Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
The native (born) workers are getting restless!
Under Biden/Harris, native born workers lost -2.7 million jobs in 2014 while foreign-born workers gained 13.4 million jobs. THAT is the great replacement of American workers.
We are in Jumanji!
October jobs report was a real shocker!!
Moments ago the BLS reported the highly anticipated number and… it was close: the monthly print was only 12K, a huge drop from the pre-revision 254K in October (revised naturally lower to 223K), and just 13K away from a negative print. Only 12k total jobs added! And -28k private jobs added!
Total jobs including government rose by a measly 12k.
The print was so low it was only above the two lowest estimates (those of Bloomberg Econ for -10K and ABN Amr0 for a 0 print). That means it was a 3 sigma miss to estimates.
And of course, as has been the case for the entire Biden admin, previous months were revised sharply lower once again: August was revised down by 81,000, from +159,000 to +78,000, and September was revised down by 31,000, from +254,000 to +223,000. With these revisions, employment in August and September combined is 112,000 lower than previously reported. This means that even after the monster September revision when 818K jobs were removed, 7 of the past 9 months were again revised lower!
This means that once the November jobs are released, we can be virtually certain that October will be revised to negative.
But wait, there’s more because while the total payroll number was just barely positive, if one excludes the 40K government jobs, private payrolls was in fact negative to the tune of -28K, down from 223K pre-revision last month, and the first negative print since December 2020. In other words, we were right… when it comes to actual, non-parasite “government” jobs.
To be sure, a big part of the drop was due to the one-time event discussed, including the Boeing strike and Hurricanes Helene and Milton. This is what the BLS said on the topic: “In October, the household survey was conducted largely according to standard procedures, and response rates were within normal ranges” however, “the initial establishment survey collection rate for October was well below average. However, collection rates were similar in storm-affected areas and unaffected areas. A larger influence on the October collection rate for establishment data was the timing and length of the collection period. This period, which can range from 10 to 16 days, lasted 10 days in October and was completed several days before the end of the month.”
More importantly, the BLS said that “it is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events. There was no discernible effect on the national unemployment rate from the household survey.”
Ironically, while the BLS was unable to “quantify the net effect” from the hurricanes, it was able to calculate that the number of people not at work due to weather surged to the third highest in recent history, up 512K!
In other words, the BLS now has an excuse to blame the plunge on, it just doesn’t know how to quantify it. Translation: if Trump is president next month, expect the downtrend to continue with little to no mention of hurricane as the BLS prepares to admit the true state of the labor market; if however Kamala wins, the November jobs will magically rebound (even as downward revisions accelerate) and all shall be back to fake normal.
Oh, and of course, today’s catastrophic jobs print gives the Fed a full carte blanche to again cut 25bps next week, even if the plunge was all hurricanes…
The rest of the jobs report was not that exciting: the unemployment rate printed at 4.1%, unchanged from last month and in line with expectations. The number of unemployed people was little changed at 7.0 million.
Among the major worker groups, the unemployment rates for adult men (3.9 percent), adult women (3.6 percent), teenagers (13.8 percent), Whites (3.8 percent), Blacks (5.7 percent), Asians (3.9 percent), and Hispanics (5.1 percent) showed little or no change over the month.
It’s worth noting that the unemployment rate actually rose almost 0.1% despite being reported as flat because in September it was 4.05% and in October it was 4.145%, and rose due to a surge in layoffs (+166K) as well as re-entrants (+108K). Additionally, as Southbay research notes, the average duration of unemployment rose from 22.6 weeks to 22.9 weeks
Wage growth came in slightly higher than expected, with average hourly earnings rising 0.4% in October, higher than the 0.3% expected, and up from the downward revised 0.3% in September (was 0.4%). On an annual basis, earnings rose 4.0%, in line with expectations, and above the downward revised 3.9% (was 4.0%).
Some more stats from the latest monthly report:
Turning to the establishment survey, we find the following breakdown in jobs:
And visually:
The US is the expensive tower of power … but it should be cheap. Getting rid of coal power was idiotic and The Left’s fear of nuclear power is laughable.
EIA data by user classification, chart by Mish.
Rising energy bills have forced companies to scale back industrial operations, threatening a greater drag on the economy.
As of May, electrical energy costs are up 24.4 percent from a year ago. Producer Price Index (PPI) data suggests things are getting worse.
