Squeezing The Consumer From Both Sides

The Federal Reserve raised the Federal Funds rate on December 13, 2017, marking the fifth increase over the last two years. Even with interest rates remaining at historically low levels, the Fed’s actions are resulting in greater interest expense for short-term and floating rate borrowers. The effect of this was evident in last week’s Producer Price Inflation (PPI) report from the Bureau of Labor Statistics (BLS). Within the report was the following commentary:
‘About half of the November rise in the index for final demand services can be traced to prices for loan services (partial), which increased 3.1 percent.’
While there are many ways in which higher interest rates affect economic activity, the focus of this article is the effect on the consumer. With personal consumption representing about 70% of economic activity, higher interest rates can be a cost or a benefit depending on whether you are a borrower or a saver. For borrowers, as the interest expense of new and existing loans rises, some consumption is typically sacrificed as a higher percentage of budgets are allocated to meeting interest expense. On the flip side, for those with savings, higher interest rates generate more wealth and thus provide a marginal boost to consumption as they have more money to spend.

This post was published at Zero Hedge on Dec 27, 2017.

Taking Turns With The B(L)S

This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
The worst aspect of this economy is by far the real effects pressed upon especially American workers. Of that there is no doubt, including young adults who would be working rather than ‘studying’ if the economy was at all like it has been described. The second worst part is watching politicians trade their descriptions for whomever occupies the White House. It does nothing to advance the cause of the American worker (or the global economy for that matter).
In early 2015, within the recent shadows of the BEA’s Q4 2014 GDP report that estimated growth that quarter of better than 5%, Republicans were more and more criticized for their economic criticism. The left-leaning Washington Post in February 2015 wrote:
A robust economy marked by a boom in jobs and a plunge in gas prices is threatening the longtime Republican strategy of criticizing President Obama for holding back growth and hiring, forcing the GOP to overhaul its messaging at the beginnings of a presidential campaign…
The improvement may mark a turning point in the nation’s seven-year-long debate over the state of the economy. Obama came to office amid a financial crisis, promising to turn the economy around. Republicans repeatedly – and, in the 2014 midterm campaign, successfully – argued that he had fallen short, with an economy suffering slow growth and unnecessarily high unemployment.

This post was published at Wall Street Examiner on December 21, 2017.

What You’re Not Being Told About The Real Economy

The year 2000 was a transition year in a lot of ways. Though Y2K amounted to mild mass hysteria, people did have to get used to writing the date with 20 in front of the year rather than 19. It was a new millennium (depending on your view of Year 0) that seemed to have started off under the best possible terms.
Not only were stocks on fire at the outset, the economy was, too. The idea of this ‘new economy’ leading toward a permanent new plateau of low inflation growth, driven by the breathtaking productivity gains in telecommunications and computing, seemed quite real on the surface. US GDP advanced by more than 3% in 15 straight quarters from Q2 1996 through Q4 1999, averaging a sizzling 4.7% in those nearly four years of dot-com supremacy.
The labor market was clearly robust, too. In March 2000, the BLS estimates (current benchmarks) that total payrolls (Establishment Survey) rose by 468k from that February. That brought the 6-month average up to +303k, a record of expansion that also mystified economists for its lack of inflationary wage pressures. In any case, the late nineties had roared up to the doorstep of the 21st century.
We all know what happened in April 2000, as investors suddenly got cold feet about first the high flying NASDAQ. It wasn’t just stock prices and IPOs, of course, as it really meant one of the major economic themes of that age was in danger being undermined, if not thoroughly debunked. The new economy of the 21st century might not have been grounded so solidly in true economics (small ‘e’) as everyone thought (especially those running the Fed).

This post was published at Zero Hedge on Dec 10, 2017.

Where The Jobs Were In November: Who’s Hiring… Who Isn’t

Assuming that the BLS’ estimate of avg hourly warnings growing only 0.2% in November is accurate, it would imply that – as has often been the case – the bulk of job growth in November took place in minimum-paying and other low-wage jobs. However, a breakdown of jobs added by industry shows the contrary to expectations, the bulk of new job creation, and 3 of the 4 top category, were not in the “low wage” bucket. In fact, as shown below, with the exception of Education and Health jobs which rose by 54K in November, Manufacturing (+31K), Professional and Business Services (+27), and Construction (+24) were the fastest growing occupations in the previous month.

This post was published at Zero Hedge on Dec 8, 2017.

