{"id":1092964,"date":"2019-01-04T18:18:08","date_gmt":"2019-01-04T18:18:08","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=106512"},"modified":"2019-01-04T18:18:08","modified_gmt":"2019-01-04T18:18:08","slug":"todays-huge-jobs-report-is-a-bad-omen","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1092964","title":{"rendered":"Today\u2019s \u201cHuge\u201d Jobs Report Is a Bad Omen"},"content":{"rendered":"

This post Today\u2019s \u201cHuge\u201d Jobs Report Is a Bad Omen<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

Markets paced the floor this morning… like a man condemned awaiting word on his final appeal.<\/p>\n

For the December unemployment report was due out at 8:30.<\/p>\n

A poor jobs report would send stocks spiraling down the greasy pole \u2014 again.<\/p>\n

The market staggered into 2019 off its worst December since the Great Depression. It is also off to its worst start in 19 years.<\/p>\n

Could it absorb another blow?<\/p>\n

Economists as a whole forecast 176,000 jobs.<\/p>\n

What number did the report actually reveal?<\/p>\n

312,000 jobs \u2014 a \u201cblowout\u201d number \u2014 and the largest monthly increase since last February.<\/p>\n

We were also informed that American wages increased a gorgeous 3.2% over the previous December.<\/p>\n

Only once since April 2009 has this 3.2% year-over-year increase been equaled.<\/p>\n

And the sweet scarlet treat atop the sundae:<\/p>\n

The unemployment level increased from 3.7%… to 3.9%.<\/p>\n

Come again, you say?<\/p>\n

How in the name of all things holy is higher unemployment good news?<\/p>\n

For this reason:<\/p>\n

It means more Americans are entering the labor force.<\/p>\n

If they cannot secure immediate positions, they are counted among the unemployed\u2026 and the unemployment rate increases.<\/p>\n

In December, 419,000 previously idle Americans volunteered for duty.<\/p>\n

And the labor force participation rate increased to 63.1% \u2014 up from November\u2019s 62.9%.<\/p>\n

Wall Street went and had itself a day at the races\u2026<\/p>\n

The Dow Jones stormed back 747 points today.<\/p>\n

The S&P surged 84.<\/p>\n

The Nasdaq leaped 275 points \u2014 a thumping 4% rally.<\/p>\n

(The unemployment report alone does not account for today\u2019s raucous numbers. Answer below).<\/p>\n

From the cheering section rose exultant gloats and howls today\u2026<\/strong><\/h2>\n

\u201cThe far-bigger-than-expected 312,000 jump in nonfarm payrolls in December would seem to make a mockery of market fears of an impending recession,\u201d beamed Paul Ashworth, chief U.S. economist at Capital Economics.<\/p>\n

\u201cWhat recession?\u201d mocked Stu Hoffman of PNC Financial.<\/p>\n

Jared Bernstein \u2014 former chief economist for Joe Biden \u2014 says it \u201clooks like the jobs market didn\u2019t get the recession memo.\u201d<\/p>\n

Just so.<\/p>\n

But let us dispatch a recession memo of our own\u2026<\/p>\n

As we have illustrated before, an unemployment rate below 4% is no cause to celebrate.<\/p>\n

The proof is clear as gin… and every bit as stiff:<\/p>\n

Recession is never far behind when unemployment sinks below 4%.<\/p>\n

U.S. unemployment dipped beneath 4% last May.<\/p>\n

Unemployment previously slipped beneath 4% in April 2000 \u2014 at the peak of the dot-com derangement.<\/p>\n

The economy was in recession by March 2001 \u2014 less than one year later.<\/p>\n

A similar schedule would put this April on recession watch.<\/p>\n

Before 2000, unemployment had previously fallen below 4% in December 1969.<\/p>\n

The economy was sunk in recession shortly thereafter.<\/p>\n

Do we stretch the facts to fit into a theory?<\/p>\n

We do not.<\/p>\n

Nicole Smith is chief economist at Georgetown University\u2019s Center on Education and the Workforce.<\/p>\n

From whom:<\/p>\n

\n

If we look historically at other times when the unemployment rate has fallen below 4%\u2026 what we find is that the low unemployment rate is often associated with a boom phase just before a recession. It\u2019s almost a precursor for a recession or a precursor for another slumping economy.<\/em><\/p>\n<\/blockquote>\n

Perhaps you are unconvinced.<\/p>\n

We therefore hammer you upon the head with the following evidence \u2014 a chart giving the history since 1950.<\/p>\n

