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SSA on NFP, Unconventional Policy and the Hangover
The Social Security Trust Fund (SSA) has provided key operating data for the month of September. This information allows for a rough estimate of this Friday’s NFP number.
The following chart compares the monthly data for FICA tax revenues at SSA (a proxy for total payrolls) for 2012 versus 2011:
A few observations:
-Payroll Tax revenues are up in 2012 versus 2011 for every month this year.
-The rate of improvement has declined in each quarter so far this year.
-The September increase was 2.25% YoY. This is a slight improvement from the 2.0% gains in July and August.
-The gain in PR receipts in Q3 is consistent with payroll growth of 150,000 per month.
My conclusions after looking at the numbers:
-The July NFP # of +163,000 is above recent trend and is not supported by the SSA PR numbers. The July number may be revised down by 15K.
-The current street estimate for the August NFP is 118,000. I would take the “over” on this estimate. My range is 140-150K.
-The SSA data suggests that 3Q 2012 GDP is lagging that of 2Q 2012. It is certainly less than 2%. It could be less than 1.5%.
Assume we do get an NFP of 150K. The question is, would this relatively good result tie Bernanke’s hand regarding the September 13 decision(s) by the Fed? I would think so, but I don’t think like Bernanke.
If the economy produces, on average, only 150k new jobs per month, then the unemployment rate will remain high (8+%), for a long-time to come. Ben doesn’t want that to be his legacy. The talk on Wall Street (and the manipulated financial press) is that a new round of QE is coming in a fortnight. It will be $500B in size (spread over 6 months). It will be directed at MBS securities.
Bernanke has referred to QE as “unconventional” monetary policy. He has said that prior unconventional policy actions were what saved the financial system during the “emergency” days of 2008. Maybe. But the story of QE has not been fully told as yet.
Bernanke needs to change his definition of “unconventional policies”. While QE1 and 2 may have been considered unconventional, QE3 will confirm that what was once unconventional, has morphed into something that has become very conventional. There is nothing “conventional” about QE. It’s dangerous that QE has gone from something contemplated only during an extreme emergency, to an everyday policy tool.
I know that some folks at the Fed will read this; I ask that they pass two questions along to the Chairman.
A) - What are the Fed's expectations for the market/economic response to another round of QE? Assume we get a six-month, $500Bn LSAP targeted at MBS.
Now turn it around.
B) - What are the Fed’s expectations for the market/economic response when the Fed announces that it will sell $500Bn of ten-year paper from its bloated inventory over a six-month period?
I grant the Chairman that if A is undertaken, there would be some modest positive consequences to both the capital markets and the broader economy. Something like a temporary 5% increase in the S&P and a 0.1 to 0.2% decrease in the unemployment rate might follow.
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B must follow A at some point. When it happens, it will have very substantial consequences. Interest rates will shoot up as the Fed crowds out all other borrowers (including the US government). The stock market will fall like a stone at the announcement and continue down each month as the Fed sells. The global markets will see/feel the consequences. Banks, pension funds and savers who are loaded to the gills with long-dated bonds with 1% yields will get crushed. Some financial institutions would have to fail. A recession would be inevitable under these circumstances; unemployment would rise as a result.
My point is that there are extremely asymmetrical results associated with more QE. Yes, there might be a few more months of “party time”. But when the party ends (it will), the cost of the party will be ten times the short-term gain.
Ben Bernanke can afford to throw another party in September. The reason is that he will not be around when the inevitable cleanup of his mess starts. He’ll be back in Princeton when the SHTF.
How can one man poison the country's well ? Easy. There is no one around to tell Ben, “No more!” This is a one-man show, and this man is bent on destroying the future, in exchange for a few pips in the unemployment rate and another pop in the S&P today.
At some point in the future Ben and his policies will be discredited. The cost will be the undoing of the country. Ben has converted monetary policy to a three-month time horizon. He gives zero consideration to the long-term consequences of his actions. I get little comfort knowing that the history books will prove that he erred at a critical time. I have kids; they will be paying for Ben’s mistakes for the rest of their lives.
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QE is DESTRUCTION OF THE 99%. Which will then invariably DESTROY 100%, on various levels. Bernanke is insane.
When its live every day as if it were your last, and you take out a six month loan. Time will fly by like nothing, and the theater will be packed like sardines in a can.
