With the mean-reverting extrapolators all calling the bottom in Europe and scandal-plagued PM Rajoy desperate for distraction repeatedly arguing that the country's depressed economy is finally emerging from a two-tear slump, the FT reports that IMF has just popped that balloon of hope. "Spain has historically never generated net employment when the economy grew less that 1.5-2%,” the IMF notes, pointing out "yet growth is not projected to reach these rates even in the medium-term." In fact, echoing recent warnings from independent economists at exuberance over the most recent data (driven by seasonally-enhanced tourism) as the start of a new trend, the IMF warns, "the weak recovery will constrain employment gains, with unemployment remaining above 25 per cent in 2018." So, for Rajoy, its back to the grift.
The latest buzz circulating around the gold market relates to news that Pakistan’s Economic Coordination Committee of the Cabinet (ECC) has decided to ban duty free gold imports for thirty days. Why you ask? Because those pesky Indians are using Pakistan as a conduit to get around the country’s recent 8% duty imposed on gold imports. All of this of course begs the question: With the price of gold “plunging” over the past several months, why did Pakistan and India both feel the need to take such draconian measures against a barbarous relic that everyone is supposedly panic selling? If there is so much gold to be had and no one wants it, what’s the problem? Strange indeed...
With US leaks about Israeli air strike on Syria, John Kerry stirring the civil war pot in Egypt, and the closure of US embassies across the Muslim world (Iraq, Afghanistan, Qatar, Bahrain, Oman, Kuwait, Bangladesh, Saudi Arabia, Libya, Yemen, UAE, Algeria, Mauritania, Sudan, Israel (Tel Aviv) and Jordan), it appears something is afoot. To add to the intrigue, the US State Department just issued a worldwide travel alert for US citizens.
*STATE DEPARTMENT WORLDWIDE TRAVEL ALERT EXPIRES AUGUST 31, 2013
*STATE DEPT ISSUES WORLDWIDE TRAVEL ALERT FOR U.S. CITIZENS
An Al-Qaeda threat has been posited but with no follow-up but we can't help but fear what we wondered about previously - the need for deficits to re-awaken (via some external event that no-one can 'un-patriotically' demur) providing more room for Bernanke to avoid his need for Taper.
While we have banged the table on the full vs part-time disconnect for so long even the mainstream media has finally caught up, another issue that few outlets mention let alone discuss is that all the job growth in the US has, so far, only benefited old workers: those 55 and older. July was no difference. As the chart below shows, of the 160k jobs broken down by age group, 60% went to workers aged 55-69. No jobs were added by those 16-19, 49K jobs went to recent college grads, or those otherwise aged 20-24, and a measly 15K jobs were gained by Americans in the prime working age between the years of 25-54.
"The more stocks go up, the more analysts, strategists, the financial media - and inevitably investors - firmly believe that the US economy has to be on the verge of rapid growth." TrimTabs' CEO Charles Biderman is back and blasting the "mass psychosis" that has overtaken the markets - driven by endless liquidity from a consequence-blind central bank - as the real economy struggles to keep its head above water. Growth must be coming sometime soon, "or else the market would not be going up," right? The "belief in the growth fairy," is not new. Since 2010, economists and sell-side strategists have been betting it all (and encouraging investors) on this faith that growth will arrive any day now. In fact, as Biderman lays out in unarguable facts, that this is simply not true - job growth is slowing, economic growth is slowing, and income growth is stagnant.
Amid all the high-fives over stocks hitting all-time highs and Edward Snowden's temporary freedom hogging the headlines yesterday, State Department spokesperson Marie Harf quietly pointed out that, due to an "abundance of caution," an unspecified number of US embassies and consulates in the Muslim world will be closed this weekend (and diplomatic facilities maybe longer). House foreign affairs committee chairman Royce suggested this morning that this closure is 'Al-Qaeda-threat-related'; and, as AP reports, the last major warning came last fall when embassies warned American diplomatic facilities across the Muslim world of potential violence around Sept. 11. (and the disaster that was Benghazi). But we can't help but worry about the coincident 'leak' by US officials of Israel's airstrike on Syria (and the potential forced response from Assad this would seem to portend).
