Call (866) 878-2881 to learn more about our investment strategies.

Commentaries & market updates.

Strong Employment Numbers Portend Worsening Economic Imbalances

Strong Employment Numbers Portend Worsening Economic Imbalances

As crazy as this may sound, not all employment is good employment. Today’s labor department release of a larger then expected 337,000 increase in October non-farm payrolls, heralded by Wall Street as evidence of a vibrant U.S. economy, actually confirms the reverse: a dangerously imbalanced economy moving further off kilter.

The over-bloated service sector added another 272,000 jobs, while the beleaguered manufacturing sector lost an additional 5,000. In other words, the wealth producing sector of the economy lost jobs while the wealth consuming sector gained. The last thing the U.S. economy needs is more non-productive service sector jobs, which will only lead to higher trade deficits, as Americans imports more goods that service sector workers do not produce, and larger current account deficits, as greater interest payments become necessary to service growing external debts.

While this reality may have been lost among U.S. investors, who reacted foolishly by buying stocks, it was not the case among currency traders, who despite an initially, almost reflexive action to buy dollars on apparent “good” economic news, quickly re-evaluated the data and sold, sending the buck to a new all time low against the euro, a twelve year low against the Canadian dollar, and the U.S. Dollar Index to a nine year low. However, unlike recent dollar routs, U.S. bond prices plunged as well. In fact, today’s tandem move in bonds and the dollar may signal an end of the recent anomaly of the two moving in opposite directions. If so, the days of American consumers exchanging IOUS’s for imported goods may finally be coming to an end.

An article in yesterday’s New York Times referred to the hypothesized symbiosis that results from Asian producers subsidizing American consumers. This naive view equates American consumers, who get something for nothing, with Asian producers, who get nothing for something. The article also referred to a nameless influential group of “economists” who content that this “symbiotic” relationship can continue indefinitely. Not only are these “economists” wrong on their characterization of the nature of the relationship, but today’s action in the currency and bond markets suggests that the hosts in this parasitic relationship may be on the verge of opting out.

Sign up for our Free Reports & Market Updates.

You are now leaving

We are providing a link to the third party's website solely as a convenience to you, because we believe that website may provide useful content. We do not control the content on the third-party website; we do not guarantee any claims made on it; nor do we endorse the website, its sponsor, or any of the content, policies, activities, products or services offered on the website or by any advertiser on the site. We disclaim any responsibility for the website’s performance or interaction with your computer, its security and privacy policies and practices, and any consequences that may result from visiting it. The link is not intended to create an offer to sell, or a solicitation of an offer to buy or hold, any securities.

You will be redirected to
in 3 seconds...

Click the link above to continue or CANCEL