Unemployment

While we have exposed the ugly under-belly of today's jobs data, mainstream media is spinning it as a 'Goldilocks' report with enough hits-and-misses for every hawk or dove. The market's initial reaction signals rising expectations of a September rate hike but, as Goldman's Jan Hatzius explains, they continue to expect the FOMC to keep policy rates unchanged at the September 16-17 meeting.

According to the BLS, the main reason why the unemployment rate tumbled to the lowest since April 2008 is because another 261,000 Americans dropped out of the labor force, as a result pushing the total number of US potential workers who are not in the labor force, to a record 94 million, an increase of 1.8 million in the past year, and a whopping 14.9 million since the start of the second great depression in December 2007.

If wage growth for supervisory workers was indicative of the overall work force, the Fed could indeed claim mission accomplished and hike not 0.25% but 2.5%. There is a problem: supervisory workers only make up 17.5% of the US work force. As such, their wage gains are anything but indicative of the vast 140 or so million US workers. What about the wages for the remaining 82.5% of US workers: the non-supervisory one. Here is the answer...

The "most important and anticipated payrolls number ever", or at least since the last payroll number, is out and it is a doozy at only 173K, it is a huge miss to the 217K expected (and almost in line with LaVorgna's forecast). This was the worst monthly payrolls number since Marhc, and the second lowest number in 19 months. However, the curious twist is that the July and June NFPs were both revised higher to 245K, making the net revision up  The unemployment rate dropped to just 5.1%, below the 5.2% expected, and well below July's 5.3%, further boosting the Fed's case that labor slack is evaporating.

With just 20 minutes to go until the latest most important jobs report ever in the history of man, Richmond Fed Chief Lacker just explained why "the case for raising rates is still strong"...

LACKER: BOTH MANDATE CONDITIONS 'APPEAR TO HAVE BEEN MET', EXCEPTIONALLY LOW RATES NO LONGER WARRANTED BY JOB MKT
LACKER: AUG. JOBS REPORT UNLIKELY TO `MATERIALLY ALTER' PICTURE

But perhaps most crucially, Lacker explains "recent financial market volatility is unlikely to affect economic fundamentals in the United States and thus has limited implications for monetary policy," removing the one last leg for permabulls to rely on (that is if you velieve The Fed is not Dow-Data-Dependent).

Perhaps one of the most notable features of the upcoming nonfarm payrolls report - which those with a flair for the dramatic have once again dubbed the "most important ever" simply because it may greenlight (or not) a Fed rate hike (any NFP print at 230K and above likely assures a September move by the Fed - which Wall Street consensus sees rising by 217K in August (although with Goldman a far below consensus 190K, and Wall Street's biggest cheerleader Joe LaVorgna predicting only 170K one has to wonder) is just how hard the punditry is trying to talk it down, with everyone from Joe LaVorgna to Bloomberg explaining why it is very likely that - due to seasonals only, and nothing but seasonals - it will be a weak report, only to be revised higher.

Moments ago, US equity futures tumbled to their lowest level in the overnight session, down 22 points or 1.1% to 1924, following both Europe (Eurostoxx 600 -1.8%, giving up more than half of yesterday's gains, led by the banking sector) and Japan (Nikkei -2.2%), and pretty much across the board as DM bonds are bid, EM assets are all weaker, oil and commodities are lower in what is shaping up to be another EM driven "risk off" day. Only this time one can't blame the usual scapegoat China whose market is shut for the long weekend.

The situation in Brazil is deteriorating rapidly after finance minister Joaquim Levy canceled a G20 appearance in Turkey (irony) and convened a meeting with embattled President Dilma Rousseff. FX traders fear a worst case scenario involving Levy's exit. Meanwhile, former President Luiz Inacio Lula da Silva is en route to Brasilia tonight to meet with Rousseff one-on-one. 

This Friday appears to be make or break for the Fed's data dependency, as the FOMC's September rate decision looms.

DRAGHI SAYS ISSUE SHARE LIMIT FOR QE RAISED TO 33% FROM 25%

ECB CUTS EURO-AREA INFLATION FORECASTS FOR 2015-2017

Mario Draghi holds court (on his birthday, no less) in a closely watched post-meeting presser as markets hope collapsing inflation expectations, heightened volatility, EM chaos, and China turmoil will be enough to force the ECB's hand. 

With China closed today, the usual overnight market manipulation fireworks out of Beijing were absent but that does not meant asset levitation could not take place, and instead of the daily kick start out of China today it has been all about the ECB which as we previewed two days ago, is expected - at least by some such as ABN Amro - to outright boost its QE, while virtually everyone else expects Draghi to not only cut the ECB's inflation forecast, which reminds us of the chart which in March we dubbed the biggest hockeystick ever (we knew it wouldn't last) but to verbally jawbone the Euro as low as possible (i.e., the Dax as high as it will get) even if the former Goldmanite does not explicitly commit to more QE.

It is time for a comprehensive audit of Janet Yellen ’s Federal Reserve - and not just for the reasons presidential candidate Rand Paul and others have given. The Fed needs to be audited to see if its ruling body has broken the law by manipulating financial markets that are outside its jurisdiction.

Then - "We will not have any more crashes in our time." – John Maynard Keynes (1927)

Now - "Ambarella, GoPro & FitBit are headed higher" - Jim Cramer (7/22)

Since today was the last day of trading for Chinese stocks this week ahead of the 4-day extended September 3 military parade holiday to mark the 70th anniversary of the allied victory over Japan, and since Chinese stocks opened to yet another early trading rout coupled with the PBOC's biggest Yuan strengthening since 2010 as we observed earlier, there was only one thing that was certain: massive intervention by the Chinese "National Team" to get stocks as close to green as possible. Sure enough they tried, and tried so hard the "hulk's" green color almost came through in the last hour of trading and yet, despite the symbolic importance of having a green close at least one day this week ahead of China's victory over a World War II foe, Beijing was unable to defeat the market even once in the latest week which will hardly bode well for Chinese stocks come next week.

Think about it. We are currently watching global stock markets gyrate toward breakdown trying to anticipate the whims of a cloistered professor who never launched a business, never met a payroll, never shipped a product, and never won an election, yet has been empowered to determine the price of money. What’s even stranger is that people consider this normal. Ask yourself: Why do we wait on pins and needles for Janet Yellen to set interest rates yet laugh at the idea that kings once set the “just price” for a loaf of bread?