Friday, June 4, 2010

Morning Update/ Market Thread 6/4

Good Morning,

Equity futures are diving this morning on the Employment Situation Report. The dollar is breaking out to new highs, the Euro is diving to new lows after breaking down from a bearish triangle:

Bonds are up significantly, while both oil and gold are lower. Gold was down substantially yesterday, but it was on very high volume. If you look at the chart below, you will see that declines that begin on high volume usually have legs. We are also close to breaking support on the current uptrend, so short term traders should take note – long term believers may have a buying opportunity coming:

One thing’s for certain, the market is not buying into the Employment Situation Report. In fact, it’s a confidence losing event. The headline numbers? We added 431,000 “jobs,” and the advertised unemployment rate fell to 9.7 trumped-up percent. The Reality? We LOST massive jobs when you remove temporary Census workers and birth/death model false jobs. And the market finally gets it – Obama’s great jobs report isn’t really great at all, in fact it flat out missed the boat.

This report is 110,000 below consensus expectations and the prior two months were revised downwards. But if that’s not bad enough, get a load of the business “birth/death” adjustments for May – 215,000 “workers!”

Let’s look at Econoday’s report:
The headline number for payrolls for May was disappointing due to anemic growth in the private sector. However, overall payroll jobs in May surged 431,000, following a 290,000 boost in April, and 208,000 gain in March. April's spike came in much lower than the consensus forecast for a 540,000 jump. Net combined revisions for April and March were down 22,000.

But the real focus of traders is private payrolls to discount the impact of temporary Census hiring. Private nonfarm employment increased only 41,000, following a 218,000 boost in April.

The positive news in the payroll survey was in earnings and the workweek. Wage inflation picked up with a 0.3 percent rise in May, following a 0.1 percent advance the month before. The average workweek for all workers edged up to 34.2 hours from 34.1 hours in April. Analysts had expected 34.1 hours.

From the household survey, the unemployment rate slipped to 9.7 percent from 9.9 percent in April, coming in below the market forecast for 9.8 percent.

On the news, equity futures fell sharply while Treasury prices rose.

They couldn’t even mention the number of Census workers… of the 431,000 “surge,” 411,000 were temporary Census workers! That’s right, the great job resurgence is created by spending 3 times the amount of money ever spent on a Census so that really unemployed Americans can stand around and pretend to count one another! Oh wait, they don’t really even do that:

Here’s the entire BLS report:

Employment May

One of the first standouts of the report is that the civilian participation rate fell by .2%, this means that they are counting the workforce as being smaller despite a growing population. Also, “the number of long-term unemployed (those jobless for 27 weeks and over) was about unchanged at 6.8 million.”

Without Census hiring, government employment fell by 21,000. This is important, it shows that municipalities are finally beginning to lay people off in earnest.

Note in the alternate table below that both Seasonally adjusted and non adjusted U6 fell by about half a percentage point:

All I can say is that these U6 numbers USED to be closest to representing how unemployment numbers were tracked. Now, however, I think it’s fair to say that none of these numbers represent anything even close to reality. I think this report is an eye opener, it is a confidence destroyer that exposes the government and their statistics for what it is – a great big lie and a great big fraud.

Reality? John William’s numbers are probably the closest to that – try nearly 22%...

Chart of U.S. Unemployment

So, back out the temporary Census workers (411k), and the fantasy “birth/death” job creation (215k), you are left with a number of MINUS 195,000! Oh, and we need 250k minimum REAL jobs just to keep up with population growth. Can you say debt saturation? I thought you could.

What’s most disturbing is not the fact that job creation is actually negative. No, what’s most disturbing is that your President and your government are working so hard to deceive you. If you haven’t lost confidence yet, then you are not thinking.

The market certainly is reacting negatively to the report as is appropriate. We are below the 1,090 support area, but we need to get beneath 1,069 to be sure that wave 3 has begun. This is certainly an impulsive move lower and it’s within a day of what I was expecting, so it very well could be. With the Euro sliding in the background to new lows, I think it’s far past time that we start being honest with ourselves.

Eurythmics - Would I Lie To You: