As we expected, yesterday’s NFP was another stinkeroo. The 121k number was significantly below the 200k consensus, and far, far away from some of the myopically optimistic upside outliers.

Let’s delve beneath the surface a bit, first via Barron’s Alan Abelson:

"As
Philippa Dunne and Doug Henwood, our favorite parsers of the monthly
employment reports, put it: "This was a weak report, with few signs of
strength under the surface." They note that the 121,000 slots added
brought the average monthly gain in the second quarter to a meager
108,000, sharply below the first quarter’s 176,000 and even more
sharply below the long-term average of 236,000.

A full 25% of the gain was from government hiring, mostly local and
state . . .

A good chunk of the 75,000 new jobs from private services were
from health care and the bar and restaurant sector. That prompts our
jolly duo to speculate that "maybe our new economic model is one in
which vigorous eating and drinking inspire a lot of doctor visits,
which reinvigorate us for a fresh round of eating and drinking."
We’ll
drink to that.

Unemployment held steady in June, at 4.6%. But a glance at the data
in the report reveals the percentage of people who want a job but can’t
get one edged up to 5.8% of the labor force from 5.3% in May
. If you
toss in the number of folks who work part time even though they’d
rather be working full time
, the percentage rises to 8.7%, from 7.9%
the month before." (emphasis added)

So not only was the top line poor, but the data points touted as strong — primarily, the low unemployment number — was lousy also.

Jared Bernstein of EPI provides some insight into why employment growth has been slowing:

"An important hint from today’s report, for example, shows that employment in residential construction fell 6,800 over the past two months, the sector’s first back-to-back monthly losses since the spring of 2001. Thus far this year, residential construction employment is up 7,000, compared to an increase of 20,000 over the same six-month period last year. And while employment in real estate was up 5,000 last month, job growth among credit intermediaries and insurance carriers—so-called "downstream industries" from the housing sector—has been notably flat over the past few months. In other words, there are many connections between the housing sector and other sectors in the job market, and the cooling of that sector has far-reaching implications."

Regular readers of The Big Picture will no doubt recognize this line of thinking.

The bottom line is that this cycle — artificially driven by government stimulus — is coming to the end of its unnatural life.  Look for a return to the prior period of flat growth and even weaker job creation — at least until the next round of Rate Cuts restarts the real estate machinary . . . 

>


Sources:
Get Shorty
ALAN ABELSON
UP AND DOWN WALL STREET 
Barron’s MONDAY, JULY 10, 2006   
http://online.barrons.com/article/SB115231256503801178.html

Slow job growth in second quarter reflects pace of overall economy
Jared Bernstein with research assistance from Yulia Fungard
EPI, July 7, 2006
http://www.epi.org/content.cfm/webfeatures_econindicators_jobspict_20060707

NFP: much ado about very little
The Big Picture, Friday, July 07, 2006 | 06:45 AM
http://bigpicture.typepad.com/comments/2006/07/nfp_much_ado_ab.html

Category: Data Analysis, Economy, Employment, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

44 Responses to “NFP: Another in a long series of disappointments”

  1. prw says:

    Does anyone know the background of these people that Barrons’ Ableson references ? Are they the best and brightest on Wall Street or Academia ?

  2. They put out the Liscio report — which is a very well respected analytical service.

    So now that any potential ad hominem attack failed, what else can we bring up to avoid discussing the actual data?

  3. prw says:

    very sensitive question ????

  4. no, I am on troll patrol –

    been getting too many weasel posts, spam, and other creeps –

    sorry if I caught you in the cross hairs

  5. Richard says:

    many are bashing the ADP Payrolls report for being way off, again. problem is ADP doesn’t do the forecasting, their partner Macroeconomic Advisors does. ADP provides the data and Advisors filters and runs it through their own statistical engines. Advisors weighs the ADP portion at 70% and BLS at 30%. Still their projections were way off. Still a useful measurement to look at as part of overall analysis IMO. Predicting monthly jobs is tricky business and as we know the margin of error considering the size of the US workforce could be that 121k. The key of course is the trend.

  6. ~ Nona says:

    Barry, sorry that you have to be on troll patrol…and THANK YOU for being on troll patrol.

