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Ready for Liftoff?

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Another first Friday of the month, another jobs report. By the time you read this the Bureau of Labor Statistics’ (BLS) monthly Employment Situation Summary for October may have been released diligently at 8:30AM Eastern Time on the appointed date. The stock market may be reacting and everyone will turn their attention to the Federal Reserve.

It’s a strange ritual which keeps financial writers busy. But does it mean anything?

If all goes as it should this one should really move the markets. Exactly which direction is hard to tell for a variety of reasons – but that is what will matter more than anything else if this report comes in as “good” (in quotes) as it should be.

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Failing “Facts”

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As I prepare for a seminar on economics for today’s progressive, this particular post has come back to haunt me.  It’s a bit subtle but hurts like a sledgehammer if you think about it.  The bizzy whirl of my life as I prepare to announce my plans requires a repeat – and this one is standing out.  Enjoy!

Back in the 1950s, people who studied complex things like economies felt they were making real progress. The general belief was that by understanding how it all worked we could even things out and usher in a new era of continuous prosperity that would benefit everyone.

Some of the underlying “facts” that were identified at this time have been accepted as simple truths. Growth is always good, and economic growth always flows to workers, making their lives better generation by generation. There’s only one problem lately – some of the “facts” appear to not be as true as they used to be. That means that the underpinnings of modern economic theory are all being questioned and, perhaps, if we don’t keep our eyes open the new era of prosperity will be far more elusive than anyone thought.

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Bad Jobs Numbers

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Last Friday the monthly Bureau of Labor Statistics (BLS) Employment Report came out, and it was lousy. Instead of an expected gain of 200k jobs it came in at 142k – a miss of 58k or 29%. The reaction in the financial press was swift and conclusive – there is no way the Fed can raise interest rates given this weakness. But there’s a bigger problem with the report than that.

It honestly can’t be believed.

It’s fashionable to say that the BLS cooks these reports to get the results they want and that no one should believe the government reports in general. That’s a general paranoid delusion that is utterly unreasonable all around. But the reports can’t be taken as pure gospel when they don’t come in exactly where they should be because there is no way they can possibly be as accurate as is demanded.

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Good News! It’s Good News.

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Before we can call the economy “good”, we have to be in a situation where good news is taken as unvarnished good news. And that seems to have finally happened.

Janet Yellen outlined in great detail exactly why interest rates not only have to start rising by the end of the year, but why they have to go up to around 2% before the Fed is done. The market responded positively, getting another shot of good news this morning. Has the monkey of cheap money finally been scraped off their backs?

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A Critical Weekend

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Monday is Labor Day.  This is a critical day for labor in America because its success is about to define our economic future, at least for the next few months.  By the time you read this, you may know how many jobs were officially created in August.  If it was 220k or more a September increase in the Fed Funds rate is likely.  If it was under 180k there probably will not be a rate increase.

The ADP Employment Report, which is less prone to noise in the first place, came in with a middling 190k gain in jobs.

What’s great about this is that Labor’s success in the last month could kill the stock market, pitting labor directly against investment.  There’s nothing productive about that arrangement, but it highlights how strange the world has been.  This oddly critical holiday is a good time to recap some of the topics that Barataria has gone over the last few months.

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