Please consider US Industrial Complex Is Starting to Buckle From High Power Costs
Europe’s fertilizer plants, steel mills, and chemical manufacturers were the first to succumb. Massive paper mills, soybean processors, and electronics factories in Asia went dark. Now soaring natural gas and electricity prices are starting to hit the US industrial complex.
On June 22, 600 workers at the second-largest aluminum mill in America, accounting for 20% of US supply, learned they were losing their jobs because the plant can’t afford an electricity tab that’s tripled in a matter of months. Century Aluminum Co. says it’ll idle the Hawesville, Kentucky, mill for as long as a year, taking out the biggest of its three US sites. A shutdown like this can take a month as workers carefully swirl the molten metal into storage so it doesn’t solidify in pipes and vessels and turn the entire facility into a useless brick. Restarting takes another six to nine months. For this reason, owners don’t halt operations unless they’ve exhausted all other options.
At least two steel mills have begun suspending some operations to cut energy costs, according to one industry executive, who asked not to be identified because the information isn’t public. In May, a group of factories across the US Midwest warned federal energy regulators that some were on the verge of closing for the summer or longer because of what they described as “unjust and unreasonable” electricity costs. They asked to be wholly absolved of some power fees—a request that, if granted, would be unprecedented.
Michael Harris, whose firm Unified Energy Services LLC buys fuel for industrial clients, says costs have risen so high that some are having to put millions of dollars of credit on the line to secure power and gas contracts. “That can be devastating for a corporation,’’ he says. “I don’t see any scenario, absent explosions at US LNG facilities’’ that trap supplies at home, in which gas prices are headed lower in the long term.
EIA Average Electricity Cost Cents
EIA Cost Data January 2021 vs May 2022
Those prices are through May 2022. Much electrical energy comes from natural gas.
US Natural Gas Futures
US gas prices fluctuated wildly in June and July. I suspect the average price is 7.33 or so for both months. Things are decidedly worse in Europe.
EU Natural Gas Price
From 25 or even 50 to 200 is one hell of a leap. It’s somewhere between 300% and 700% depending on your starting point vs 100% or so for the US.
Let’s now check the latest PPI data for a look at where things are and more importantly headed.
PPI Electrical Power Index 2020-Present
From pre-pandemic to January of 2021, the PPI electrical power index was flat. It has since surged on a relatively steady pace.
From May to July the index went from 231 to 238. That tacks on another three percentage points since the EIA report.
PPI Electrical Power Index 1991-Present
Long Term Trend
The long-term trend does not exactly look pretty.
And as Bloomberg noted, Century Aluminum Co. says it’ll idle the Hawesville, Kentucky, mill for as long as a year, taking out the biggest of its three US sites.
Reflections on Beer
Regarding the price of aluminum, please note America’s Beer CEOs Have Had It With the Trump-Era Aluminum Tariffs
The beer industry uses more than 41 billion aluminum cans annually, according to a Beer Institute letter to the White House dated July 1.
“These tariffs reverberate throughout the supply chain, raising production costs for aluminum end-users and ultimately impacting consumer prices,” according to the letter signed by the CEOs of Anheuser-Busch, Molson Coors, Constellation Brands Inc.’s beer division, and Heineken USA.
This letter to the president comes amid the worst inflation in more than 40 years and just months after aluminum touched a multi-decade high. Prices for the metal have since eased significantly.
Whatever victory beer makers and drinkers may have with aluminum prices may not last with US aluminum plants shutting down.
Then again, the cure for everything is likely to be a huge recession.
Zero Consumer Inflation
I am pleased to report there was no consumer inflation in July.
For discussion, please consider CPI Month-Over-Month Was Unchanged, Year-Over-Year Up 8.5 Percent
The CPI report resulted in a nonsensical Twitter debate on the meaning of zero. For the record, assuming you believe the numbers, there was indeed zero inflation month-over-month.
The accurate rebuttal is: One month? So what?
Moreover, zero is not as good as it looks. All of it was due to a 7.7 percent decline in the price of gasoline. And year-over-year inflation was a hot 8.5 percent.
Meanwhile, rent and food keep rising and the price of rent will be sticky. Gasoline is more dependent on recession and global supply chains.