    ~ Nona

  7. JWC says:

    Barry, I don’t mind honest debate but I can’t stand trolls. So keep up the good work.

    And by the way, I’m glad that even though you have your new “pay” blog, you are still posting over here. As a retired grandmother, our financial efforts are over and are on a conservative auto pilot. We no longer buy. But I love your blog and am trying to learn more about all things financial. So thanks for continuing your posting here.

  8. JWC says:

    Barry, I don’t mind honest debate but I can’t stand trolls. So keep up the good work.

    And by the way, I’m glad that even though you have your new “pay” blog, you are still posting over here. As a retired grandmother, our financial efforts are over and are on a conservative auto pilot. We no longer buy. But I love your blog and am trying to learn more about all things financial. So thanks for continuing your posting here.

  9. jcf says:

    Construction continues apace in the new-home industry and inventories build. A major slackoff in hiring has not yet occurred. A goodly share of the NFP uptick was probably seasonal hiring, lifeguards, camp couselors, etc.

  10. gsc says:

    what are your thoughts on :
    —–The level of job growth that is “consistent with economic growth near potential and a steady unemployment rate” is probably closer to 100,000 instead of 150,000, as “it used to be,” Chicago Fed President Michael Moskow said last month. (bloomberg)

  11. john says:

    Yet on the same day these crappy numbers are published the First Appointee gets on the soap box and tells the country how good we are doing, how his tax cuts have made the economy so robust, blah, blah, blah.

    I don’t know who he is talking to. Probably the rich folks who have benefited from his policies. Nobody else can get in to see him.

    One of these days the media is going to find out that most intelligent people in the country are ignoring them and the rest of the people could care less. In a nation of 350 million people to suggest that you are relevant because a quarter million watch your program is a bit ingenious. Wonder what the other 349 million 750 thousand folks are doing? (Actually I know what I’m doing it’s the rest of you I’m wondering about).

    Point is the market tanked on a bad jobs number. Since the jobs number has been declining month over month and that is a “data point” shouldn’t that have suggested that the Fed might stop now?

    The fact is we are in a recession. It isn’t “official” it is real and I have found that there is a difference between those two states.

    This is going to be the shortest period ever between raising interest rates and lowering them the world has ever seen. I wouldn’t be surprised to see 4.5 before the end of the year. (Well, I would, but we’ll see).

  12. Andy says:

    john: slower growth does not always equal lower inflation in the short term. The Fed is saying they’re out to fight inflation, not necessarily spur growth. In the same set of reports yesterday, wages were creeping up even with fewer new jobs being created. Don’t be suprised when the rates don’t come down this year.

  13. j. cameron says:

    “One of these days the media is going to find out that most intelligent people in the country are ignoring them and the rest of the people could care less. In a nation of 350 million people to suggest that you are relevant because a quarter million watch your program is a bit ingenious. Wonder what the other 349 million 750 thousand folks are doing? (Actually I know what I’m doing it’s the rest of you I’m wondering about).”

    We are a nation of not quite 300 million . . .

  14. fx says:

    i would suggest that the pre-announcement by MMM and AMD was what sold the market…. futures were fine before those reports , then turned down right into the cash market

  15. V L says:

    “We are a nation of not quite 300 million . . .”

    vs

    “a nation of 350 million people”

    Both of you are correct. The only difference is one counts all legal residents and the second one takes into consideration both legal and illegal.

  16. PeterB says:

    The behavior of the home builder stocks Friday morning was particularly strange as they all (BHS excepted) jumped in lock step. From there they drifted lower, with some actually closing in the red.

    Maybe the MMM and AMD news was the catalyst for the retreat? And maybe the early rally was driven solely by program buying?

    Who knows. Anyway, it’s as if the early buyers were encouraged by the prospect that poor jobs == recession == end of rate hikes. Then again, recession == fewer home buyers == lower profits. The latter is more significant for the HBs, imo.

    That little rally could be the final gasp of a necessary correction in a strong downtrend before the march lower resumes.

    Thanks for a great blog, Barry.

