By the numbers: Consensus for monthly BLS payroll data are gains in the 200k level (survey forecasts 100,000 to 297,000). This follows an increase of 36,000 workers in January, with many blaming winter storms for depressing hiring. Expectations are for Unemployment to tick up from 9% to to 9.1% as more job seekers enter the labor market.

Let’s consider what this might mean to markets: If we start seeing consistently larger sustained payroll gains, that might lead to the end of QE and ZIRP.  (See Fed Policy Makers Signal Abrupt End to Bond Purchases in June). Note that this would be good for the economy and the US Dollar, but likely cause a hiccup in equity markets, which have been extremely sensitive (is dependent a better word?) to Fed liquidity.

The key question is whether the end of ZIRP can occur as the economy develops a self sustaining organic expansion — and not, as was discussed earlier this week, as a “national economy on performance-enhancing drugs.”

What happens when the dope gets taken away is now anyone’s guess. And that is the phase we are in — hypothesizing whether (or at least when) the economy can stand on its own.

This is, in no small way, a substantial improvement from not too long ago, when we were guessing when the world would collapse, and the more extreme societal elements were stockpiling bottled water, dehydrated food, and ammo.

Be thankful for the little things . . .


BLS data released at 8:30am

Category: Employment, Federal Reserve

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.

28 Responses to “NFP: Likely Improvement May Lead to End of QE, ZIRP”

  1. contrabandista13 says:

    My thoughts exactly…. Good job numbers could be bad for equities, considering how much we discounted yesterday… However, bad job numbers are certain to be bad for the equities…. Either way, from a very short term perspective, I see more downside risk, especially with the steady crude….

  2. Super-Anon says:

    The US economy hasn’t been able to survive with out bubbles since the mid 90s because it’s being sustained by debt-financed consumption. This is dependent on the illusion that peoples savings are increasing even as the go into debt because this is being offset by surging asset prices.

    In as much as the current recovery has been driven by debt financed consumption and business expansion (massive government borrowing and sub-prime corporate debt), I’d have to say it’s simply a continuation of the bubble economy that started in the mid-90s.

    When we actually start paying for the stuff we consume that will change.

    Also, it has to be pointed out that what people think of as “savings” in this country is in fact exactly the opposite — it’s a stealth tax. Inflation turns savings into a tax on which the government is now dependent (all the savings in this country is merely a balance sheet fraud).

    If the US population were to realize this and to attempt to find a legitimate way to save (e.g. hoarding) that would cause these stealth tax revenues to vanish (in practice real interest rates would surge) and possibly lead to a shock destabilization of governments at all levels and the expected ripple effects throughout the overall economy.

    We’re a society built on lying to one another via the financial system. Historically that ends in severe civil unrest and often war.

    Maybe this time its different.

  3. MayorQuimby says:

    ***The ONLY chart that matters re: employment***

    I’m getting MORE bearish, not less.


    BR: Yes, but how do you control for people living longer, more people on retirement not working, as well as the migration of jobs overseas?

  4. riffraff says:

    Birth/Death added 112,000

    Yeah baby, yeah!!!

  5. Wes Schott says:

    …and gold (stockpiling)

  6. Feb Payrolls rose by 192k

    Private sector job gains totaled 222k,

    Unemployment ticked down by .1% to 8.9%.

    The labor force rose by 60k after the sharp decline over the past 2 months.

    Avg hourly earnings were flat (monthly), and up 1.7% y/o/y.

    Bottom line: an improving, but still soft report

  7. curbyourrisk says:

    The participation rate……not improving.

    Living on Long Island, I am seeing more and more people without jobs when I go to my kids school functions. When I go to the basket ball games I talk to everyone. When I head to the weekend lacrosse clinincs that the school provides….same thing. No one out of work is finding work. I know this is all anectdotal…..but its the truth. You know…the truth, not like what we see in ANY of the government produced reports. You play with the divisor and you can get ANY number you want.

    NOTHING is improving.

    NOW, I know Barry lives on Long Isalnd as well, and I am sure he sees things differntly. but then again, Barry’s Long Island is like no other place in the world. I don’t think to omany people up there on the North Shore are out of work….and if they are I bet they are in no hurry to go out and find something.

  8. Petey Wheatstraw says:

    What we’ve built is rickety and the foundation was never repaired. Credit expansion is still the only driver of growth (not a good thing — just a fact), and higher interest rates will create nothing but drag. IMO, QE/ZIRP are all that’s sustaining the banks and the markets. Take away the free money, and all you will get is the reemergence of bad debt.

    At our level of existing debt (not to mention our absolute reliance on increasing both the amount end velocity of new debt for any realistically foreseeable future), a strong currency will crush us into oblivion. TPTB will not let strong dollars return home to buy deflated assets and commodities (we can rest assured that foreign holders of our debt won’t be looking for labor or products).

    That said, I hope they try it. Nothing will wake the middle class up like another whack square across the forehead with a 2×4.

  9. mark says:

    The key number for me is average annual earnings unchanged m/m. This is the key to the inflation/deflation argument and at present it continues to point to deflation.

  10. Mike in Nola says:

    The pattern BR relates is one that first came to my notice back thirty years ago and has occured periodically, when the Fed was trying to pump things: good news for the economy didn’t necessarily mean good news for equities because it reduced the prospect of cheap money.

  11. mark says:

    If QE and ZIRP end, it will happen at the same time as fiscal stimulus ends and fiscal austerity begins. This is the same formula that led to the depression aftershock of 1937 and the many aftershocks of Japan in more recent times.

  12. dead hobo says:

    There’s still 4 months left to make money, maybe more. Then a dip, then back to the recovery rally.

