Alongside the CPI data released earlier which showed the smallest possible broad price increase, when considering that previously the BLS reported flat nominal hourly wages in September, it implied that real wages declined once again. Sure enough, in a separate report today, the BLS announced that real average hourly earnings (in constant 1982-1984 dollars) declined once again, this time from $10.34 to $10.32, a -0.2% drop from past month. This also means that since March, there has been just one month in which real hourly wages have increased, and that was mostly due to the outright deflationary print the BLS reported last month.
Put another way, those individuals responsible for running the largest companies in the US, who know more about their companies’ growth prospects and the economy have used the Fed’s policies to cash out.
Remember when banks said to ignore "one-time, non-recurring" legal fees because they are going away? Well, JPM yesterday showed they aren't. But it was Bank of America today which was slammed with the latest whopping $5.3 billion pretax litigation charge, which pushed its EPS once again into the red. But wait, there's great news: the loss of $0.01 is really a $0.42 non-GAAP adjusted profit if one "adds back" the $0.43 in litigation charges.
The old adage that if something is repeated often enough it is soon assumed to be true couldn’t be more apt with respect to the Fed’s 2% inflation target. That Keynesian central bankers peddle this nostrum with a straight face is amazing in itself, but it is at least understandable because it gives them a reason to keep the printing presses humming. That journalists repeat it with no questions asked is even more remarkable. It proves that the impending replacement of financial journalists with robo-writers may not be so bad after all. It won’t make any real difference.
A year after the Fed injected $1 trillion into the stock market, the US economy was supposed to show stable, benign inflation north of 2%, validating stable, benign "growth" and pushing yields well into the mid-3% range. It failed to do that, stumping many a Keynesian hack who can't explain how it is possible that inflation (at least the variety measured by the BLS, not the real type, like food, energy, tuition costs, and healthcare which is considered largely irrelevant) has so far failed to spring up. For all those hacks, here is the answer in one simple chart.
If you like your 'disappointing' government-sponsored wage growth data, you can keep it... but if you are an ambitious talking-head economist looking to boost confidence in the economy in the hopes of a career in the administration, then ADP has just the 'tool' for you. Behold, the "ADP Workforce Vitality Index" - which measures the total real wages paid to the US private sector workforce, implying that the BLS is not measuring wage growth correctly as it is actually notably higher. In Q3, the ADP data grew 0.77% which they argue "is a good sign that may lead to increased consumer spending and a boost for the economy," and implicitly means The Fed should be hiking rates sooner as ADP warns "real wages are accelerating." Zandi the optimistic hawk?
The September jobs report was greeted by a flurry of robo-trader exuberance because another print well above 200k purportedly signals that growth is underway and profits will remain in high cotton as far as the eye can see. But how many years can this Charlie Brown and Lucy charade be taken seriously - even by the headline-stalking talking-heads who inhabit bubblevision? For the entirety of this century they have actually been gumming about little more than “born again” jobs, not real expansion of labor inputs to the faltering US economy.
While according to the BLS survey employers have almost never had more open positions, they have also decided to put an abrupt stop to hiring, something which certainly points to a major disconnect in the US labor market. In fact, according to the JOLTS report, its far less tracked "Hirings" number plunged from 4,934K to just 4,640K. This was the lowest number of monthly hiring since January's "Polar Vortex" ground the economy to a halt. What's worse, the 294K plunge in monthly hiring was the biggest monthly drop since June 2010, and was the third biggest monthly plunge in hiring since Lehman!
What is really embodied in today’s report is more evidence that America’s dependency ratio is still rising and that the already crushing burden of the welfare state will weigh ever more heavily on an economy that is visibly failing as measured by any of the fundamental trends of performance. Indeed, it is well to recall that even today—after what the clueless occupant of the White House claims as 10 million new jobs when 90% of that number, in fact, represents “born again” jobs relative to the 2007 peak—-there are 110 million Americans living in households receiving means-tested benefits and 158 million in households that receive transfer payments of all types. Yet as the burden of taxation and public debt resulting from these trends weigh ever more heavily, it leaves the mad money printers resident in the Eccles Building stranded in an impossible corner.
"Hiring Grandparents Only": 230K September Jobs Added In 55-69 Age Group; 10K Lost In Prime, 25-54 GroupSubmitted by Tyler Durden on 10/03/2014 10:00 -0500
The further one digs into today's "blockbuster" jobs report, the uglier it gets. Because it is not only the participation rate collapse, the slide in average earnings, but, topping it all off, we just learned that the future of the US workforce is bleak. In fact, with the age of the median employed male now in their mid-40's, the US workforce has never been older. Case in point: the September data confimed that the whopping surge in jobs... was thanks to your "grandparents" those in the 55-69 age group, which comprised the vast majority of the job additions in the month, at a whopping 230K.This was the biggest monthly jobs increase in the 55 and over age group since February! What about the prime worker demographic, those aged 25-54 and whose work output is supposed to propel the US economy forward? They lost 10,000 jobs.
The good news in today's jobs report is that at 248K, more jobs than expected were added in September.
And now, the bad news: What happened in September when the BLS just reported that average hourly earnings for all private industries were $24.53, is that this was only one of 6 months since the failure of Lehman, when there a sequential decline in average hourly earnings, down from $24.54 in August.
With the September jobs report, perhaps one of the most irrelevant monthly updates from the BLS in a long time, due out in less than half an hour, BofA's Chart of the Day looks at what has become the most sticky issue in the monthly jobs report of late: where the inflation-adjusted income growth, or lack thereof, can be found. What it finds is that the average American can still hope for rising real wages: they just have to be massively underwater on unrepayable student debt.
- Citigroup 175K
- HSBC 200K
- Deutsche Bank 200K
- JP Morgan 225K
- Morgan Stanley 230K
- Goldman Sachs 230K
- BofAML 235K
- UBS 250K
In is only fitting that a week that has been characterized by deteriorating macroeconomic data, and abysmal European data, would conclude with yet another macro disappointment in the form of Markit's sentiment surveys, for non-manufacturing/service (and composite) PMIs in Europe which missed almost entirely across the board, with Spain down from 58.1 to 55.8 (exp. 57.0), Italy down from 49.8 to 48.8 (exp. 49.8), France down from 49.4 to 48.4 (exp. 49.4), and in fact only Russia (!) and Germany rising, with the latter growing from 55.4 to 55.7, above the 55.4 expected, which however hardly compensates for the contractionary manufacturing PMI reported earlier this week. As a result, the Composite Eurozone PMI down from 52.3 to 52.0, missing expectations, as only Germany saw a service PMI increase. And yet, despite or rather thanks to this ongoing economic weakness, futures have ignored all the negative and at last check were higher by 9 points, or just over 0.4%, as the algos appear to have reconsidered Draghi's quite explicit words, and seem to be convinced that his lack of willingness to commit is merely "pent up" commitment for a future ECB meeting. That or, more likely just another short squeeze especially with the "all important" non-farm payrolls number due out in just over 2 hours, which for the past 24 hours has been hyped up as sure to bounce strongly from the very disappointing, sub-200K August print.
While all the western banks are clearly envious at the facility with which Zimbabwe managed to hyperinflate away its debt mountain after simply printing a few trillion in fiat monetary equivalents, which instead of the stock market hit the broader economy, there is much more the "developed" world can learn and is learning from Robert Mugabe domain of experimental yet practical monetarism.