Stocks Tumble On Ugly Jobs Data, Russian Retaliation

UPDATE: WTI breaks back over $110

After the initial knee-jerk reaction to the dismal jobs data, stocks began to fade and bonds continued to rally as traders realized the Taper is coming no matter what (sentiment, deficits, technicals, and international resentment) and growth is weaker than expected. However the big slamdown occurred this morning when Putin confirmed Russia will help Syria if there is an external strike (cough USA cough). As the chart below shows, this week has been all about "war" and continues to be so... Gold, Crude Oil, and Bonds remain well bid and the USD is sinking (as JPY carry unwinds en masse).

Putin "Brings It": Says Will Assist Syria In Case Of Attack

Following a supposedly "warm" 20-30 minute conversation this morning with President Obama, Russian President Putin has rattled the sabre one more time:


This will not end well... and of course will raise more doubts among Congress that this 'strike' makes sense. Equity markets are not amused...

Quality Of August Jobs Added: Absolutely Abysmal

While we already have the quantiative components of today's jobs number (horrendous), here is the qualitative breakdown. For the time constrained readers we will jump to the conclusion: absolutely abysmal, to a degree perhaps not seen in years. Of the 169K jobs added, the vast majority, some 144K or 85% of the entire August gain, consisted of the lowest paying jobs possible:

  • +44K jobs added in Retail Trade
  • +43K added in Education and Health
  • +27K added in Leisure and Hospitality
  • +17K added in Government (looks like sequester effect has finally "tapered")
  • +13K added in Temp Help services

Putin: "Chemical Attack In Syria Was 'Provocation' By Rebels"

The awkward tension in St. Petersburg must be palatable as following Russia's release of the 100-page report yesterday showing that the chemical attacks were not the doing of the Assad regime, Putin has come out swinging this morning ahead of President Obama's press conference:


On the bright side (if there is any), while Putin points out that he and Obama do not agree, they will listen to each other (we suspect only in order to prepare a response to any barbed rhetoric) Meanwhile, the navies continues to grow.

Real Unemployment Rate Rises To 11.4%, Difference Between Reported And Real Data Rises To Record

As frequent readers know, for the past three years we have compiled data looking at the US unemployment rate assuming a realistic labor force participation rate, which is the trendline average of the past three decades, or in the mid-65% area. Using such an approach allows us to estimate what the true unemployment (U3, not U6 underemployment) rate is. We can report that as a result of the latest monthly collapse in the labor force whose only purpose was to lower the unemployment rate from 7.4% to 7.3%, the actual implied unemployment rate just rose from 11.2% to 11.4%. This can be seen on the chart below. Also can be seen that the spread between the reported manipulated unemployment rate and the real rate accounting for a realistic labor force participation, just hit a record high 4.1%. In other words, unemployment data manipulation by the BLS was never been greater in the history of the US than in the past month.

Santelli Blasts Bad-Jobs Bullish Market Response: "What Are We A Banana Republic?"

Bond yields snapped lower, equity prices surged higher, gold and silver prices ripped higher, and the USD snapped dramatically lower (as JPY surged) on the worse-than-expected payrolls print (and terrible downward revision). The sad reflection of bad-news-is-good-news reaction of US capital markets to this 'most important number in the world' is summed up perfectly by CNBC's Rick Santelli as he exclaims how sad this reaction is and asks "what are we a banana republic?" Well, yes, Rick, it appears we are...

Record 90.5 Million Out Of Labor Force As Half A Million Drop Out In One Month; Labor Force Participation Rate Plunges To 1978 Levels

While the Establishment survey data was ugly due to both the miss and the prior downward revisions in the NFP print, the real action was in the Household survey, where we find that the number of people not in the labor force rose by a whopping 516,000 in one month, which in turn increased the total number of people outside the labor force to a record 90.5 million Americans.  And what is even worse, the Labor Force Participation Rate declined from 63.4% to 63.2%: the is the lowest print since August 1978!

August Jobs Rise 169K, Less Than Expected, Unemployment Rate 7.3%, Huge Downward Revision To July Print

A messy report out of the gate with the number of jobs added in August at 169K, or as predicted by ADP, worse than the 180K expected, however this was offset by the Unemployment Rate dropping from 7.4% to 7.3%, on expectations of an unchanged print. However what has shocked the market is the revision to the July jobs number from 162K to only 104K, resulting in a net drop of 74K jobs, and breaking the average 2013 jobs gain of 200K which previously was said by the Fed to be the key threshold level for tapering. The question now is: is this print bad enough to delay the taper?

Guggenheim On The US Jobs Growth "Mirage"

Throughout this year, the consensus view has been that current economic weakness is justified and we are just one or two quarters away from faster growth. Now, in the third quarter Guggenheim's Scott Minerd exclaims we are hearing the same arguments, although growth targets are starting to dip. He calls this "hope", the growth mirage. Minerd adds, that, in the heat of the desert, the eye perceives water on the horizon, but the closer one tries to get, the farther away it moves – until the traveler realizes that he has been chasing an illusion caused by shimmering layers of hot and cool air.

The Soap Opera Plot Thickens: Iran Plots Revenge If US Hits Syria, According To "Intercepted" Message

We have not seen the YouTube clip that will serve as "incontrovertible" evidence of the following, nor is there any indication that Iran is actually aware of the NSA and that it intercepts every form of electronic communication (and when such communication is not available, one is made up), but since we have no reason to doubt the US government or its pristine, best intentions with or without YouTube clips, it is only obvious that the latest development in the Syrian/Iranian/Qatari/Saudi/Israeli soap opera is definitive proof that a US attack must happen to punish not only evil Assad but the just as evil Iranians, who dare to contemplate retaliation in the case of the latest defensive US war of aggression.

