Friday, November 6, 2015

Earlier today the government released the Non-Farm Payroll Report for the month of October

I was told that this was the most import Non-Farm Payroll report ever

They were looking for 190,000 jobs and we created 271,000 jobs

Everybody now has jumped to the conclusion that a December rate hike is a lock

There is nothing in this jobs report that indicates that

The reason everybody believes that the Fed is like to raise rates is because Janet Yellen testified before Congress earlier in the week

This is what the Fed Chair said about interest rates:

If we get further improvements in the labor market and we make progress at achieving the Fed's inflation goal of 2% in the medium term

How much improvement and what kind? We don't know, because thus far, no improvements have been enough to prompt a rate hike

Yellen said that if we got those improvements, then a rate hike in December would be a "live possibility"

This does not mean it will actually happen - it means it is possible

She did not even use the word probable

I don't think the Fed is going to raise rates in December

We have one more "most important" jobs report between now and December and this month's numbers may be revised down, as others have

From my perspective, if the Fed does not know that they will raise rates by now, they will not decide on the spur of the moment after a jobs report

Even with positive economic news, the Fed still does not have to raise rates; they can come up with another excuse, real or unreal

What happens if the stock market declines after a rate hike? what would the Fed do then?

"Extend and Pretend" is working like a charm for the Fed now

Getting back to today's job's report:

This is the strongest month of the year following the two weakest months of the year

Both of those months arrived with expectations of upward revisions, and they did not happen

The three month average is 187,000 jobs

The last three months have been slower than any prior three month period this year

Last year, the 3-month average was about 250,000+ jobs

So the job market is much slower this year than it was last year when the Fed was looking for "more improvements" before raising rates

The unemployment rate did decline, but so far no positive data on unemployment rates have prompted the Fed to raise rates

The Labor Force Participation Rate stayed at 62.4% which matches the low of this so-called recovery

So we are not seeing more people entering the labor force

This is not a sudden accelleration in the pace of job growth

Let's look at the quality of the jobs:

Most of the jobs, about 200,000 of the 271,000 jobs added are low-paying service sector jobs

In second place, at 45,000, is temporary help

Third place, at 44,000, is retail trade

The fourth largest category is leisure and hospitality

Manufacturing, mining, logging, transportation sectors lost jobs

Where it really gets bad is in the demographics:

All job gains went to people 55 and older

People under the age of 55 lost 35,000 jobs

If you look at the gender, men from 25 - 54 lost 119,000 jobs

What would explain this?

Older people can no longer afford to be retired, and are supplementing their retirement incomes

Some of the older people are taking better jobs because they are more experienced

Why are more women getting jobs?

Women who were previously homemakers also need to supplement their incomes

When you look at the demographic numbers, it is further proof that the Fed's explanation of the labor force participation rate is wrong

The Fed claims the participation rate is due to retiring Baby Boomers

The people who should be buying houses are the younger ones who are not getting jobs

Freddie Mack reported its first quarterly loss in 4 years

This is with rates still at zero

Imagine the losses if the Fed raises rates?

Also later in the day today, the government reported a record increase in consumer cred...