November Payrolls Jump 228K, Beat Expectations But Wage Growth Disappoints

In a continuation of the recent theme shown by the labor market, the BLS reported that November payrolls rose by a seasonally adjusted 228K, beating expectations of 200K, if lower than October’s downward revised 244K (from 261K) while September was revised up from +18,000 to +38,000. With these revisions, employment gains in September and October combined were 3,000 more than previously reported.
There were few surprises in the report, which saw the labor force participation rate flat at 62.7%, near a 30+ year low, while the unemployment rate also remained unchanged at 4.1%, the lowest since Dec 2000.
And while overall the labor report was strong, there was once again disappointment in wage growth, with average hourly earnings rising 0.2% m/m, below the consensus estimate of est. 0.3%, with the October number revised lower to -0.1%. The Year over year number also missed, printing at 2.5%, up from October’s 2.3% but below the consensus print of 2.7%.

This post was published at Zero Hedge on Dec 8, 2017.

Jobs Report Preview: Here’s What Wall Street Expects

What a difference a year makes: last December, just as the ECB was about to shock the market with the announcement of its first 20 billion QE tapering, macroeconomic data mattered, especially since the Fed’s tightening intertia appeared to truly be data-dependent, if only for a very short period of time. Fast forward one year, when 3 rate hikes into the Fed’s “paradoxical” tightening cycle, in which much to the BIS’s shock the higher Fed Funds rates rise, the easier financial conditions get, a “dovish” December rate hike is assured, and as such Friday’s payroll report, which will probably print withint a few thousands of 200K, is completely irrelevant.
Still, to at least some headline-scanning algos, the jobs report will matter, if only so that it can respond in a knee-jerk reaction, and be stopped out by yet another group of headline-scanning algos whose only job is to make sure the first group of algos pukes their trades at a loss, regardless of what the underlying data is.
With that in mind, and with the understanding that fundamental data hasn’t really mattered since 2009, here is what Wall Street expects – and algos – will expect from tomorrow’s charade, which no matter what will send the market higher.
From RanSquawk
The BLS will release November’s Employment Situation Report at 1330 GMT (0830 EST) on Friday 8 November
After October’s bounce-back, analysts expect normalisation in the rate of payroll additions (consensus 200k) Wage growth may be buoyed by calendar effects, pushing the Y/Y rate up to 2.7% SUMMARY: Analysts expect payroll growth to ease in November; the October data was boosted by unwinding negative effects from hurricanes Harvey, Irma and Maria, and therefore, analysts will see a slowing as more of a normalisation, rather than the beginning of a new slowdown. There may be some upside in retail hiring given the early Thanksgiving Holiday. Rounding effects may result in the rate of joblessness slipping slightly. Earnings growth is likely to be supported by calendar effects, which may push the Y/Y rate up to 2.7%, matching the pace of annualised wage growth seen in Q3.

This post was published at Zero Hedge on Dec 8, 2017.

New York Fed’s ‘Underlying Inflation’ Hits 11-Year High

Something is moving beneath the surface. Today is inflation day. After the Bureau of Labor Statistics released its Consumer Price Index for October this morning, several other inflation gauges were released, all based on rejiggering in some way the minute disaggregated details of the BLS data pile. This includes the Atlanta Fed’s ‘Sticky-Price CPI,’ which ticked up 2.2%, and the New York Fed’s ‘Underlying Inflation Gauge,’ which hit the highest level since August 2006.
Inflation – when defined as increase in consumer prices – is very much in the eye of the beholder, or rather of the spender. Every household has its own inflation rate, depending on whether they have kids in college, have high medical expenses, or rent an apartment in a city where rents are high and soaring at double-digit rates.
And now that the New York Fed’s Underlying Inflation Gauge has hit an 11-year high, in a sign of things to come, we better take a look at it.
The UIG comes, like most inflation measures, in two forms: The ‘prices-only’ UIG, which is based on 223 disaggregated price series in the CPI and is comparable to a ‘core’ inflation measure; and the ‘full data set’ UIG, which incorporates all the data of the ‘prices-only’ UIG plus 123 macroeconomic and financial variables.

This post was published at Wolf Street on Nov 15, 2017.

A new record yet again: 95,385,000 Americans not in labor force. The army of non-working Americans continues to grow.

We continue to live in a country with two very different stories to tell. In one of the stories, we have a country with a very low unemployment rate and a record in the stock market. In the other story we live in a place where 95,385,000 Americans are not in the labor force. This new record was reached in the latest set of data released by the Bureau of Labor and Statistics (BLS). This is a bigger issue than most would like to admit. Many older Americans are drawing substantially from the government and we now have a younger American population working in low wage positions. This is a new record that isn’t something to be proud about.
Another record of those not in the labor force
The number of Americans not in the labor force is troubling when you dig deep into the data. Part of this is being governed by Americans retiring but millions of these people are falling into this category for harder to characterize reasons.

This post was published at MyBudget360 on Nov 11, 2017.