  17. V L says:

    “i would suggest that the pre-announcement by MMM and AMD was what sold the market…. futures were fine before those reports , then turned down right into the cash market”

    Not so fast!

    1. AMD warned the night before

    2. The initial futures spike was a knee jerk reaction to a 121K number, under the initial assumption – it was lower than expected so it means good news. Actually, it gets even more complicated: there is evidence that the number 121K had leaked before it was announced. (documented by unusual trading activity in bonds and futures before the announcement)

    3. When the official data came out the futures initially spiked higher. It was the confirmation response that the number that leaked earlier was correct. The interesting part was that after examining all the data everyone noticed that wages were up 0.5% hourly and 0.8% weekly (inflationary big time) and 121K number did not look that good (the economy is slowing but inflation is picking up); and the futures started drifting down.

    4. MMM warning was a catalyst expediting already underway drifting down process.

    This is how I saw it last Friday (the above)

    This is what other analysts were saying in the letters to their clients:

    “Abhijit Chakrabortti, U.S. equity strategist at J.P. Morgan Chase (JPM) , said he expects earnings to grow just 7% during the second-quarter as information-technology companies, financial-services firms and consumer-focused businesses disappoint.”The market will need to see a reasonable sized earnings beat combined with positive guidance for the third quarter and beyond for the second-quarter earnings season to provide a positive catalyst,” he wrote in a note to clients on Thursday. Just meeting second-quarter expectations won’t be enough because there are “rising doubts that any near-term earnings performance can be repeated” and increasing concerns about inflation and interest-rate risks, he added.”

    “Expectations for financials have been revised up,” he said, but “we are concerned that bank earnings may modestly miss. J.P. Morgan’s Chakrabortti said he is more concerned about commercial banks, which, due to rising rates, are going to have to start paying interest on deposits that, up to now, were non-interest bearing.

    “Expectations for financials have been revised up,” he said, but “we are concerned that bank earnings may modestly miss.”

    Analysts at Fox-Pitt, Kelton expect more than a third of the banks they cover to miss second-quarter profit expectations. ”

    “Oppenheimer’s Metz said investors should be backing companies that sell to consumers in emerging economies. “That’s where the growth in incomes and the standard of living will take place, rather than in the U.S., where things may stagnate, unfortunately,” he said. ”

  18. j. cameron says:

    “Both of you are correct. The only difference is one counts all legal residents and the second one takes into consideration both legal and illegal.”

    Census Bureau estimates are for the entire population, with various techniques used to estimate the illegal component. The 300 million is the CB’s estimate for the entire population (by this October), legal and illegal, rich and poor, democrat and republican.

    See http://www.cis.org/index.cgi for more on this topic, or the Census Bureau site (www.census.gov) itself.

    Without the illegal migration and higher latino/hispanic birth rate we would probably be suffering the same fate as much of Europe, Russia, and Japan in the years ahead, only adding to the economic and social distress we are already likely to face as our entitlement and pension costs come due.

  19. HT says:

    No one mentioned that the bond market rallyed on friday, suggesting expectations for slower growth/rate hike over. Oddly, the yield curve also steepened, the opposite read. I’m currently finding gold an interesting indicator of “fed watch”–namely, when Bernanke comes out dovish or there is a less than great “data” point [suggesting they'll prematurely stop], gold rallies. It didnt friday, I suspect, because there was also wage inflation with the crummy jobs number and the Fed supposedly loves the ol’ Phillips curve. Question is, are we heading for stagflation?

  20. V L says:

    “Without the illegal migration and higher latino/hispanic birth rate we would probably be suffering the same fate as much of Europe, Russia, and Japan in the years ahead, only adding to the economic and social distress we are already likely to face as our entitlement and pension costs come due.”

    Using your logic America should accept all 5 billion of poor citizens of the world (not only Mexicans) who wish to come here illegally as long as their birth rate is high. An estimated one-tenth, or 380K, of U.S. births in 2002 alone were to illegal aliens. There are many other poor and overpopulated countries in this world. Even purely from an economic perspective, moving to America has a lot of appeal. The average Mexican earns a twelfth of an American’s wages. There are 4.6 billion people around the world who make less than the average Mexican.
    Let’s all of them come here illegally, have high birth rate and save America!
    Are you going to discriminate between Latino/Hispanics and other 4.6 billion?
    You as many other illegals have a sense of entitlement. Illigals come to suppose they have some inherent right to impose themselves on another, sovereign nation.

