- Today we got the Non-Farm Payroll report for the month of June
- Remember the last 2 reports were quite weak and everybody was hoping for a rebound in June to prove that April and May were a fluke and not a new trend
- In fact the Fed talked about that in their last FOMC meeting minutes
- The consensus was for 180,000 jobs to be created and the range went from a low of 130,000 to as high as 235,000
- The consensus average of that range was 180,000
- The actual number came in at 287,000, over 100,000 jobs above the consensus
- Now we did revise down the really bad number from May, and made it even worse
- Initially that number was 38,000 jobs and now we know it was just 11,000 jobs
- So about 70% of the jobs disappeared
- I have a good feeling that the reason June’s number is so high is that it’s just wrong, and we’ll see what kind of revision we get to it next month
- Remember, a good chunk of these numbers are jobs that the government assumes were created without evidence, based on the birth-death model
- I would suggest that far fewer businesses are actually being formed than the government believes
- In fact, its possible that more business are shutting down than are hiring
- Given the economy and the minimum wage, those business that are starting up are hiring fewer people than start-up historically hire
- I think these guesstimates are wildly optimistic and skewing all the numbers
- Unemployment rate, which was 4.7 last month and expected to notch up to 4.8, instead notched up higher to 4.9
- Private payrolls which were expected to rise by $170,000 jumped by $265,000
- But last month they revised a $25,000 gain to a $6,000 loss
- Why did unemployment move up? Because the labor force participation rate notched up from 62.6 to 62.7
- Obviously not all the people who re-joined the labor force could find jobs
- Average hourly earnings were expected to rise by .2%
- Again they disappointed; they rose by just .1%
- Overall, a mixed picture, but the headline number, the 287,000 vs 180,000 consensus
- That’s normally the number the market trades off
- And that is exactly what happened – as soon as the report came out we had a big jump in the dollar index and we had a big selloff in Gold
- Gold started out largely unchanged, went down about $22 on the news
- Silver sold off, it was down about 40-50 cents
- That was the knee-jerk reaction: strong dollar, weak gold, weak silver
- Why?
- A strong jobs number means the Fed is more likely to raise rates, right?
- Rate hike is coming, good for the dollar, bad for gold
- But what did I say on Wednesday’s podcast?
- I said that it didn’t matter what the jobs number was
- That gold was not going to go down, and if it was a weak number, I expected a big rally in gold
- But I also said that a strong number would not hurt gold
- Earlier in the year, a strong number would crush gold
- I said that what’s going on, and based on the latest FOMC minutes, I don’t care what the jobs number is
- The Fed is not going to raise rates
- Jobs have nothing to do with it, Jobs are the excuse
- The Fed can’t raise rates now because of the fragility in the banking system, all the things that were revealed by Brexit
- The market is sensing that and that’s why within the first hour gold reversed all of its losses and finished the day up about $5.60 at $1365.40
- The highest close of the year on a day when we had a huge beat in the Non-Farm Payrolls
- Silver had an even more impressive reversal; it rallied over $1
- Stocks really broke out; the GDX was up over 30% today to close at $30.54
- Not quite the highest close of the year
- Many silver and gold stocks hit 52-week highs today, some hit 2 or 3-year highs
- The overall stock market was also up just under 80 points; the Dow was up 250
- We have now recovered all of the post-Brexit losses
- The Dow now back up around 18,000
- The foreign markets have done so much better, particularly the markets I’m involved in
- Particularly the stocks we own – we are so far above where we were before Brexit
- We didn’t just catch up, we went way beyond
- But if you listen to the news tonight, they are going to say the market rallied because of the strong jobs number
- That’s not why the market rallied
- The market rallied because the strong numbers did not produce a reaction in the bond market
- In fact, the bond market, after a knee-jerk spike up in yields reversed and the 10-year ended up with a decline
- The 30-year closed at 2.1 – a new low for the year
- The reason the stock market went up is because the strong jobs number does not mean the Fed is going to raise rates
- It doesn’t matter what the jobs numbers are, the Fed can’t raise rates and that’s what the markets are sensing
- They sense the Fed can’t raise rates, which means more air in the bubble
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