The REAL Jobs Report Suggest the US Economy ‘Treading Water’

The REAL Jobs Report Suggest the US Economy ‘Treading Water’

The REAL Jobs Report Suggest the US Economy ‘Treading Water’


There is almost no way to explain Friday’s buying spree in response to another NFPs (official jobs report) that proved nothing about a growing economy, hang on an allegedly growing economy.

When the S&P 500 hit 2130 on 21 May 2015, reported LTM (last twelve months) earnings were $99.25/share, and that was down 6.4% from the cyclical high of $106/share in September 2014.

That meaning the socks were being valued at 21.5X in the face of falling earnings, nuts!

During the 4 Quarters since then, reported LTM earnings have slumped by a further 12.3% to $87/share. So that brings the cap rate to 24.5X earnings that have shrunk by 18% over the last 6 Quarters. Super Nuts!

The US stock market indexes are moving higher in “daredevil” mode until something Big & Bad stops it.

The Big Q: What might that be?

The Big A: Global deflation and US Recession, both are looming.

When those economic forces hit home there will be blood on Wall Street. As historically that is the price paid when wild central bank actions destroy (cheap money) honest price discovery in markets.

The Fed and other world central banks have transformed the money and capital markets into a robot of wild speculation.

Janet Yellen and the others who run the world’s central banks have no clue as to the financial killing machine they have put on the road. They “think”  efficient pricing and allocation of capital does not matter now.

Their modus operandi is to peg the price of money, bonds and the yield curve sharply below market-clearing levels, so that households and business will borrow and spend more than they might do otherwise (stimulus).

They aim to drive stock prices to ever higher levels. That is so that the Top 10% and the Top 1%, who own the largest share of equities, will feel the wealth(effects) and then spend-up and invest-up more than they might otherwise.

The Fed caused the other world central bankers to create market-based price discovery for 1 Key reason.

That is to try to insure that in the arena of financial market supply and demand, that the forces of fear and greed would contend on a level playing field.

Short-sellers and Contrarians heading South were to intercept the unthinking followers of greed heading North before they reached the edge of the cliff, and dove over, recall the Tale of the Pied Piper.

Central bankers have put the short-sellers to death and empowered the lemmings of greed with free money to fund every manner of speculation while gifting them with cheap Southside hedging insurance.

There is a terrible price to be paid for 1-way markets, they do not correct, they crash.

“…the suddenness, unexpectedness, and violence of these episodic crashes slam the main street economy with gale force. That confidence shock, in turn, cancels out the gains that the resilient forces of capitalism have eked out since the previous crash, thereby causing trend rates of gain in real output and wealth to fade toward the flat-line and even below.”– David Stockman

The gambling culture the Fed has implanted in the financial markets degrades analysis and dumbs-down incoming economic and financial information to the point that it becomes uselessness.

And so now to Friday’s NFPs report

Within mins of the NFPs release (8:30a Friday), Dow-Jones’ MarketWatch turned the June reports report into a stock market ignition switch.

“Hiring in the US roared back in June with a gain of 287,000 new jobs, largely putting to rest lingering worries that the labor market and broader economy had taken a turn for the worse…..The sharp rebound in hiring last month….. suggest(s) the labor market remains the healthiest it’s been in years. The June jobs report also offers confirmation the U.S. economy is expanding at a moderate pace and keeping a seven-year-old recovery intact.”

But, the internals and trends of the report did not say that.

And, within the next hour, the great market analyst, David Rosenberg, dispatched the euphoria eagerly: “The simple fact of the matter is that May and June were massive statistical anomalies. The broad trends tell the tale. Go back to June 2014 and the six-month trend in payrolls is running at a 2.2% annual rate and the three-month trend at 2.4%. A year ago, as of June 2015, the six-month pace was 1.9% and the three-month at 2.2%. Fast forward to today, and the six-month annualized rate is 1.4% and the three-month has slowed all the way down to a 1.2%. This is otherwise known as looking at the big picture.”

A close look a the BLS (Bureau of Labor Statistics) random numbers generator shows that the actual US economy and labor market is weakening rapidly.

That is, the BLS establishment survey gains of 144-K, 11-K and 287-K for April, May and June, respectively, amount to a statistical average of 147,000. But that tells you nothing about the trend and almost certainly overstates what is actually happening in the jobs market.

