The Top Five Ways To Profit From The Non-Farm Payroll Disaster

The greatest tap dance in economic history is unfolding right before our eyes. On the one hand, the central banks have to talk positively about their efforts in drowning the world in cash. The idea being that they know exactly what they are doing, or they wouldn’t be in charge. On the other hand, there is the reality of whether or not it’s working. While assumptions can be a good thing, it’s the data that tells the story.

The Fed has been looking at sustained, strong hiring as the major sign that the economic recovery is well under way, that its efforts at fighting deflation are working, and it is, therefore, time to start raising interest rates. While other data has conflicted with the hiring spree, at the end of the day there is no good argument against a strong jobs market. If an economy were in trouble at the grassroots level, so the saying goes, firms wouldn’t be hiring. There is nothing else to consider. The payroll numbers, after all, tell the real story. Alas, Friday’s numbers brought an unexpected twist.

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Non-farm payrolls came in at 38,000 against an expected 170,000 jobs being added to the economy, the weakest jobs growth in six years. Like Uber’s efforts to fight the Austin city council (my home town), this is a big miss, throwing all of the Fed’s logic out the window. It is also sending a clear signal with a bullhorn, that raising rates is not a possibility in this environment. The bond market read this message loud and clear, exploding higher after the report.

The data is telling us there is no major recovery barreling at us down the highway. There is no magic bullet. The plan is not working. We are now in a lower-growth economy, where it will be normal to get little or no growth from quarter to quarter. This doesn’t mean the economy is falling apart. It just means it is sluggish and is going to stay that way, potentially for a long time. This also opens up the possibility of a recession, with the current jobs data sending the message that it could happen over the next 12 months. In this type of environment, any plans to raise interest rates further get pushed back, if not abandoned. There is too much at stake to risk driving the economy into the toilet, and it is very easy to continue kicking the proverbial can down the road. Plus, politicians like to keep their jobs. Right now there is no one to blame.

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