    “Census Bureau estimates are for the entire population”

    The last “estimates” were done six years ago and there were no illegal Mexicans or other illegals responding to the questionnaires; therefore, illegals were not counted in the last census.

  21. Craig H says:

    Bond prices could have been lifted by a flight to quality as investors rotated out of stocks.

  22. john says:

    Sorry I woke the illegal immigrant sector. Having worked in Geo Info Systems using census data I can say this – the census is just as political as everything else the gov does and is also a WAG. Remember in 2000 the Repubs refused to allow the census to upgrade their estimation methods. Wonder why?

    But let’s not get political – I take it all back. My point was simply this – the unemployment number was totally irrelevant to just about everyone in the world except for those who make a living cussing and discussing it. It proves nothing. Wages are going up? Really? When did that happen. My god that must mean inflation is coming. Nonsense.

    Ok – let’s take this a little step at a time. I saw corn in the supermarket today for 50 cents an ear (when it gets to be a dollar we can call it pirate corn – buck-an-ear … never mind). Tomatoes a dollar a pound. The pizza that cost me $11 a month ago cost $13 tonight. Why? Because the fuel associated with all of these things has gone up. So if the employee needs more money to buy pizza so the pizza guy can stay in business because the cost of gas needed to both cook his pies and deliver them has gone out of sight – how can we say that wages are driving inflation? Why can’t we say the price of gas is driving inflation because, yes, indeed, it is.

    And I’ve asked this august board this before and I’ll ask it again – how does raising interest on overnight loans cause the price of gas (the source of inflation) to abate?

    That’s right – it doesn’t. Which means as I’ve said over and over again, the Fed is irrelevant to the process. Or, in the words of an old ’60′s hippie radical – if you ain’t part of the solution – you are part of the problem. And the Fed is certainly not part of the solution. And the more I think about it the more I think we get a cut by the end of the year. Probably not but the odds keep going up.

  23. J. Cameron says:

    ‘The last “estimates” were done six years ago and there were no illegal Mexicans or other illegals responding to the questionnaires; therefore, illegals were not counted in the last census.’

    Again, not correct. The CB devotes a good deal of time and effort measuring what they characterize as the “foreign born,” including illegal aliens. This is done through the census surveys and the yearly estimates. Here is the CB’s definition of
    “foreign born”:

    http://www.census.gov/population/www/socdemo/foreign/FAQ.html

    Here a variety of survey/estimate data (including the 2000 census):

    http://www.census.gov/population/www/socdemo/foreign/reports.html

    Here’s a summary from the 2000 survey on the foreign born:

    http://www.census.gov/prod/2003pubs/c2kbr-34.pdf

    This information is all readily available (again) on the CB site.

    Regarding this:

    “Using your logic America should accept all 5 billion of poor citizens of the world (not only Mexicans) who wish to come here illegally as long as their birth rate is high.”

    What was stated was demographic fact, not logic. It’s well established what the demographic trends are here and elsewhere. The statement above has no bearing whatsoever and is a different topic.

  24. V L says:

    J. Cameron,

    With all due respect you are changing the topic to fit it with your distorted world.

    I am saying “there were no illegal Mexicans or other illegals responding to the questionnaires” and you are calling me wrong and providing me with the government definition of foreign born.
    What is this definition has to do with illegals not responding to the questioners? Show me the data of how many illegals received the questionnaires and how many responded. Show me the data that the responders checked that they were illegals. Show me the data of how many “foreign born” checked that they were also illegals. There were none.

    “Without the illegal migration and higher latino/hispanic birth rate we would probably be suffering the same fate as much of Europe, Russia, and Japan in the years ahead”

    Without the illegal immigration we would be “suffering”? Are you calling the above nonsense “well established” and “demographic fact”?

    I rest my case. There is no point of discussing anything with you because you are the type of people who will twist the facts and change the topic to support their agenda.

    Have a nice day!

  25. Bluzer says:

    “at least until the next round of Rate Cuts restarts the real estate machinary . . ”

    You really think lowering interest rates at this point will revive real estate? Case in point – Japan

    Bluzer

  26. J. Cameron says:

    “Show me the data of how many illegals received the questionnaires and how many responded. Show me the data that the responders checked that they were illegals. Show me the data of how many “foreign born” checked that they were also illegals. There were none.”

    There is certainly some error, but this is the best data there is. Anything else is pure speculation. The Center for Immigration Study and other have looked at the data in detail. See:

    http://www.cis.org/articles/2005/back1405.html

    for example on the general subject of the foreign born and the reliability of the data. Questions regarding the CB methodology can be directed to them directly.

  27. V L says:

    “at least until the next round of Rate Cuts restarts the real estate machinary . . ”

    Unfortunately, it will take much longer for the real estate to restart.
    Ironically, the only aspect that keeps the housing market from completely collapsing right now is the belief that the Fed will keep raising rates. This makes the remaining home buyers to buy before mortgage rates move up. However, once the general perception is that the Fed is done, this last remaining support will be gone.
    Will you rush to buy a house knowing that the rates and maybe the prices will be lower in a few years? Definitely not if you are a speculator and buying a second or a third house as many did within the last five years.

  28. whipsaw says:

    per john:

    “And I’ve asked this august board this before and I’ll ask it again – how does raising interest on overnight loans cause the price of gas (the source of inflation) to abate?

    That’s right – it doesn’t. Which means as I’ve said over and over again, the Fed is irrelevant to the process.”

    Okay, I’ll take the other side of this to see where we wind up.

    I’d say that gas prices are not *the source of inflation*- they are a manifestation of inflation, one of many. Inflation/deflation is ultimately sourced to currency which is generally valued according to the structural pros and cons of the issuing country’s economy, including net trade balances, budgets, political trajectory, local resources, etc., along with interest rates paid on govt debt.

    Short rates don’t necessarily steer the rates on govt (or corporate) debt, but they can’t be ignored either. They do ultimately filter thru the credit system and have an impact on which borrowers can meet credit standards and for how much? You are correct in observing that rate hikes do not bring down the cost of gas, but they do tend to eventually make the USD worth more which eventually impacts the price of oil as long as it is priced in dollars.

    Looking at another aspect of your argument, if the Fed is irrelevant in controlling inflation, do you also believe that it was irrelevant in creating it to begin with? I think that you lose on that- Greenspan deliberately tanked the dollar for the purpose of creating inflation because by 2003 we were in a deflationary state. So we wind up with ridiculously low interest rates and the liquidity flood that is bound to run up prices sooner or later.

    So deflation is stabilized and then reversed eventually and then we start watching prices rise. The dollar slide is reversed to some extent once they start raising short rates, but prices go up anyway mainly because of the rate of increase.

    My point is that if the Fed is able to create inflation by tanking the USD, why wouldn’t it be able to contain it by pumping up USD as well?

  29. NFP: Another in a long series of disappointments

    Alan Abelson discussed yesterday’s employment report, quoting Dunne and Henwood of The Liscio Report in his Barron’s column. The analysis is so misleading that I could have used it as an example in my stat class in the old days.

  30. Employment Report Disappointment (??) Part 3

    My biggest objection to the analysis in today’s Barron’s is the most difficult to prove in a conclusive fashion. I must add it to the score of projects that would make a good Master’s thesis. But anyway, here it is.

  31. whipsaw says:

    per HT:

    “Question is, are we heading for stagflation?”

    Ah, my favorite topic. I think that we are already there and that’s what accounts for oddities like you observed with bonds. It is true that the current environment isn’t identical with that of the 70′s, but that doesn’t really matter because stagflation was supposed to be impossible in any case. When impossible things happen, you tend to get odd behavior.

  32. V L says:

    “Question is, are we heading for stagflation?”
    I think we are heading for stagflation instead of recession, not because the Fed went too far but because it will not go far enough.
    There are gigantic economic imbalances that must be resolved. They resulted from huge excess of consumption and borrowing, and insufficient savings and production. These can only be resolved with less of the consumption and borrowing plus more of the savings and production “in the USA” (not China).
    The reduction in consumption (2/3 of US economy) should bring the recession but the gap between wages and the cost of living will likely grow more than in prior inflationary periods, making the current experience more painful and the possibility of stagflation more likely.

