar tanks, and interest rates don’t go up, foreign debt becomes easier to service
  • This will be a massive reassessment of asset values and exchange rates
  • Everyone will come to the same conclusion at once that they were wrong
  • It will be surprising how quickly the current situation is going to reverse
  • So many people will have to move from one side of the boat to the other when they realize how wrong they have been.
  • Also, I wanted to talk about these regional Fed surveys that have been coming out over the last several weeks
  • The numbers have been much worse than expectations
  • The only kind of numbers you see in a recession
  • I was wondering why the mainstream media was not covering them
  • Zero Hedge is the only website that is covering this story
  • We did a survey of editors as to why these numbers were not reported and the answer came back that they are considered insignificant because manufacturing is a small percentage of the economy
  • Think about what this is saying:
  • Manufacturing is not important – manufacturing is the most important part of an economy
  • The second part of the problem is that manufacturing is a small part of the economy – manufacturing will be a big part of the economy when the economy collapses
  • Over the years we have conned the world into accepting our paper money for manufactured goods
  • If the Fed doesn’t raise rates, and launches QE4 and the dollar tanks, our days of riding on the global gravy train are over
  • Then, the fact that we don’t manufacture is going to be a big deal
  • What are Americans going to do with our paper money and no manufactured goods?
  • That’s when all the hidden inflation will manifest itself in a big way