Frontrunning: September 6

  • Summers Faces Key 'No' Votes if Picked for Fed (WSJ)
  • NYT Editorial Board Says Summers Would Be Wrong Fed Choice (NYT)
  • Russia says it's compiled 100-page report blaming Syrian rebels for a chemical weapons attack (McClatchy)
  • China says Syria crisis can't be resolved with military strike (Reuters)
  • G-20 Faces Growth Threats as Syria Adds to QE Exit Risks (Bloomberg)
  • Apple Supplier Fire Spurs Biggest Chip Price Rise in 3 Years (BBG)
  • U.S. Decided Not to Horse-Trade With Russia on Assad (WSJ)
  • Financial Crisis: For Corporations and Investors, Debt Makes a Comeback (WSJ)
  • Gorman Says Chance of Another Financial Crisis ‘Close to Zero’ (BBG) and in other news, "no risk of a Us downgrade" -  Tim Geithner
  • A Biotech King, Dethroned (NYT)

Yet Another "Most Important Jobs Number Ever" On Deck

The highlight of today's economic releases will be the 8:30 am non-farm payroll data, expected to print at 180K jobs, up from July's 162K, and result in an unchanged 7.4% unemployment rate. The "most important jobs number ever " is neither, because even if it comes as a wild outlier to the good or bad side, the Fed is unlikely to change its tapering intentions this late in the game. Still, it will provide fireworks in a very jittery market and if the number is far stronger than expected, expect the 10 Year to finally blow out from below the 3% range which it breached briefly overnight, and never look back, at least not until there is an August 2011 wholesale risk revulsion episode and stocks tumble. Speaking of jittery, overnight the WSJ reports that if picked as Bernanke's replscament, Larry Summers' faces an uphill battle to get the votes of three key democrats on the Senate Banking Committee (Jeff Merkley, Sherrod Brown and Elizabeth Warren). It would be only fitting that the dysfunctional Democratic dominated senate now lashes out against the president, and in the process scuttles the market's only hope of maintaining its Fed-derived gains over the past five years... And there is, of course, Syria which is becoming increasingly problematic for Obama whose support in Congress is looking ever shakier. Will he go it alone in the case of a no vote?

These False Flags Were Used To Start A War

Just in case one's history textbook had a few extra pages ripped out, this may be a good time to recall just how far one's government is willing to go to start a war under false pretenses.

10Y Crosses 3.00%, Just 50bps Left Until The "Disorderly Rotation"

UPDATE: As opposed to CNBC's earlier premature note, the 10Y Treasury cash bond just broke above 3.00% for the first time in 26 months as China gets going...

We are assured by the great and good of the status quo that when 10Y rates burst through the 3.00% barrier (its highest in 26 months) it will not hinder the housing recovery (as affordability plunges), slow equity buybacks (via increased cost of capital), or crush bank earnings (via AFS losses and NIM compression as the curve flattens). Bond yields are rising as a 'positive' sign for the economy... must be right? But wasn't it Steve Liesman just 2 weeks ago, amid his "best nailing it on CNBC in years", that proclaimed 10Y would hit 2.65% before 3.00%? As we warned 3 weeks ago, a move to 3.0% will create more meaningful outflows from retail and ETFs and 3.5% is the trigger for a "disorderly rotation," from risk to cash.

Guest Post: 10 Chemical Weapons Attacks The U.S. Government Doesn’t Want You To Know About

A couple of weeks ago we highlighted the fact that declassified documents analyzed by Foreign Policy proved that the U.S. government knew about Saddam Hussein’s egregious use of chemical weapons and in fact we helped him be more effective in their deployment. Well unfortunately that’s just the tip of the American chemical weapons iceberg. From white phosphorus and depleted uranium (DU) usage in Iraq, to secret radioactive tests in poor black neighborhoods within the U.S. itself, the list is pretty horrific. While one might be able to say that this is the reality of war, then what the heck are we doing entering a civil war in a country where chemical weapons are being used that poses no threat to us?

A 'Textbook' Case Of The "Untenable Trajectory" Of Inflation

Just last week we revisited the surging 'flations' in almost everything we 'need' - led of course by the screaming credit-fueled bubble in college tuition. Today's episode of "nope, no inflation here' is brought you to by the number "+101%" and the words "college textbooks." As the CEO of the Education Policy Institute exclaims "we are on an untenable trajectory;" a fact that is so evident in the difference between 'recreational' books (-1.5% in the last decade) and 'college text'-books (+101.5% in the same period). The rise is more than triple that of CPI and, as Bloomberg reports, is "one of the reasons that students drop out, because its an unforeseen cost." But rising prices are good, right? Just ask investors in the Caracas Stock Exchange... (especially when unit labor costs are stagnating)... and now JPM ceasing its student loan operations, we are sure, will help...

Guest Post: Calling Off America's Bombs

As the US Congress considers whether to authorize American military intervention in Syria, its members should bear in mind a basic truth: While Syrian President Bashar Al-Assad has repeatedly used extreme violence to retain power, the United States – and other governments in the Middle East and Europe – share responsibility for turning Syria into a killing field. The US government’s misguided move from potential mediator and problem solver to active backer of the Syrian insurrection was, predictably, a terrible mistake. It is time for the US to help stop the killing in Syria. That means abandoning the fantasy that it can or should determine who rules in the Middle East.