The August jobs report came out last Friday. Mike Maharrey offered a little bit of analysis during the Friday Gold Wrap podcast, saying he was skeptical that the actual employment situation is as great as the mainstream seems to think. Peter Schiff offered a more in-depth breakdown of the employment report in his latest podcast, saying it was “anything but strong.”
The headline number was the 201,000 jobs employers added last month. That came in above expectations, and as Peter noted, people tend to get excited when the number pushes north of 200K.
“For an economy the size of the United States, this is really not a lot of jobs, even if we were creating 200,000 jobs a month.”
Peter said that lost in all the breathless reporting about that August number was the fact that the labor department revised the previous two months downward. It came to a net loss of 50,000 jobs. Analysts took 10,000 jobs away from the July number and 40,000 off the June estimate.
“So, it was a weaker report than probably what everybody was looking for, yet it was spun positive by the media because the current month was better than estimates.”
And when you look at the types of jobs the economy is generating, the picture becomes even less impressive. Not only did the labor department revise down the number of manufacturing jobs created in July, the economy actually lost manufacturing jobs in August, according to the report.
“So, we actually fired people in the month of August from manufacturing. So much for the manufacturing revolution. So much for how the tariffs are working and we’re bringing our jobs back and American manufacturers are bringing back the jobs. Three thousand pink slips sent out in the month of August. So, this is bad news. If you’re trying to hang your hat on the revival of American industry, of American manufacturing, we lost 3,000 jobs.”
Peter also looked at the labor participation rate. It was at 62.9 in July and had been ticking up. People in the Trump administration were even saying, “See, people are coming in off the sidelines.” Well, in the latest report, labor force participation came in at 62.7. The payroll-to-population ratio also dropped from 60.5 to 60.3.
This means fewer people are in the workforce. The unemployment rate held steady at 3.9%, but more people simply dropped out of the labor force.
“So, had people not left the labor force then the unemployment rate might have gone up, because maybe some of the people who left the labor force, well, now they’re no longer looking for jobs because they’re no longer part of the labor force. And so if you’re not in the labor force, you can’t be unemployed even though you’re not working.”
The gain in average hourly earnings got the most attention from the mainstream. It came in at 0.4 – higher than expected. The year-over-year number also came in higher than expected at 2.9%.
“Is a 2.9% year-over-year gain in wages really indicative of a strong economy, or is it indicative of inflation? See, I think it’s the latter. I think it’s inflation that is the reason wages are going up. Remember, wages are prices. They’re the price that you pay to hire labor. So, the price of labor is wages… The price of goods and the price of labor are both affected by inflation. So, because we have all this inflation, prices are rising. They’re rising for goods and they’re rising for labor.”
Peter noted the CPI is currently at 2.9%, exactly the same as the growth in hourly wages. And he said he thinks the real cost of living is rising far faster than 2.9%.
“If all you’ve done with your increased wages is keep pace with higher prices, there’s nothing to brag about.”
Peter went on to talk about how the markets reacted to the jobs report. Of course, it continued to buoy expectations that the Fed will keep pushing forward with interest rate hikes. That made Peter wonder what investors are smoking. You’ll want to listen to the rest of the podcast to get his breakdown of what all of this really means for the markets. One thing he pointed out is that people should be buying gold.
“Gold is an inflation hedge! It’s the absence of inflation that might be bad for gold. As inflation rears its ugly head, that makes gold look prettier and prettier. So, people should be buying gold when the inflation numbers are higher. Now, eventually, they will, once people realize no matter how hot the inflation fire burns, the Fed’s not going to put it out.”
Posted by The NON-Conformist