There is really no need for the BLS employment report in the 1st place. That’s because the daily payroll tax withholding receipts of the US Treasury tell you all you need to know, and with one huge advantage above the other data.

We can all be sure that no employer in the US who sends payroll tax money to Washington based on phantom jobs owing to seasonal adjustments, birth-death imputations or trend-cycle adjusted models which re-calibrate shop floor headcounts to fit a prior trend. NONE!

So, if you strip from the payroll tax data an allowance for any tax policy changes, and allow for the going rate of nominal wage increase, you get a proxy for real units of labor input to the American economy.

Or, real time estimates of labor hours worked, not a polished statistical model projections of what a handful of GS-16’s (medium grade government employee) think the census count in the nation’s workplaces should have been.

According to the US Treasury’s vault, June employment did not come roaring back.

On the contrary, it has continued to decline, and has been for several months running.


The fact is, that monthly BLS data is so statistically modeled and manipulated that it is useless. Only after several years of revisions and bench markings based on state unemployment insurance rolls and Federal tax data do the BLS figures move out of the realm of models and into the world of empiric’s.

The BLS monthly numbers are at best lagging indicators.

For example: during the Y’s 2008-2010 jobs downturn initially reported numbers were reduce by millions of jobs after re-benchmarkings. The BLS’ momentum based models drastically over-projected current rapidly weakening conditions in the labor market.

And there is plenty of evidence in the Treasury tax collection data that suggests that the US is at an economic turning point again and that the BLS monthly numbers are again overstating the jobs market truths.

The data shows that during the 1st 9 months of FY 2016 individual income tax collections were $1.171-T. That was up just 0.3% from the $1.167-T collected in FY 2015. Weak yes?

Also, corporate tax collections of $224-B over the last 9 months were down $32-B or 12.5% from FY 2015. Those figures do not fit any kind of rebound narrative.

There is a common factor at work here.

Within total payroll tax collections, income and OASDHI, withholding collections are up by 3.7% for the 1st 9 months of FY 2016, whereas the net of estimated payments by non-withholders and refunds is down by nearly 7%. So, when the economy cools down, corporate profits, employee bonuses and contract hires get hit 1st, and that’s exactly what these figures indicate.

The tax collection numbers for June are a disaster. The recently documented withholding tax collections hit the flat-line in June, coming in at $180.6-B compared to $180.0-B last June. The jobs market is not healthy.

Further, non-withheld taxes in June, which reflect bonuses and estimated payments for anticipated earnings dropped from $76.7-B last year to $62.3-B this year, a 19% dive.

Also, corporate tax collections in June dropped from $74.9-B last year to $62.8-B this year, a 16.2% dive.

Lastly, excise tax collections are down by nearly 3%. Since they reflect 2X monthly payments based on current sales, it is hard to see how that is consistent with an economy that is roaring forward.

So, when tax collections are down, the economy is already in the ‘mud”. So that fact that total Federal tax collections came in at $300.6-B in June compared to $327.5-B last year trumps the headline noise issued by the BLS Friday morning.

This all means that there is nothing going on in the US economy that merited Friday’s celebration and the headline BLS number was just statistical “noise”.

The report should be a reminder that the US jobs market is unhealthy in the extreme no matter what you hear in the financial media or from the Obama Admin. The fact tell us that this business cycle is running out of steam after 84 months of lukewarm expansion.


The entire frame since Y 2000 has exhibited a process of replacing high pay jobs with low paying jobs, and that process has accelerated during the last 7 years of the Obama recovery.

The June report confirmed that this huge trend has taken an “End of the Cycle” turn South. Notably, during the 7 months since last November, the number of goods producing jobs reported and revised several times by the BLS has declined by 3,000.

In summary


In this era of central bank driven ‘bubble finance”, financial asset prices have been disconnected from the economic fundamentals. The US economy has lost 2.3-M goods-producing jobs since the year Y 2000 and replaced them with 2.6-M 35% jobs in hospitality and leisure.

“That does not speak to a roaring engine of capitalist prosperity and occasion for the highest PE/R (price earnings ratios) in history. The fact that we have the latter merely reflects that the casino is crowded with “monkeyshiners” high on the monetary drugs dispensed by today’s central bankers.” — David Stockman

The evidence shows that this 3rd crack-up boom of the 21st Century is heading for a “crash” landing.

Prudence dictates Caution, and moving into safe-havens, like Gold and Silver.

Have a terrific week.

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