Recession Confirmed by Jobs Report: Independent Financial Advice
Today’s non-farm employment report
Today’s Labor department non-farm payroll employment report came in at 80,000 jobs versus the consensus forecast of 100,000, thus confirming we are in a recession. When adjusted for the need to create 125,000 new monthly jobs for population growth that means in real terms that the unemployment increased by 50,000. At an annualized rate that would be a 0.5% increase in the unemployment rate. Of course, one month’s results are not a very reliable indicator, however the trend has been weak for several months. I had forecast 100,000 jobs and I’m bearish; as a bearish advisor I was surprised it was worse than I expected.
The age 55 and up cohort actually increased the amount of jobs that they hold, while other age groups lost jobs. This implies that the most experienced people are taking jobs away from less experienced with the youngest workers suffering a severe increase in unemployment. Since young people are the first-time homebuyers who are a critical part (the foundation of the pyramid) of the home buying “food chain” then less of them can buy starter homes and thus other people will be unable to sell and move up to bigger homes.
A symbol of the amount of real wages increase
There was a slight increase in real wages but that could be explained by employers laying off mediocre low productivity younger workers and replacing them with more experienced and expensive older workers who might do more work in a lesser amount of hours. Thus the notion of real hourly earnings rising needs to be carefully checked, because in this case the alleged increase in real wages didn’t occur. Further, this could be warped by the top 5% of the most skilled workers getting raises while the rest got nothing.
The unemployment rate is the foundation on which rests the cause of inflation which in turn is the foundation of bond market values. (Although part of what moves Treasury bond prices is a flight to safety factor). When unemployment rate is worsening then that is deflationary. Today gold and foreign currency went down, as did stocks, and commodities .
I wrote an article “Jobless rate to show no real improvement” and “Unemployment will take years to fix”.
Investors should seek independent financial advice.