JOLTS: Hiring Slides To Lowest In 6 Months As Job Openings Remain Near All Time High

After a burst of record high job openings which started in June and eased modestly in August, today’s September JOLTS report – Janet Yellen’s favorite labor market indicator – showed another modest increase in job openings across most categories in the hurricane-affected month, with the total number rising fractionally 6.090MM to 6.093MM, above the 6.091MM estimate, resulting in an unchanged Sept. job opening rate of 4%. Still, after nearly two years of being rangebound between 5.5 and 6 million, the latest job openings number confirms that there may be a “breakout” about what was the previous resistance level, as increasingly more jobs remain unfilled in a labor market where skill shortages and labor imbalances are becoming structural.
The number of job openings was little changed for total private and for government. Job openings increased in professional and business services (+156,000), other services (+52,000), state and local government education (+36,000), and federal government (+15,000). Job openings decreased in accommodation and food services (-111,000) and information (-28,000). The number of job openings was little changed in all four regions. Now if only employers could find potential employees that can pass their drug test…
Comment on the impact from the hurricanes, the BLS said that “Hurricane Irma made landfall in Florida during September, the reference month for the preliminary estimates in this release. All possible efforts were made to contact and collect data from survey respondents in the hurricane-affected areas. A review of the data indicated that Hurricane Irma had no discernible effect on the JOLTS estimates for September.”

This post was published at Zero Hedge on Nov 7, 2017.

THINGS COULDN’T BE BETTER – RIGHT?

Donald Trump tells me our best days are ahead. Once his tax cut plan is passed, the future will be so bright I’ll have to wear shades.
Sometimes a single chart reveals the truth being obscured by the Deep State propaganda machine, working overtime selling their economic recovery narrative. The economy most certainly is booming for Wall Streeters and D. C. parasites sucking on the teet of Federal government largess. But for the average working deplorable, this supposed recovery has passed them by.
The cognitive dissonance is strong, as average Americans want to believe what their ‘leaders’ are telling them to believe, but their personal financial situation contradicts the narrative. Even using the highly manipulated data peddled by the BLS, any critical thinking individual can see through the lies, misinformation and bullshit.

This post was published at The Burning Platform on Nov 6, 2017.

Nothing Really Matters, Anyone Can See

The US labor force is rapidly shrinking. Wage growth is non-existent. The vast majority of the American people have no savings and little hope for economic improvement. But none of that matters with the G-3 central banks in charge!
So today saw the latest installment of the BLSBS. If you check your “mainstream” sources, you;ll be led to believe that everything is great and getting even better!
***
But look under the hood and you see that this is all bullshit. The unemployment rate that Drudge blares on behalf of Trump is only at its “lowest since 2000” because October saw an astonishing 968,000 people leave the labor force. This leaves the total number of people NOT in the labor force at a record 95,385,000. Then, as ZH notes, “this took place as the number of employed Americans declined by 484,000, however since the unemployment rate denominator dropped more, it translated into an actual decline in the unemployment rate!” Read all about it here:

This post was published at TF Metals Report on Friday, November 3, 2017.

Where The October Jobs Were: Record Waiters And Bartenders

Following last month’s sharply upward revised jobs report, whose initial negative print of -33,000 was since revised to a positive 18K, there was a sharp jump in October jobs, which while failing to meet consensus estimate of a +310K print, was still a solid +261K. But which jobs contributed the most? The answer, not surprising, is that the single biggest contributor was the same job category which was devastated in the previous month.
Readers will recall that last month we pointed out that workers in “food service and drinking places” aka waiters and bartenders, suffered their biggest drop on record, plunging by a whopping 111K. Well, one month later it’s payback time, and according to the BLS, 88,500 waiters and bartenders found jobs in October, as the “plowhorse” sector of the so-called recovery found its spark. As shown in the chart below the monthly increase in waiters and bartenders was a record.

This post was published at Zero Hedge on Nov 3, 2017.

Home Prices In All US Cities Grow Faster Than Wages… And Then There’s Seattle

According to the latest BLS data, average hourly wages for all US workers rose at a respectable 2.9% relative to the previous year, if still below the Fed’s “target” of 3.5-4.5%, as countless economists are unable to explain how 4.3% unemployment, and “no slack” in the economy fails to boost wage growth. Another problem with tepid wage growth, in addition to crush the Fed’s credibility, is that it keeps a lid on how much general price levels can rise by. With record debt, it has been the Fed’s imperative to boost inflation at any cost (or rather at a cost of $4.5 trillion) to inflate away the debt overhang, however weak wages have made this impossible.
Well, not really.

This post was published at Zero Hedge on Oct 31, 2017.

Unemployment Is a Geography Lesson

According to the Bureau of Labor Statistics (BLS), the US economy is at full employment, or close to it. Yet it doesn’t feel that way for many Americans. Even if you have a secure job, you probably know people who don’t.
On the other hand, many small-business owners and HR people complain that they have trouble finding qualified workers – and that’s true for well-paid, low-skill jobs too.
What gives?
My theory: it’s all about geography.
Percentages Are People
In September, the US unemployment rate dropped to 4.2%. That number got overshadowed by a more disturbing 33,000-person drop in total employment, due to Hurricanes Harvey and Irma.
But 4.2% unemployment is about as low as we’ve seen in recent history. Here’s a chart showing the monthly jobless rate since 1970.

