Sorry for the late report this morning, but duty calls. And by “duty”, I mean driving family members to the airport while battling a dog who thinks it’s her right to sit on my lap in the car.
Bad is good, good is good. That’s the David Tepper stock market for you. At least that’s the view of this morning’s labor report which was quite disappointing. The basic thinking is, bad data means more Fed action and good data means better economy. This morning’s bad data means more Fed action so now we all get to sit around and wait for this magical reserve swap to generate a sustainable economic recovery through the Fed’s various mystical powers. All the while creating a distortion between nominal prices and real asset values thereby reinforcing the disequilibrium caused by the Bernanke Put and in the long-run, making the economy even more unstable than it should be.
Here’s a summary of this morning’s NFP Report (via Econoday):
“The odds of some kind of Fed easing at the September FOMC just went up as the employment situation for August was not pretty. Payroll jobs were anemic even though the unemployment rate dipped. The unemployment rate slipped to 8.1 percent from 8.3 percent in July due to a sharp drop in the labor force. Payroll jobs in August advanced a mere 96,000, following gains of 141,000 in July (originally 163,000) and 45,000 in June (previous estimate of 64,000). The net revisions for June and July were down 41,000. Analysts projected a 125,000 gain for August.
Private payrolls increased 103,000 in August after gaining 162,000 the prior month. The consensus called for a 134,000 boost.
Private service-providing jobs rose 119,000 in August after a 139,000 increase the prior month. In August, notable gains were in food services and drinking places (up 28,000), in professional and technical services (up 27,000), and in health care (up 17,000).
The public sector contracted but at a slower pace. Government jobs fell 7,000 in August, compared to a 21,000 drop in July.
Turning to wage inflation, average hourly earnings were flat after a 0.1 percent rise in July. Expectations were for a 0.2 percent rise. The average workweek was unchanged at 34.4 hours. Expectations were for 34.5 hours.
Today’s report is very disappointing. Equities dipped on the news but generally remained positive on favorable news from Europe. German industrial production unexpectedly posted a gain in July and British industrial output gained significantly more than forecast. Also, the weak U.S. report boosted hopes of further ease by the Fed.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.