Is The Jobs Report Wrong?
Happy Friday, Brian Manning here with the weekly update. Let’s get right to it.
So, let’s see. I had double hernia surgery this week on Tuesday. I got to tell you that there’s a million better things you could do with your life than go to a hospital Tuesday morning for double hernia surgery, but had to have it done. I’ve been living off some Advil and Tylenol since then, feeling good through the recovery process. But if there’s other things you want to do with your life, I can tell you avoiding double hernia surgery would be a good one.
With all that said, there’s so much for us to talk about. We actually have a lot of news this week. I just want to break it down and give you some feedback, because it’s going to give you some clues as far as what’s happening with the markets and what’s going on with interest rates.
Monday this week was a quiet news day; not a lot to talk about there.
Tuesday this week, though, we got retail sales for the month of December. This looks at consumer spending. There was an expectation that retail sales would be up by 4/10ths of a percent, and we actually got a big goose egg—we got a zero. So, we had no progress for retail sales in the month of December. Then we look at the “core,” which strips out volatile items. The core missed the expectations as well by about a half a percent; it came in at negative 1/10th as far as retail sales are concerned. So, not great consumer spending for the month of December.
We also got what’s called the Employment Cost Index. This was one of Alan Greenspan’s favorite gauges for looking at inflation and what’s going on with the economy. And this was down from 8/10ths of a percent to 7/10ths of a percent. So, it was really good to see a reduction there. That just means that there are some lower inflationary costs out there as far as employment is concerned.
Wednesday this week was probably the biggest report of all: the BLS (Bureau of Labor Statistics). We should have gotten this last week. This is the employment report that we were all waiting for, but I’m just going to call bullshit on this report. I just don’t know where this report came from; I think it’s wrong. It says in the prior month, we had one hundred and thirty thousand new jobs created. All right, well, ADP said we lost twenty-two thousand jobs. Revellio said we lost thirteen thousand jobs. The JOLTS report shows that we have been down six hundred thousand jobs.
If we look at what’s called the Challenger report—which looks at job cuts and what’s going to happen with hiring in the country—this is currently at the highest level of job cuts since 2009. Furthermore, the hiring plans for companies across the country are at the lowest level in the last 17 years. Unfortunately, the track record for the BLS is not super strong. I’m not blaming this on the people; I think that the methodology of how the BLS functions and how they gather their information is just weak and incorrect. How is everybody else out there showing negative job creation in the U.S. economy, but all of a sudden the BLS comes out and shows one hundred and thirty thousand jobs created? So, I’m just going to call bullshit on this; I just don’t think it’s right.
At first, the markets reacted, but then I think the markets actually realized, “Oh my gosh, this report is not accurate”. Everything out there completely goes against what this report says, and you saw the markets turn around from there. Unfortunately, the BLS track record is atrocious, and this always has an impact on interest rates. But we did start to see it come around as well.
Thursday was a quiet news day.
Today we get the CPI. We’re always looking at inflation data because the Federal Reserve is looking at inflation when they’re trying to make decisions on what they want to do with interest rates. This is for the month of January, and it actually came out really good. The core reading for the month of January was up 3/10ths of a percent. The headline reading was only up 0.17. If you take 0.17 percent and annualize that out by 12 months, that means inflation is running at a two percent rate. That’s exactly what the Federal Reserve is hoping for. On a year-over-year basis, we saw inflation move lower from 2.7 down to 2.4 percent.
Something that really helped us here was shelter. We’ve talked so much about the shelter component over the last couple of years. Shelter was only up 2/10ths of a percent. So, it feels like maybe it’s finally coming in line, because when we look across the country, we’re not seeing rents accelerating at a crazy pace right now. Seeing shelter come in line at a 2/10ths increase was definitely very helpful for the CPI number.
With all this said—the realization that the BLS report was probably a BS report, looking at ADP not being that strong, and looking at this very favorable report as far as inflation is concerned—we’ve seen some improvement in interest rates this week. We’ve seen rates move lower, which is amazing.
I’m around all weekend. I’m available 7 days a week, 8 AM to 8 PM. Surgery’s not going to stop me; you’re still going to call me. I’m available 7 days a week, 8 to 8—don’t worry. Tylenol and Advil are my best friends. I got you; we’re here to help you. Let’s run payments, and we’ll get a pre-approval done.
Happy Friday. Hope you have a great day.
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