This post was published at Mauldin Economics on OCTOBER 17, 2017.

Here’s How the Unemployment Rate Dropped Last Month While U.S. Lost 33,000 Jobs

This morning’s September jobs data from the Bureau of Labor Statistics (BLS) does not actually capture the extent of the economic misery in the U. S. mainland last month. The data showed a stunning loss of 33,000 jobs (the first time the U. S. has had a negative figure since 2010) while simultaneously reporting that the unemployment rate dipped to 4.2 percent from 4.4 percent in August.
But here’s the quirky thing about how the U. S. government’s counts people as being employed: according to the official web site of the U. S. Department of Labor’s Bureau of Labor Statistics, an individual can be counted as employed even if they didn’t receive a dime in salary during the week the data is collected. The BLS explains its rationale as follows: (Italic emphasis added.)
People are considered employed if they did any work at all for pay or profit during the survey reference week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Individuals also are counted as employed if they have a job at which they did not work during the survey week, whether they were paid or not, because they were:
On vacation;
Ill;
Experiencing child care problems;
On maternity or paternity leave;
Taking care of some other family or personal obligation;

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

6/10/17: Life-Cycle Wages and Trends: September US Wage Inflation in Perspective

Last month, I wrote an editorial for @MarketWatch on the declining fortunes of the American wage earners. And this week, the BLS released new data on wage growth in the U. S. economy. The new numbers are ‘shiny’.
Per headlines reported in the media, the BLS reported that the annual increase in Average Weekly Earnings was an impressive 2.9%, which is:
Well above the 2.5% rate of growth expected in prior estimates, Well above the 2.5% reported last month, and The highest since the financial crisis This is a great print. Except, it really is not all that exciting, when one reaches below the surface.
Take the following summary of recent growth rates (H/T @BySamRo):

This post was published at True Economics on Saturday, October 7, 2017.

BLS Caught Fabricating Wage Data

While it’s not the first time we have observed the BLS manipulate data (the last time was in “This Is What Happens When The Bureau Of Labor Statistics Is Caught In A Lie“), never before had we actually caught the Bureau Of Labor Statistics openly fabricating data. Until now.
As reported earlier today, in one of the most closely watched statistics in today’s payrolls report, the BLS reported that the annual increase in Average Weekly Earnings was a whopping 2.9%, above the 2.5% expected, and above the 2.5% reported last month. On the surface this was a great number, as the 2.9% annual increase – whether distorted by hurricanes or not – was the highest since the financial crisis.

This post was published at Zero Hedge on Oct 6, 2017.

September “Hurricane” Payrolls Tumble 33,000, First Drop In Seven Years, As Wages Surge Due To Labor Shortages

As noted earlier, Wall Street was completely clueless ahead of today’s payroll, with most expecting a small positive print but two brave forecasters went so far as to predict that the recent hurricanes would result in a negative print, and sure enough, moments ago the BLS reported that in September, the US economy lost 33,000 hurricane distorted jobs, the first payrolls decline since September 2010.

While the September number was expected to be noise, the historical revisions were more problematic: total nonfarm payroll employment for July was revised down from +189,000 to +138,000, while August was revised up from +156,000 to +169,000. With these revisions, employment gains in July and August combined were 38,000 less than previously reported. After revisions, job gains have averaged 91,000 over the past 3 months.
Offsetting the poor headline print from the Establishment survey, according to the BLS Household Survey, the number of employed Americans soared by 906,000 to 154.435 million, a sharp 1.6% jump from the year prior.

This post was published at Zero Hedge on Oct 6, 2017.

Time To Lay Low

Even though we’ve tried to warn and prepare, none of that makes the inevitable Spec wash-and-rinse any easier to watch.
At the end of the day, it just is what it is. The year 2017 has unfolded almost precisely as we initially forecast back in January with two steps back following every three steps higher. We had carried a target of new highs for 2017, near $1320, through this most recent rally that began on July 10. That we instead reached $1360 was just a bonus, I guess.
From here and with Bank NET short positions hitting extremes over the past two weeks, we must expect further downside as Specs continue to be washed out and USDJPY/CDG reacts negatively to any hint of positive economic news that serves to reinforce Mother’s hogwash of yesterday. As we discussed in yesterday’s podcast, this period of frustration could very well last all the way through the next BLSBS two weeks from tomorrow. Once that’s behind us…and hopefully haven’t fallen too far from here…the stage will be set for the final three-steps-forward part of this year’s pattern.

This post was published at TF Metals Report on Thursday, September 21, 2017.