A few of Friday’s headlines set me off…
“July’s strong jobs report puts the Federal Reserve on track to slow its bond purchases.”
“Unemployment rate drops to 5.4%, according to the Labor Department’s Bureau of Labor Statistics.”
“President resists temptation to take a victory lap Friday following the release of strong jobs numbers.”
Give me a break (please)!
By Dave Allen for Discount Gold & Silver
A few of Friday’s headlines set me off…
“July’s strong jobs report puts the Federal Reserve on track to slow its bond purchases.”
“Unemployment rate drops to 5.4%, according to the Labor Department’s Bureau of Labor Statistics.”
“President resists temptation to take a victory lap Friday following the release of strong jobs numbers.”
Give me a break (please)!
Look, I’m as happy as the next American that 943,000 of our fellow countrymen and women found jobs last month — especially after the miserable year of Covid shutdowns we had.
But the one thing WallStreeters have been talking the most about the past few months — ad nauseum — is when the Fed will start to taper or even start to talk about it.
And the bottom line is, it’s not going to happen anytime soon as long as the Fed sees its massive QE continuing to prop up the stock market as a proxy (misplaced as it is) for the economy…
…despite how positive last month’s, this month’s or next month’s jobs reports appear to be.
Next, stop telling us the unemployment rate is only 5.4%, because it’s not; it’s a lot higher, especially if you’re a person of color.
Some call it a misrepresentation; some more bluntly call it exploitation; others say it’s simply understated and just a number; I call it something more dark, almost sinister: a lie.
The government’s official, U-3 unemployment rate has outlived its usefulness — at least for smaller investors and the general public.
It may have dropped half a percentage point to 5.4% in July. But that misleading figure excludes a wide swath of people who aren’t working —those who are considered “marginally attached to the workforce.”
The BLS tells us that the marginally attached are people “who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.”
Over a decade ago, I found myself in this murky, unwanted category after an awful set of circumstances converged to create the perfect storm; it’s not fun or pretty.
A broader, more encompassing — and, I believe, more accurate — measure of unemployment, which includes discouraged workers and the marginally attached, is the BLS’ U-6 rate, which was 9.2% in July.
Admittedly, that’s down more than half a percentage point from June’s 9.8% (it peaked at 16.8% a year ago). But 9.2% is still a lot higher — in fact, 70% higher — than the U-3 rate of 5.4%.
And that’s not good for the Fed or for Biden or members of Congress — or for the economy as a whole (but its lowness explains why most everybody continues to defy credibility by using U-3).
And last, but certainly not least, presidents do not an economy make. Much as they and their propagandists like to think they do, they don’t.
In Biden’s particular case, however, I believe that tipping our hats wouldn’t be the most inappropriate thing we could do today.
The president yesterday resisted what he himself has done on more than one occasion earlier in his first term and what all of his predecessors have done before him:
Take credit (or not shy away from it) for rising private payrolls, falling aggregate unemployment, stronger than usual GDP numbers, and most other economic reports with positive outcomes.
Instead, on Friday, he chose to tell the country that rising Covid cases pose an urgent threat to the economy and its recovery and that “we have a lot of hard work left to be done.”
To be sure, the pandemic is causing agita amongst policymakers of all sorts.
One of them is Minneapolis Fed Prez Neel Kashkari, who’s warning that Covid’s highly contagious Delta variant could throw a "wrinkle" into the labor market recovery.
And that, he adds, could affect the timeline for a reduction in the Fed's $120 billion per month asset-purchase program.
“If Delta causes the labor market to heal much more slowly,” Kashkari said the other day, then that's going cause me to step back" to reconsider whether continued bond buys would help speed the return of jobs.
The labor market is still 7-9 million jobs shy of what could have been expected by this time before the pandemic hit.
Fed officials and other pundits continue to say they expect the lack of access to childcare, closed schools, health concerns and pandemic unemployment benefits to significantly decrease or end in the fall — thus allowing more people to return to work.
But Kashkari laments that a spreading Delta could discourage many of those people from returning to work — especially those that require in-person contact — and keep kids out of schools.
Granted, presidential policies — and words — matter. But what happens in an economy as huge as ours, especially during any given day, week or month, is almost always the result of a massively collective, team effort.
So, regardless of your political affiliation or whom you vote for or against, give yourself a high five — instead of your president and elected representatives or the Fed chair — the next time you read or hear about upbeat economic news.
Chances are you had at least as much to do with it as they did. In the meantime, it’s not a time for celebration just yet.