    In short, all roads will bring us to stagflation. It is just a matter of time.

  33. HT says:

    per “stagflation”

    Stagflation has been my concern for some time now, hence positioning my portfolio accordingly–cash-equivs, gold, and commodities. This trade could go south if Bernanke dramatically raises rates in some surprise larger upside move. My bet this is unlikely because, 1. the conventional wisdom is the fed will over tighten, so play the contrarian play and say no; 2. Bernanke is a greenhorn–the “Money Honey” comment was a classic; 3.the November elections. I’m from DC–there’s a lot of worried GOP senators up for re-election [trust me]. I have to believe the administration will be pressuring the Fed to pause. This, in my opinion will result in a surge in gold, and likely other commodities.

    For whipsaw [vis a vis John's comment] With all due respect, the Fed does matter– and not just for trades. Besides controling short term rates, they also control the money supply–M3 money supply [now, oddly, no longer calculated] has risen tremendously: the Greenspan effect/remedy of avoiding deflation and recession post bubble–flooding the world with both cheap [low rates] and amount[paper money] of money. Now we have new bubbles…

  34. V L says:

    “gold, and commodities”

    1. Gold is a good play but it is overpriced. I would not pay more than $500.

    2. Oil is a good relatively short term play. I am not sure if the demand will remain the same during the recession. Last week BP, XOM and Total said that there was a 10% drop in demand in Europe compared to the previous year (mostly because of high prices and environmental concern). US has been flat but can be down during the recession. As far as China, they have been buying a lot of oil for their reserves lately and to keep their factory electricity generators running (there are frequent power shortages in China and it is costly to be without power). Most of these factories have been producing cheap garbage for sale in the US and they will be affected by the slowdown in the US economy. I do not see the demand from China growing exponentially as it used to be in the past.

    3. Metals: I will let the experts from this industry to comment: “Phelps Dodge said it expects copper to slip from an average $2.85 a pound to $2.25 next year and $1.75 in 2008, which might lend support for its push to diversify assets and acquire nickel-rich Inco. But it also expects nickel producer prices to drop from $8.25 this year to $7.60 next year and $6.20 in 2008 — projections that, incidentally, are above Street estimates.”

    4. USD: slowly but surely down

    5. Other commodities like corn, sugar, coffee, etc will go up but not as parabolic as metals spiked in the past

  35. whipsaw says:

    HT-

    Yes, good point about M3, but I think that it is a lot easier to expand than contract at least over the long term. I am also well aware of the political aspects of all of this, but promised myself that I would only attack the gops obliquely here. :)

    Anyway, moving from macro to personal metrics, here are some things that I look at to gauge where stuff is around Atlanta as I drive to work:
    _High Rise Construction Cranes: some, but nothing special
    _Established Non-chain Storefronts: closing
    _Cell Phone Stores: dying
    _Pawn shops/used cars/auto parts: growing
    _Used Tire/Rim stores, se habla Espanol, growing
    _Other Young, Marginal Storefront Businesses: tailspin
    _Subdivisions: Not so much under construction, lots of homes for sale but still apparently in the 400-600k range which I find amazing for something with a 3 car garage on a quarter acre lot.
    _computerjobs.com: I am not in the market now but I check the Atlanta section every month or so to see what is going on. Less than 2900 listings, was about 3200 (for perspective, the last time that I fell into the hands of the slave traders in Oct 2000 there were 7000 Atlanta listings there; at the bottom of the dive there were about 900).

    I also follow private music lesson rates as best I can because I have been playing guitar for 40 years and have always looked at that as Plan D. Sadly, normal working musicians are being paid less than usual at present and teaching is completely in the tank. I suppose that the first thing you cut when things tighten is your 14 year old son’s embrace by Satan’s Third Arm, the Guitar. heheheh. Point is that people are starting to cut back.

