Is Today’s Weak Job Number a Head Fake?

Posted On Sep 2, 2016 By Dave Gonigam

  • A cheeky question we can’t resist asking as a holiday weekend looms
  • Does the job number even matter as far as a September rate hike?
  • How job numbers have been manipulated for more than a generation
  • Empty store shelves in America after a shipping bankruptcy overseas?
  • The silver screen becomes a virtual-reality headset
  • Cautious Canadians and Tide as a currency: More dispatches from the War on Cash

If unemployment numbers can be manipulated to look better than they really are, does it not follow that they can also be manipulated to look worse?

That’s the cheeky question we can’t resist asking on a lazy Friday morning headed into Labor Day weekend.

It being the first Friday of the month, the Bureau of Labor Statistics regaled us this morning with its monthly job numbers. The wonks conjured 151,000 new jobs for August — rather less than the 175,000 the “expert consensus” was counting on.

Bloomberg tried to put the best spin on it possible, describing “steady hiring in the face of lackluster global growth.”

Maybe that’s true. But it’s equally true that it takes 150,000 new jobs each month just to keep up with population growth. By that standard, “the economy” is barely keeping its head above water.

And maybe that’s the perception the Obama administration wants to convey, at least for a few days, the better to squelch any talk of the Federal Reserve raising interest rates.

There’s been persistent chatter for weeks that the Fed wants to raise interest rates at least once during 2016 — maybe as early as its next meeting, on Sept 20–21. But pulling the trigger this month would likely push a U.S. teetering economy over the edge and boost Donald Trump’s hopes in the run-up to Election Day.

The Fed is, to use its own shopworn phrase, “data dependent.” If the data don’t measure up, there won’t be a rate increase. Maybe the White House just wants to make sure?

In the final weeks of the Obama-Romney race four years ago, former General Electric CEO Jack Welch accused the White House of jacking up the new-job numbers to make things look better than they were. “These Chicago guys will do anything,” he said in an infamous tweet.

Then as now, we have no idea whether the number-fudging is for real. We do know Welch is the last person who should call out anyone for manipulating figures; under Welch, GE monkeyed with earnings every quarter to beat analyst estimates by precisely a penny per share. Heh…

As irony would have it, the job numbers don’t even matter to Fed policymakers anymore.

At an unemployment rate of 4.9%, the Fed figures we’re as close to “full employment” as we’re going to get. The problem is that unlike during other economic expansions of the post-WWII era, inflation isn’t cranking up along with job creation.

“The linkage between jobs and inflation assumed by the Fed has completely broken down,” says Jim Rickards. “For the Fed, policy is all about achieving inflation.”

As we’ve pointed out for months, the Fed’s favorite measure of inflation is stuck around 1.6% — well short of the Fed’s 2% sweet spot. There’s no way the Fed will raise this month under those circumstances; if the White House really did fudge the numbers this morning, they needn’t have bothered.

But that raises the question: What will the Fed do to bring about more inflation?

“The fastest way to achieve inflation in a deflationary environment is to engineer a weaker dollar, and that’s exactly what we expect,” Jim goes on.

There will likely be some behind-the-scenes maneuvering to accomplish a weaker dollar at the G-20 summit in China on Sunday. And that maneuvering will set the stage for the big event Jim anticipates at the end of the month, when the “world money” being schemed by the global elites will take a big step toward supplanting the dollar as the world’s reserve currency.

The date is all but carved in stone — Sept. 30. That’s 28 days from now. If you haven’t watched Jim’s D-Day for the Dollar exposé, we urge you to give it a look right away.

With a September Fed rate increase “off the table” now, junior traders are bidding up stocks on this final business day before their bosses return from the Hamptons. At last check, the Dow has added nearly 100 points, pushing past 18,500 again.

Treasuries are selling off, pushing rates higher; the yield on a 10-year note is up to 1.61%.

The easy-money vibes aren’t benefiting gold; the bid is up barely $4, at $1,317. Even more curious, the dollar is exhibiting a bit of strength after the job numbers, the dollar index up to 95.9.

One more thing about job numbers: In one sense, they’ve been manipulated for decades by administrations both Democratic and Republican.

If you’re a longtime reader, please bear with us while we bring newcomers up to speed: Going back to the Reagan administration, the statisticians have steadily excluded more and more people from the “U-3” unemployment rate dutifully reported by the media every month. (Again, the latest figure is 4.9%.)

There are part-timers who’d like to work full time… and folks who’ve given up looking for work over the previous year. They’re still included in the government’s “U-6” unemployment rate, which sits at 9.7%.

And then there are the legions of people who gave up looking for work longer than a year ago. Include them in the mix and you’d have an unemployment rate measured the way it was during the Carter administration.

Economist John Williams at Shadow Government Statistics reconstructs that number each month. His real-world unemployment rate rings in this morning at 23.0%. It’s hovered around that level for more than four years.

And now for a sneak preview of life during the next financial crisis — courtesy of a corporate bankruptcy in South Korea.

