The marginal increase of 34,000 non-farm payroll jobs that was reported in today’s employment data was far less than the 240,000 gain that had been widely forecast. However, the bad news didn’t stop there. The labor department also downwardly revised the prior two months by a combined 61,000 jobs, resulting in a net of 267,000 fewer jobs than had been the consensus. The U.S. has now had two consecutive months with fewer than 100,000 jobs being created, well shy of the 300,000 plus gains recorded in March and April (which even Wall Street should finally view as flukes) and less than half of what foolishly had been expected.
Despite these clear signs of a soft employment market, the unemployment rate itself actually slipped a notch to 5.5%. Perhaps this apparent anomaly is the result of homeowners concluding that extracting home equity is sufficient to make ends meet, and that they no longer need to be in the workforce. After all, homes no longer represent an expense, but due to the magic of home equity loans, a source of tax-free income. The Bush administration was quick to seize on this drop in the unemployment rate, as evidenced by John Snow’s press release (talk about a snow job). However, even Wall Street’s spin doctors were hard pressed to make lemonade out of today’s anemic data.
Investors reacted to the data by selling stocks and buying bonds. The Dow Jones fell by 147; the S&P shed 16.75 and the Nasdaq, now down over 11% this year, plunged 44.7. The major stock market indexes, which have now fallen for five of the last six weeks, have significantly broken key support levels, indicating much lower prices to come, and elevating the odds of a 1987 type crash. However, while stocks slid, bonds rose sharply, as the latter continues marching to the beat of economic weakness. However, bonds soon will march to the beat of a different drummer, inflation. As the most inflationary monetary policy in Fed history continues to drive the dollar lower and oil and other prices higher, bond prices will ultimately reverse course, sending interest rates soaring. When this change occurs, rising interest rates themselves will act to further weaken the economy, as the cost of paying those higher rates cripples consumer spending, ravages corporate profits, and sends the federal budget deficit to unbearable heights.
What is far more shocking than the weak job numbers is that none of the highly followed Wall Street pundits could see it coming. Despite mountains of evidence of an economic slow-down (which I have repeatedly cited), Wall Street “economists” have looked the other way, choosing instead to blindly follow a path to their predetermined bullish conclusions. In discussions on CNBC this morning, the “experts” were unanimous in their view that the jobs data numbers would beat expectation, and yesterday, on the same network, a chief “economist” of a major Wall Street firm confidently predicted over 300,000 new non-farm jobs. When I heard those predictions I actually screamed at my television. How could he possibly make such an absurd forecast? Had he not even looked at any of the data? Perhaps his true intention was to make a bullish rather than an accurate forecast.
However, despite the fact that this “economist” is either incompetent or disingenuous, I’m sure CNBC will continue to televise his “forecasts” as if they represented the objective, competent economic analysis of a reliable source. I wonder how much longer CNBC will continue to ignore the far more accurate forecasts that I have consistently been making. Is it simply that they do not like my conclusions or because they believe Euro Pacific Capital is not a credible brokerage firm? So while main-stream brokerage firms remain in the media spotlight as they lose money for their clients while passing off self-serving propaganda as legitimate analysis, Euro Pacific Capital will remain in the shadows, making money for its clients while disseminating unbiased, accurate economic and market analysis. Unfortunately, by the time the rest of Wall Street admits the truth; its clients will be out of money.