On each occasion the unemployment rate fell below 4%, it reveals, recession was on tap:<\/p>\n

\"Chart\"<\/p>\n

Of course… recessions are not always occasioned by unemployment rates below 4%.<\/p>\n

But once again, the chart proves it beyond all cavil:<\/p>\n

When the official unemployment rate sinks beneath 4%… recession is close by.<\/p>\n

In pleasant reminder, unemployment presently hovers at 3.9%.<\/p>\n

But why should recession rapidly follow peak employment?<\/p>\n

Mainstream economics equates extremely low (official) unemployment with an \u201coverheating\u201d economy.<\/p>\n

Central banks must therefore raise interest rates to lower the temperature, to bring the business under control.<\/p>\n

Our own central bank has been following the operator\u2019s manual.<\/strong><\/h2>\n

But instead of slowing things down\u2026 the clods end up slamming the engine into reverse.<\/p>\n

As the following chart informs us, rising interest rates preceded each U.S. recession since 1950:<\/p>\n

\"Chart\"<\/p>\n

Confirms analyst Jesse Colombo:<\/p>\n

\n

Economic recessions, financial crises and bear markets have occurred after virtually all Fed rate hike cycles, and there is no reason to believe that the current one will be an exception.<\/em><\/p>\n<\/blockquote>\n

Which brings us now to Mr. Jerome Hayden Powell, chairman of the Federal Reserve System\u2026<\/p>\n

He appears to be a man with a bit between his teeth.<\/p>\n

He has seemed determined, that is, to increase interest rates at any excuse.<\/p>\n

Last month, for example \u2014 as the stock market was plunging into correction, no less \u2014 he went ahead anyway.<\/p>\n

Many analysts believed the continued stock market horrors would back him off.<\/p>\n

But will today\u2019s go-go jobs report encourage him to press ahead?<\/p>\n

MarketWatch on Powell\u2019s dilemma:<\/p>\n

On the one hand, the markets are reflecting fears of a deceleration in activity, but more fundamental sources of information on the economy show the danger of an overheating economy remain present.<\/em><\/p>\n

\u201cThis will be very difficult for Powell to reconcile,\u201d warns Carl Tannenbaum, chief economist at Northern Trust.<\/p>\n

But what does the man himself have to say?<\/strong><\/h2>\n

Powell addressed the American Economic Association this morning.<\/p>\n

His comments suggest a new flexibility<\/em>…<\/p>\n

He said he is \u201cprepared to adjust policy quickly and flexibly.\u201d<\/p>\n

What about the balance sheet?<\/p>\n

We contend that quantitative tightening (QT) has throttled markets far more than a series of pinprick rate hikes.<\/p>\n

Last month Powell said QT was running \u201con autopilot,\u201d a remark that sent stocks careening.<\/p>\n

Not today.<\/p>\n

The chairman said this morning the Fed is \u201clistening carefully\u201d to markets.<\/p>\n

He further pledged to announce a halt \u201cif needed,\u201d adding, \u201cWe wouldn\u2019t hesitate to change it.\u201d<\/p>\n

By sheerest coincidence\u2026 the Dow Jones jumped 400 points following the remarks.<\/p>\n

We can only come to one conclusion:<\/p>\n

The Federal Reserve will never truly \u201cnormalize\u201d its balance sheet \u2014 despite all gabble to the contrary.<\/p>\n

Wall Street will simply not allow it.<\/p>\n

But it will not be enough to keep the show going.<\/p>\n

We stand by our 2019 forecast:<\/p>\n

Dow 18,000 by year\u2019s end.<\/p>\n

And recession \u2014 just look at the unemployment rate.<\/p>\n

Regards,<\/p>\n

Brian Maher
\nManaging editor, The Daily Reckoning<\/em><\/p>\n

The post Today\u2019s \u201cHuge\u201d Jobs Report Is a Bad Omen<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post Today’s “Huge” Jobs Report Is a Bad Omen<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

The December unemployment rate shatters all expectations, stocks explode… Why unemployment below 4% is no reason to celebrate… Jerome Powell sends the Dow surging 400 points…<\/p>\n

The post Today’s “Huge” Jobs Report Is a Bad Omen<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[817,366,928,463,929],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1092964"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1092964"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1092964\/revisions"}],"predecessor-version":[{"id":1092965,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1092964\/revisions\/1092965"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1092964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1092964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1092964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}