    The end of QE2 will be offset by flows that are the result of an improving economy. This will be a mitigating factor that will potentially move the correction down the road a little from July 1. The dip will be caused by a combination of less concentrated liquidity flowing directly into assets for the purpose of pumping prices, sell the news, uncertainty, and price discovery after a large run. Plus somebody will undoubtedly provide a magic chart that will absolutely prove this dip is for real and absolutely corresponds with an actual event from 52 years ago that charted a lot like this one, except for log adjustments and scaling differences, and a completely different set of historical facts (ha ha). Also, QE1.5 will still be in operation.

    I have a bond fund plan in the works now. Rather than move into cash, I plan to park in bond funds to take advantage of capital gains that will likely occur during the flight to safety during the dip. I finally found a few that have returns which correspond to recent market events in a predictable way. I plan to watch them to see if they continue to perform in a predictable way.

    After the dip will bring the return of the recovery rally. This will continue until the end of ZIRP. No plans yet for then other than to expect another dip, most likely.

    Then, possibly as soon as 12-21-2012 but certainly within a couple of years after that, will be the beginning of the mother of all market crashes followed by a sickening recession .. The US Debt Crisis. There will be no safe places other than cash in the mattress when that bad boy hits and, thanks to politicians who will be no less inept then as they are now, it should last a long time and the solution will make nobody happy. I’m stockpiling empty cans of coffee as I write this.

  13. SivBum says:

    Surprise, 8.9% headline rate. Boomers are chosing to retire early at 62 instead of fighting for jobs with little financial incentive and benefits.

  14. crunched says:

    Gee, I wonder who we should believe… I know who I believe. ( hint: not the government)

  15. inessence says:

    I continue to stockpile ammo, food and water…investors are not and have not been a realistic influence on the direction of the capital markets for years. The markets have become a grand illusion, based on farcical data from the g-men, and manipulation from HFT, private equity, and other high powered special interests. For the average Jane and Joe investor they may have better success running through a mine filed covered with razor wire.

  16. constantnormal says:

    An odd perspective, considering how much of the ranks of the employed are (momentarily) occupied by public sector employees. I fully expect that the gains in private sector employment will soon be erased by layoffs in the public sector.

    The states really have no choice in the matter.

  17. Ted Kavadas says:

    RE: “This is, in no small way, a substantial improvement from not too long ago, when we were guessing when the world would collapse, and the more extreme societal elements were stockpiling bottled water, dehydrated food, and ammo.”

    While one can argue how much the economy has improved since the early 2009 lows, I see many problems.

    One problem, IMHO, that is becoming more prominent is that of the formation and enlargement of the entire stock market being a “bubble”. While this opinion, admittedly, is held by few, I think that there are a lot of signs – especially “technical” in nature – supporting such an opinion.

    For those interested, here is a link to my first (of two) blog posts on the topic:

  18. constantnormal says:

    Happy days are here again! I’m sure that the folks in Vallejo, CA (as well as many other towns and cities across the great expanse of Bananamerica) are celebrating … their troubles are over …

    Broke Town, U.S.A. –

  19. slocald says:

    Barry- Can you explain the process by which ZIRP and QE cause stock prices to go up? I have never been able to wrap my head around it. I realize that low rates reduce cost of capital and thus a component of overhead for corporations, but your post and others imply that there there is a more direct relationship here that is beyond me. I would appreciate it a linear, cause and effect, type explanation. Thank you!

  20. The key question is whether the end of ZIRP can occur as the economy develops a self sustaining organic expansion — and not, as was discussed earlier this week, as a “national economy on performance-enhancing drugs.”

    What happens when the dope gets taken away is now anyone’s guess. And that is the phase we are in — hypothesizing whether (or at least when) the economy can stand on its own.



    re: “self sustaining organic expansion”

    from here, where ‘the Economy’ is, at this point? that’s a ‘knee-slapper’ …

    and, U$D 100+ Oil helps, even, more..riight.

  21. Lugnut says:

    If light crude continues to trend as recent, I think QE3 is in the works.

  22. contrabandista13 says:

    Looking like a MELT DOWN…. That is a hot knife going through butter…

  23. gordo365 says:

    “What happens when the dope gets taken away is now anyone’s guess.”

    Look – the fed isn’t going to take the dope away until the $14T we have borrowed in dollars – can be paid back with 50 cent pieces.

    The specifics of this business cycle are almost irrelevant.
    20% of the US population will retire in the next 15 years. Who will repay the debt?

    We have to devalue the dollar. ZIRP for ever. Buy gold.

  24. Sunny129 says:

    The questions being thrown out there:

    Will the REAL Economy stand up, please ( without Ben’s help!)? Will the fundamentals matter, which got NEVER since 2008?

    Can one cure the ills of DEBT with more Debt?

    Can one spend one’s way to prosperity by Ben’s model of re-inflating the assets and giving wealth effect?

    We learned NOTHING and did NOTHING since 2008! Apparently we have arrived to NIRVANA without any real pain or sacrifice! Wow!

  25. Bill Wilson says:

    That chart from Bloomberg is eye-popping. Do you think the FED governors high five when they see that, or do they think “Sh*t, how do we unwind this?” Probably a little of both.

    We need the chart that shows the FED’s balance sheet over the next six months.

  26. dead hobo says:

    Barry Ritholtz Says:
    March 4th, 2011 at 2:11 pm

    here’s a chart from Bloomberg

    Very Excellent chart. I even copied it and have a link on my desktop so I can easily look at it again in case I get a little squishy towards 6-30 and decide it will go on forever. And not even one heebie-jeebie on it anywhere.

  27. DeDude says:

    Great Bloomberg chart

    They just need QE to continue until the Mom & Pop investor get into stocks, allowing the big guys to dump and get out of there. But what if M&P resist and decide to stay in CD’s regardless of the cost the Fed is making them pay for that decision. It’s not like the big guys never panic.