Jobs Report Well-Received, But Below The Surface - Fissures Emerge

With the stock market closed on Friday, Wall Street waited for the Non-Farm payrolls report, also referred to as the "Jobs Report", with baited breath.  Earlier in the week, optimism was running unchecked, as the hopelessly perma-bullish investor community began to predict that the number would be a blowout.

Then came the ADP (Automatic Data Processing) employment report, which showed that private sector jobs were LOST, not gained, and suddenly a more sober Wall St. began to ratchet down expectations. 

Even with the projections running above a hoped-for gain of more than 200,000 jobs, down from the 300,000 anticipated a week earlier, the final number still stunk.  Monthly job gains were a poor 162,000, of which 48,000, were made up of temporary census hires.

Therefore, as reported, March payrolls were up by a net of 114,000.  The latest data also included upside revisions totaling 62,000 to prior January and February reporting.  Part of the relatively stronger March report has been attributed to rebound effects from February’s blizzards.  There we go with the weather again!

Logically, any weather-related impact would be non-recurring.  But, who knows, maybe as the snow melts, we'll have floods to blame!

Dr. Williams, of the marvelous site ShadowStats (http://www.shadowstats.com/), believes that the government currently overestimates monthly payroll growth by at least 250,000, which suggests that more-accurate current reporting still would be very much in negative territory.  On the unemployment-rate side, the broader measures increased and the headline number would have too, except for some rounding and census hiring.

The trend of reported monthly decline has continued to slow sharply against prior-year comparisons, indicating a bottoming process.  The year-to-year decline in total non-farm payrolls narrowed to 1.7% (1.8% net of census effects) in March, versus an unrevised 2.5% decline in February and from a post-World War II record 5.0% decline in July 2009. 

The July 2009 decline was the most extreme annual drop seen since the production shutdown at the end of World War II, which reflected an annual trough of  7.6% in September 1945.   Otherwise, the current annual decline would be the worst since the Great Depression!

The Obama administration was jubilant over the tremendous news and couldn't wait to begin its ritualistic back-patting.  Have they forgotten that 8.4 million jobs have been lost in the last 2 years?  Oh, yes, that's all George Bush's and Ronald Reagan's fault!

Beneath the surface, however, a more dangerous trend and un-noticed by most economists, is the VERY ominous decline in liquidity as measured by the contraction in the broad money supply aggregates.  According to Dr. Williams, "real (adjusted for inflation), broad systemic liquidity, as reflected in M3 (SGS Continuing Estimate), continues to shrink year-to-year.  As of March, the series appears to be down by the largest percentage in modern reporting.  The negative effects of this liquidity squeeze on the economy should become increasingly obvious in the next month or so, including subsequent employment data, ex-census."

Historically, sudden, sharp fall-offs in money supply growth have been closely followed by both stock market sell-offs and economic decline.  In addition, this contraction bodes poorly for commodities, despite the recent strength. 

Here's to hoping everyone has a Happy Easter with a booming PERSONAL money supply!

Marko's Take

Please visit us on YouTube at http://www.youtube.com/markostaketv.  The very excellent Phoenix Film Group is now placing the final touches on our next episode on the legality of the Personal Income Tax.