Food Prices Rise Most Since February 1979
For more on the price of food, please see Food at Home is Up 13.1 Percent From a Year Ago, Most Since February 1979
For more on rent, please note Tennant’s Unions Demand Biden Declare a National Emergency to Stop Rent Gouging
For more on producer prices please see Producer Prices Decline For the First Time Since the Pandemic Due to Energy
Although energy declined, electricity didn’t.
Spotlight on Fed Silliness
The above reports and this one industrial costs puts a spotlight on the silliness of the Fed’s focus on consumer inflation as if that’s all that matters.
The Fed has blown three consecutive bubbles trying to produce two percent consumer inflation while openly promoting raging bubbles in assets and missing the boat entirely on industrial matters.
Not a great sign for the mighty US economy.
This morning, the flash PMI for manufacturing printed at 47.8.
Three straight months of print below 50 means … contraction.
Do I say contraction?
The US economy is crumbing down under Biden/Harris. No, the economy doesn’t hurt so good.
The Citi Economic Surprise Index just rose to its highest level since April.
The 10Y Treasury yield just rose to its highest level since August.
Housing starts dropped -0.7% YoY in September.
After surprising top the upside in August, Housing Starts and Building Permits disappointed in September, declining more than expected (-0.5% MoM and -2.9% MoM respectively)…
Under the hood, multi-family permits plunged 10.8% MoM (and multi-family starts dropped for the second straight month). Single-family starts rose 2.7% MoM and permiots inchjed higher by 0.3% MoM…
Rate-cut expectations appear to have taken the excitement out of the building market…
Housing Completions also dropped (but the BLS thinks construction jobs continue to rise non-stop)…
So, The Fed cuts short-term rates… mortgage-rates rise… and builders slow their building plans… that’s not how it’s supposed to work!
Perhaps Harris/Walz should adopt the Imperial March from Star Wars as their theme song. Between Biden/Harris uncontrolled immigration disaster helping to destroy New York City, Harris’ statement that she won’t do anything differntly from Biden/Harris is alarming.
The NY Empire survey crashed from +11.5 to -11.9 – the lowest since May. That is the biggest MoM drop since January…
A measure of current new orders plunged nearly 20 points to -10.2 after climbing a month earlier to the highest since April 2023.
The index of shipments decreased almost 21 points to minus 2.7.
The employment index, however, rebounded to 4.1 – the first expansion in a year – while a measure of hours worked also climbed.
Meanwhile, the New York Fed’s gauge of prices paid for materials increased to a six-month high of 29, while an index of prices received by state manufacturers also accelerated.
And with this awful news, the US Treasury yield curve remains downward/upward sloping. I call this the schizophenic yield curve.
Thunderstruck! Interest rates should be thunderstruck when realization dawns that the recend BLS jobs reporr was grossly mismeasured.
National unemployment was 8.7% in this month’s Rasmussen Reports Real Unemployment and significantly more than double the 4.1% rate officially reported by the Bureau of Labor Statistics today.
Mortgage rates are rising again with Friday’s surprising jobs report. But as it just a false election report. If Rasmussen is correct, mortgage rates should FALL again.
The Presidential and Vice Presidential debates thus far feature weak moderators asking lame questions. For example, there are still 97 hostages stll held by Hamas and what would the candidates do to get them released? (Hint: Trump/Vance would have sensible responses. Harris would just laugh and say she was raised in a middle class family and Walz would look like a deer in the headlights. Then we have national debt of $36 trillion, $271K per taxpayer.
But the hidden bomb that will never be discussed is unfunded liabilities (entitlements) such as Social Security and Medicare. Currently, unfunded liabilities are $219 TRILLION or $650K per citizen.
Of course, Biden/Harris have let the southern border wide open to criminals and uneducated Democrat voters who will voter for MORE entitlements.
So, when will the lame debate moderators ask HARD questions? And can Harris attempt to answer one hard question without laughing or falling back on lame “I was raised in a middle-class household.” etc.
The University of Michigan consumer survery is out and the results are startling.
Under Biden/Harris, buying conditions are far worse than under Trump/Pence.
In fact, buying conditions were extremely favorable (above 100) under Trump and dismal under Harris. Particularly for housing (where higher than normal mortgage rates and high housing prices made the “American Dream” the American Scream.
Confounded Interest - Anthony B. Sanders 
You must be logged in to post a comment.