"WWJ(P)D?"
The ugly truth behind Friday's jobs report, interpreting
mainstream media and figuring out what would Jerome do?
by Joel Bowman
“We used to have Bob Hope, Steve Jobs and Johnny Cash… now we have no hope, no jobs and no cash! Let’s just hope Kevin Bacon doesn’t die soon!”
~ Popular Internet joke
Buenos Aires, Argentina - "Jobs up... stocks down. That was the take-away from yesterday’s headlines. After all the experts had tortured their numbers, the consensus predicted 258,000 new jobs were added in July. Then, the Bureau of Labor Statistics (which, without the Labor, is really just BS), announced that, in fact, 528,000 were added.
Stocks promptly sank on the news. Here’s CNBC: "Stocks wavered Friday in a volatile trading session after the July jobs report was much better than expected, as investors assessed what a strong labor market would mean for the Federal Reserve’s rate tightening campaign."
Both the S&P500 and the Nasdaq were down for the session. The Dow was up a smidge. Wait... what gives? Aren’t jobs good for the economy? Isn’t a strong economy good for the companies that operate within it? Isn’t 528k a bigger number than 258k? Let’s back up a moment, to get a clearer picture...
Truth vs. Power: First of all, the mainstream media – at this point little more than a virtual bullhorn for establishment opinion – has become expert at burying the real story. Once a proud and noble profession, which aimed to “speak truth to power,” to “afflict the comfortable and comfort the afflicted,” the fourth estate has largely deteriorated into muckraking partisanship, where everything is viewed through the warped looking glass of Team Red vs. Team Blue politics. Joe Biden could announce tomorrow that 2+2=4 and half the country would be up in arms. Same for Trump, Obama, Bush, et al. Nothing new there. Every aspect of modern life has come to be presented through the lens of one or another political party... even (and sometimes especially) things that seemingly have nothing to do with politics.
Curious about the origins of the virus that (was used to) shut the world down for two years? That’s political. Wonder about the efficacy of masks and/or vaccines? That’s political, too. Confused as to the accepted definition of a recession... and whether or not the country is actually in one? Again, such a consideration is not merely a matter of interpreting the relevant economic data, but a question of political allegiance. (More on “mere semantics” in tomorrow’s Sunday Session...)
An earnest reader, looking for “just the facts, ma’am,” has a long way to go to get to the truth, if he can even find it at all. Instead he gets “narratives,” “talking points” and “positions.” Modern day mythology, in other words, concocted by insiders to coral outsiders into manageable formation.
WWJ(P)D? As if that weren’t enough, investors must also take into account the likely action of the biggest para-market actor of them all, the mighty Federal Reserve Central Banking System of the United States of America. Every inflation print... every GDP read... every fleck and mote of economic data that comes down the pike must be interpreted in light of the all-important question, “What Would Jerome (Powell) Do?” (WWJ(P)D?)
As Dan Denning explained in yesterday’s note to Bonner Private Research members... “Good news is bad news when it comes to monetary policy,” he wrote. “If the economy is stronger and wages are going up (BLS reports average hourly wage growth of 5.9%) then the economy can handle higher interest rates and Quantitative Tightening from the Fed, right? Higher rates and lower liquidity are bearish for stocks.”
But might investors have missed the story for the headline, the truth behind the myth? What if wages were not growing... but actually sinking? What if the unemployment rate was not 3.5%... but 9.6%? What if all were not as it appears?
Digging deeper into the actual numbers, Dan helps readers get to the bottom of the story. Here’s a choice snippet from his note from yesterday..."The Bureau said the US economy gained 528,000 jobs in July. Consensus forecasts were for a gain of 258,000. By all accounts it was an incredible result. And I do mean in-credible.
Here’s the bad news. The real unemployment rate is 9.6%. Nearly 100 million Americans are out of the workforce. Much of the gain in jobs came from people taking a SECOND or part-time job. The labor force participation rate is at the same level it was in March 1977. And with official inflation at 9.1%, wages are still getting crushed by cost-of-living increases for ordinary Americans. Don’t take it from me. The following facts come straight from the BLS report (emphasis added is mine):
"The number of persons not in the labor force who currently want a job was 5.9 million in July, little changed over the month. This measure is above its February 2020 level of 5.0 million. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
The number of persons employed part time for economic reasons increased by 303,000 to 3.9 million in July. This rise reflected an increase in the number of persons whose hours were cut due to slack work or business conditions. The number of persons employed part time for economic reasons is below its February 2020 level of 4.4 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
The labor force participation rate, at 62.1 percent, and the employment-population ratio, at 60.0 percent, were little changed over the month. Both measures remain below their February 2020 values (63.4 percent and 61.2 percent, respectively)."
From a high-level point of view, it’s great news that the 22 million jobs lost between March and April of 2020 are back. It’s also great news that the official unemployment rate is the lowest since 1969. But remember, the government response to the pandemic created an economic calamity for Middle Class Americans. The market economy has repaired some of that damage. But the pandemic did not ruin the job market. Government policy did. You have to read beyond the headline figures to get the full picture about the state of the labor market in the United States.
It’s not political, dear reader. Them’s just the numbers. But you do have to take the time to find them. Reading behind the headlines is a big part of what we try to do at Bonner Private Research. Whether you’re investing your money or your time (or both!), it pays to take a step back, question accepted wisdom and reevaluate what you thought you knew... “Come to think of it, how do I know what I think I know... other than that’s what I’ve been told?” We won’t always get it right, of course... but, as our founder Bill Bonner says, “Sometimes right. Sometimes Wrong. Always in doubt.”
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