Bernanke is a crack addict. Just one more hit, just one more hit. The synapses in his monetary brain have been burned out.
ZIRP/QE- the disease which purports to be the cure.
Of course another round of QE won't solve anything. Yours is just another story in a long line repeating the futility of QE. But, as soon as I read "my kids", I see red. The problem with the privilidged, largely white population, is that they think opportunity is evenly distributed and that is just not true. Oh, and by the way, I am a privilidged white guy. If I felt that everyone had an equal opportunity I would feel differenty about the welfare state we have. But we have a zero sum game in which a few, largely white guys, gamed the system.
How different is our situation in the US from Europe where the lone "rich white guy", Germany, is expected to bailout the economically hurting Mediterranean countries? It's the same situation - redistribute the wealth. And whatever riots and civil discontent we see in Europe is a primer to what we can expect in the US.
The end game that BK is foreshadowing is far, far worse than the inequality that you feel so guilty about today. The red that you will see will be in the streets and not just in some rich white liberal’s eyes.
Chartist, I agree with your points. But I don't think they invalidate Bruce's article. The legacy of QE is very much a "we centric" issue. The loss of confidence in our government that QE will eventually cause will hurt the balance sheets of the "1%", but it will be catastrophic to the rest of us.
There's a desperate need for a serious discussion of what we should be doing INSTEAD of QE. "Serious" would require the left to recognize that income redistribution by itself isn't going to solve the problem. It would require the right to recognize that simply axing domestic programs and letting millions of people starve isn't acceptable. It would require the "1%" to come to the table ready to give up some of its wealth and all of the cronyism that helps it maintain its wealth.
I wish I believed this stood a chance of actually happening.
Nicky and Chart
This loss of jobs was not done as a planned event. Triffin saw it coming in 1960. Until we resolve his 'dilemma' we shall continue with more of what we are getting.
No Picky, you and BK are both way off base. This welfare state trainwreck has taken decades gaining speed. Bernanke is just the shift's engineer throwing on coal when it is the passengers who demand to get to the station on time.
Tho Bruce Krasting is a Swiss as well as US citizen, you are recommending your children stay in the US empire as it crumbles?
When your own family escaped Nazi-occupied Europe all around Switzerland at the end of the 1930s, and you are now in the parallel situation there in the US ...
You are now recommending your children stay in the country with the biggest prison gulag in the world? And with FEMA concentration camps ready for a million and more over the 2.3 million they already have imprisoned - 25% of the prisoners in the whole world?
The USA where your children can be arrested and jailed indefinitely without charges, murdered by the government under Hitler-type enabling laws, all approved by the same Nazi-style US judges who approve all the torture and illegal jailings, and the defrauding of billions of assets of citizens customer funds in the various schemes like MF Global, Peregrine Financial, and Sentinel?
You think your children - assuming they are not jailed or killed in America in what will follow - will be 'paying' for a US government scheme 'for the rest of their lives' ... when the whole scheme is impossible to 'pay' for the American people, and the house of cards will come tumbling down long before then, when not only the scheme won't exist, but the US government might not even exist either after the Downfall?
What is debt with-out honor? Although the State extends its influence and will across this land I will not despair. My children have been prepared and know how to fight.
disorganized, vague.. what are you even trying to get at?
There is nothing vague about what he says. And if it is disorganized, it is because he is making several big points in a short post. Do you care to answer the substance of what he says?
always wondered why your tag wasn't letthemeatfacism or letthemeatcommunism or letthemeatstatism or letthemeattheiryoung instead it seems your tag is equal to letthemeattheweakindividual -- but you have probably to everyone's satisfaction answered this already so I apologize in advance
Because he knows that kindly Uncle Mitt will wave his magic wand on January 21st and make all those bad things go away.
His name is Willard...
Willard Romney
Like the Rat movie Willard...
Mitt is a baseball glove...
After this last worthless cocksucker Barry Soetoro, no more aliases...
More is rather Uncle Mitt than Uncle Joe!
Living on the shores of Lake Ontario allows me and my family a quick boat ride over to Ontario, Canada (although those along the Niagara or St. Lawrence have a much quicker ride to the other side).
Those landlocked in the heart of america might not be so lucky.