  36. drey says:

    Whipsaw: you know better than to posit that the Fed creates inflation – on the best day it ever had, it reacts to (or ideally forestalls) inflation.

    And VL, your post on Americans emigrating to Mexico is a classic – keep it up. Agree that stagflation is right around the corner if not inevitable…

  37. John says:

    Whipsaw – “My point is that if the Fed is able to create inflation by tanking the USD, why wouldn’t it be able to contain it by pumping up USD as well?”

    Excellent argument throughout but – (always a but) … Given the amount of inflation going back to whenever there aren’t enough interest rate bullets in the world to “pump up the USD.”

    I follow forex – loosely – I bet on Euro/USD and others daily but only for fun. The international markets are laughing off the rate rise so far. Gold snears and goes higher (I play gold miners too – but not for fun). Oil continues higher and there are still mumblings about a euro-based oil bourse.

    I fear stagflation but I’m telling you people will not only stop buying guitar lessons but also corn and tomatoes if things continue the way they are. And when that happens the prices will have to come down even when the interest rates continue up.

    And illegal immigration has nothing to do with either the unemployment rate or inflation in this country so as a descendent of a immigrant (as probably most of you are) I say let’s drop this particular distraction from the political landscape. There are far more pressing issues at hand and the more we discuss this nonsense the more that bunch of assholes in Washington feel permitted to ignore the heavy lifting.

  38. rick says:

    “I fear stagflation but I’m telling you people will not only stop buying guitar lessons but also corn and tomatoes if things continue the way they are. And when that happens the prices will have to come down even when the interest rates continue up.”

    Hey John, there are many countries where people
    buy or afford less where interest rates and prices have
    gone up together… like Argentina in the
    past. Just because
    the interest rates go up does not guarntee that
    prices of services , food and gasoline etc will come down.

  39. john says:

    OK – once more with feeling – there aren’t enough interest rate hike bullets in the magazine to stop the inflation that the Fed itself has begun – therefore eventually it will get to a point of extreme and then it will reverse (as do all things) and go the other direction.

    Eco 101 when the price gets too high folks stop buying which causes the price to come down. If that ever fails then the entire ponzi scheme fails so you better hope it never fails – your future depends on it.

  40. whipsaw says:

    drey: The idea that the Fed is the primary source of inflation is one of the pillars of Goldbug Religion. I don’t necessarily accept it, but think it’s worth examining even if I am not much of a Bug.

    john: I play forex for modest amounts of real money and would attribute the EUR/USD journey from 118->135->118->129 mainly to interest rate manipulation. If you look at a $USD chart, you can plainly see correlation with the points at which interest rate cuts began in 2002 (not 2003 as I originally said) and where increases began in 2004. I would attribute the resumption of the decline over the past 8 months to the ceaseless ‘one and done’ chatter.

    Anyway, useful discussion I think.

  41. me says:

    “1. Gold is a good play but it is overpriced. I would not pay more than $500.”

    From Newmont:

    “Demand is strong yet there is no ability to increase production,” said Lassonde, who predicted that gold will top $850 in the next 12 to 18 months.

    Lassonde is the president of Newmont Mining and is the most accurate when predicting the price of gold. I bought at $415 when he said it would be $600 last year.

  42. nd2 says:

    MMM was down 9% , works out to 49 DJIA points … I would suggest that that downward guidance was a large factor for the market falling

  43. Guy says:

    Jared Bernstein makes a compelling case that wage growth in the NFP is a lagging indicator, and will slow in the coming months if the slowdown in job growth continues. It’s also non-inflationary since it’s below productivity growth. Bernanke has said that a slowing economy should slow inflation, which is a hint that he might share Bernstein’s view. But I don’t think he’s specified the criteria that he’ll use to gauge inflation, which leads to guesswork as to whether he’ll overemphasize lagging indicators and overshoot. I think it would help if he specified which indicators he looks at, especially when it comes to real-time indicators vs. lagging indicators.

  44. NFP: Another in a long series of disappointments

    Alan Abelson discussed yesterday’s employment report, quoting Dunne and Henwood of The Liscio Report in his Barron’s column. The analysis is so misleading that I could have used it as an example in my stat class in the old days.