Hanjin Shipping, one of the world’s biggest container shipping companies, filed on Wednesday for protection from its creditors. The firm handles nearly 8% of all trans-Pacific trade volume for the U.S. market, according to a trade group of U.S. retailers, the Retail Industry Leaders Association.

Within hours, U.S. port operators panicked they wouldn’t get paid and started turning away Hanjin ships. “Already delivered cargo is sitting unhandled, clogging ports and occupying containers needed elsewhere,” says a Wall Street Journal story that should have made the front page but didn’t. Still other Hanjin ships remain stuck in South Korea, seized by creditors.

Shipping rates are already zooming up; one U.S. importer tells the Journal he’s getting rate quotes of $2,000 per container, up from $700 before the news broke.

Retailers are sweating; the time to stock up on holiday inventory is fast approaching. The aforementioned retail trade group is begging the Commerce Department and Federal Maritime Commission to intervene — how, it’s not exactly saying.

The bottlenecks are in both directions, by the way; the Puget Sound Business Journal says Washington state apple farmers fear their goods will rot on the pier instead of making it to their export destinations in Asia.

Nothing quite like this happened during the Panic of 2008. But if it happens during the next financial crisis and the effects snowball? Hoo boy…

“It’s a startling, bizarre, often weirdly hilarious experience,” writes the Guardian reviewer who got a preview this week of the world’s first virtual-reality feature film.

We told you about it two months ago — a depiction of the life of Jesus, from the executive producer who brought us Mel Gibson’s The Passion of the Christ. It’s due for release at Christmastime, but a 40-minute rough cut is showing in Venice this week.

The acting and direction are dreadful, says reviewer Peter Bradshaw. But he was nonetheless captivated by the 360-degree effect: “As the wise men presented their gifts to the baby Jesus during the nativity scene, I spin round to be confronted with a large, placidly chewing cow…

“What could not be achieved in VR if you had someone who knew what they were doing?” he muses. “Someone who could see the potential and the limitations and work with them?

“The producers of the VR Jesus say they’re targeting the 2 billion-plus smartphone users worldwide (you attach your handset into the VR headset gear) and also the 2 billion-plus Christians. It’s a smart initial move. But this is a home entertainment market and I have a feeling that virtual reality is going to be driven by the same thing that drove the internet and VHS in the early years. And that is… erm… not Bible stories.”

Gosh, weve been saying that for months. [Click only if you’re not easily offended.]

“Quick comment about the ongoing war on cash, north of the border,” a reader writes.

“Recently, my wife and I were visiting with her sister and husband. We owed them a bit of money for a restaurant trip and some odds and ends.

“So a quick and simple way to settle the debt was pull out my wallet and give them $160 in cash.

“Their first comment — ‘Whoa, what are you, a drug dealer!?’ I wonder what they’d think if they knew I sometimes carry $1000 cash…

“Media influence/collusion is certainly alive and well. Of course, it probably doesn’t help that they both work for the Canadian government.”

“There is one simple advantage I usually see with cash,” writes another. “That is, when you buy something and exchange the item for cash, then the transaction is finished.

“There is no check writing, no waiting for a check to clear, no checking bank statements, no checking credit card statements, no paying an e-bill with another e-payment and then checking it. It’s over and done with.

“When you interject a cash surrogate or have an intermediate processing step for supplying cash, it’s inevitable that you’ll need more effort and administration. Just look at the income tax and the sprawling parasitic drain its administration and complexity imposes on us all. Now imagine that same complexity cancer spreading to your bank accounts when negative interest rates get established and that becomes a fertile field for cronyism.

“In fact, if they really wanted to encourage us to spend as their planned inflation gets rolling, they would gladly reintroduce the $500, $1,000 and higher -denomination bills to make it easier to spend. But the monetary elite aren’t doing that, so they must have another agenda. And I bet it’s not one I’d like.”

In response to the reader who said yesterday that “when cash systems fail, barter seems to emerge,” we got this email…

“Just a couple of years ago, there was media coverage about an upswing in widespread theft of Tide detergent.

“It was suggested that Tide would be a useful commodity to barter because the bottles are easily recognized, they are not serial marked (and can’t be traced), everyone needs to wash clothes and the individual bottles are about the (tradeable) value of necessary items like food and drugs. Someone is stocking up.”

The 5: We were on the case when the story broke in 2012. Shoplifters were going after bottles of Tide. Retailing for $10–20, they’d fetch $5–10 on the black market.

Evidently, it’s still a thing. Tide makes a clickbait list of “12 Weird Things That People Steal—Sometimes in Enormous Quantities” posted this week at Money magazine’s website. Go figure…

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

P.S. As “market shocks” go, the one set for next week could rival Enron.

Silicon Valley’s most notorious technology firm is poised to rattle the stock market… dominate the headlines… and make a few investors filthy rich….

All with one unbelievable “confession.”

But while the rest of the world reels… you can set yourself up for a massive payday. Click here for the FULL story.


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