This data really doesn't need much explanation. Here are the facts: so far in 2013:
The ratio of waiters and bartenders to manufacturing jobs: 10 to 1.
For the third month in the last four, US Factory Order growth missed expectations. In fact the last four months have seen the biggest plunge in a year. Adding to the disappointment for the 'manufacturing renaissance' hopes (despite proof in the payrolls data that it does not exist) is the fact that New Orders (ex-transports) dropped 0.4% (its worst in 3 months) with non-durable shipments down 0.6%.
One of the overlooked components of today's NFP report is that in July the one industry that posted a clear decline in workers was none other than Construction, the sector which is expected to carry the recovery entirely on its shoulders once Bernanke tapers and ultimately goes away, which saw a decline of 6,000 workers: the largest job loss by industry in the past month. Perhaps there isn't quite as much demand as some would propagandize? But most notably, and disturbingly, is that the industry with the most job gains in July was also the second lowest paying one: retail, which saw an addition of 47,000 jobs: far and away the biggest winner in the past month. The worst paying industry - temp jobs - rose by 8K in July following a revised 16K increase in June. And the reason for the swing in July: the plunge in another low-quality job group: Leisure and Hospitality, which increased by only 23K in July following 57K additions in June.
The reality of the jobs number's apparent 'good' news (unemployment, yay!), and dismal news (part-time workers and less-than-expected jobs created) was instantly met by most markets (except stocks which appeared to have baked all that in and are losing ground) with a 'Taper-off' reaction. Bonds (10Y -12bps post-NFP) and Gold (+$28 post-NFP) are the headline-makers (along with silver) but the USD's 0.6% plunge dwarfs the 0.25% gain post-FOMC. All-in-all, post-FOMC we are net: S&P +12pys, 10Y Yield -5bps, USD +0.25%, WTI Crude +2.6%, Gold +$5.
When the payroll report was released last month, the world finally noticed what we had been saying for nearly three years: that the US was slowly being converted to a part-time worker society. This slow conversion accelerated drastically in the last few months, and especially in June, when part time jobs exploded higher by 360K while full time jobs dropped by 240K. In July we are sad to report that America's conversation to a part-time worker society is not "tapering": according to the Household Survey, of the 266K jobs created (note this number differs from the establishment survey), only 35% of jobs, or 92K, were full time. The rest were... not.
So much for the trends of beats: July nonfarm payrolls +162K missing expectations of 185K; June was revised lower to 188K and the unemployment rate dips from 7.5% to 7.4%. The rate dropped because the civilian labor force declined from 155,835 to 155,798 or 37K, driven by an increase of people not in labor force to 89,957 - just shy of the all time high. This also means that the labor force participation rate once again ticked down to 63.4% from 63.5%. What is worse however is that the change in average hourly earnings dropped -0.1% on expectations of a 0.2% increase and down from the 0.4% increase last month. Those part-time jobs are finally starting to bite.
Today's sellside NFP estimate, from top to bottom:
- Deutsche Bank 225K
- Goldman Sachs 200K
- UBS 195K
- Bank of America 180K
- Barclays 175K
- JP Morgan 175K
- HSBC 165K
- Citigroup 175K
Consensus is 185K, with a low of 87K, high of 225K (LaVorgna), June printing at 195K and May 165K. The Unemployment Rate Consensus is 7.5%, with a low 7.4% (LaVorgna), high 7.7% and June at 7.6%, May 7.5%.
Yesterday, in the aftermath of first Apollo then Blackstone, it was the turn of that third mega Private Equity shop, Fortress, to "say that now is the time to exit investments as stocks rally and interest rates start to rise. "This is a better time for selling our existing investments than making new investments," Pete Briger, who oversee the New York-based firm's $12.5 billion business said on a call with investors yesterday. "There’s been more uncertainty that’s been fed into the markets." Ironically, this is precisely the opposite of what one will hear on the mainstream media, but such is life: for every smart money seller, there must be a willing sheep led to the slaughter.