Unemployment

Q. Should somebody have gone to jail.

Bernanke: Yeah, yeah I think so. It would have been my preference to have more investigation of individual actions as obviously everything that went wrong, or was illegal, was done by some individial not by an abstract firm.

The markets are beginning to show just how tall and flimsy this house of cards built on QE quicksand has grown. Entrepreneurs and ideas thrive in that type of environment. Exactly what we so desperately need. Yet, instead, all we have is this crony styled, unicorn imagined monstrosity of all that’s unholy to true business principles. "Markets right themselves with pain... That’s Capitalism. Back room manipulation to avoid that pain only increases the severity of it down the road."

"Australia has benefited from China’s growth over the past decades, but has become a less diversified and commodity dependent economy in the process. It is now exposed to China’s slowdown, and may be unable to re-engineer itself quickly enough to avoid the end of the commodity super-cycle. The worst is yet to come, in our view."

1. Dollar doesn’t matter, indicates strong economy relative to the world
2. Dollar matters for oil, but lower oil prices mean stronger consumer
3. Manufacturing slump doesn’t matter, only temporary
4. Manufacturing declines are consumer spending, but only a small part
5. Manufacturing declines are becoming serious, but only from overseas
6. US consumer demand is strong, except everywhere you look to actually find it.
7. ...

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

And so the "most important payrolls number" at least until the October FOMC meeting when the Fed will once again do nothing because suddenly the US is staring recession in the face, is in the history books, and as previewed earlier today, at 142K it was a total disaster, 60K below the consensus and below the lowest estimate. Just as bad, the August print was also revised far lower from 173K to 136K. And while it is less followed, the household survey was an unmitigated disaster, with 236,000 jobs lost in September.

In addition to the Fed's credibility, one other privately-controlled organization that has seen its credibility completely crushed in recent months is the Goldman economic forecasting team (if not the team that "forecasts" Fed monetary policy, simply because Goldman controls the Fed and tells it what to do; as such what Goldman "thinks" the Fed will do is usually ironclad) whose Jan Hatzius "for what it's worth" forecast above trend growth for the US economy in 2014.  So, "for what it's worth", here is Goldman jobs report post-mortem (in a parallel report Goldman just cut its Q3 GDP forecast from 2.0% to 1.9%), in which the bank admits that the report was a disaster, and that as a result "we now see action at the December meeting as a close call."

While the September jobs number was an absolute disaster, here is the real punchline: in September, the people not in the labor force soared by a whopping 579,000 to a record 94.6 million, up from the previous record 94.0, even as number of people employed - according to the household survey used to calculate the "5.1%" unemployment rate - tumbled by 236,000 to 148.8 million. 62.6% to 62.4%, it was the lowest since October 1977.

Goldman forecasts nonfarm payroll growth of 215k in September, above consensus expectations of 200k by about 0.3 standard deviations of a typical surprise. Noting that August payrolls were likely distorted downward by seasonal bias last month and may be revised up, Goldman expects the unemployment rate to remain flat at 5.1% (and earnings growth to slow). Howver, judging by the collapse in September's regional Fed surveys, today's "most important" payrolls data ever could be a massive miss.

With China markets closed for holiday until the middle of next week, and little in terms of global macro data overnight (the only notable central banker comment overnight came from Mario Draghi who confidently proclaimed that "economic growth is returning" which on its own is bad for risk assets), it was all about the USDJPY which has seen the usual no-volume levitation overnight, dragging both the Nikkei higher with it, and US equity futures, which as of this moment were at session highs, up 7 points. The calm may be broken, though, as soon as two hours from now when the September "most important ever until the next" payrolls report is released.

For those eager to push aside the endless government propaganda and concerned about the rapidly deteriorating economy, here is a list of the Top 20 biggest private-sector job cut announcements of 2015. Our advice: for anyone who is still employed at any of the following corporations, if you can find a job elsewhere (because the "recovery" and all), do it before you too become a seasonally-adjusted pink-slip.

The signs of deflation are now flashing all over the globe and the possibility of an associated financial crisis is now dangerously high over the next few months. Our preferred model for how things are going to unfold follows the Ka-Poom! Theory, which states that this epic debt bubble will ultimately burst first by deflation (the "Ka!") before then exploding (the "Poom!") in hyperinflation due to additional massive money printing efforts by frightened global central bankers acting in unison. First an inwards collapse, then an outwards explosion.

But the question remains whether financial condition concern should manifest itself through unemployment and inflation dual mandate forecasts or be a separate consideration all together? To me, the danger in the latter is it turns central bankers into traders and market timers and that is something they are unlikely to have trained for

Does not compute. That may be the best way to summarize the discrepancy between the statistically-massaged, seasonally-adjusted initial claims data reported by the DOL, and what Challenger reported just an hour earlier when it said that U.S.-based employers announced plans to shed 58,877 in September, a 43 percent increase from the previous month. Worse, for 2015 YTD, employers have announced 493,431 planned layoffs, 36 percent more than the 363,408 cuts tracked from January through September a year ago. Someone is lying.

Good news! Bad news is again great for stocks, and overnight we had just the right amount of bad news from Japan, China and Europe to send stocks surging on the first day of the final quarter.