Saturday, June 5, 2010

Jobs Disappoint!

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By Mike Conlon | June 4, 2010

US Non-Farm Payrolls came in at a less than expected 431K vs. an expectation of 520K.  While this does reflect job growth from last month’s gain of 220K, the number is disappointing as census workers were included in this reading.  This shows that job growth in the private sector is not happening as quickly as the market would like to see and offers proof that we may be in a “jobless recovery”.

In addition, news out of the Euro zone is that Hungary may need a bailout as default may be imminent.  This could set off a chain reaction which causes the bailout facility to be accessed by other countries with similar problems.

What this adds up to is major risk aversion, as traders will not want to go into the weekend long risk assets in the event of further complications in the Euro zone.  US stock market futures are down significantly, as is oil, trading back to 72.5.

In the forex market:

Aussie (AUD):   The Aussie is lower this morning on risk aversion coming from the Euro zone.  However, sales of gold to Europe have increased dramatically as the Euro zone debt crisis induced a flight to safe-haven assets.

Loonie (CAD):  The Loonie is also lower on risk-aversion, despite a better than expected employment report.  Data showed an addition of 25K jobs vs. an expectation of a 15K gain.  The unemployment rate remained unchanged at 8.1%.

Kiwi (NZD):   The Kiwi is lower as well for the same reasons as the Aussie.

Euro (EUR):  Well it was just a matter of time before the debt crisis reared its ugly head again.  To think that the problems plaguing the Euro zone were solved with the announcement of the bailout facility would have been naïve.  Hungary’s announcement that it is in a “grave situation” as a result of the previous governments lies and manipulated figures which gave a false picture of its economy.  Euro zone GDP figures came in as expected, but this reading from the previous quarter may not paint a proper picture of the state of overall Euro zone economic health.

Pound (GBP):  The Pound is mixed; trading higher against risk currencies but lower vs. Dollar and Yen.  The Halifax report showed that home prices fell for a second straight month; however this report appears to be conflicting with other reports on home prices.  The takeaway here is that housing prices are likely to remain flat.

Dollar (USD):   Well what can I say about this employment number that’s positive?  Truthfully, not much.  The majority of job gains reported in this month’s NFP were temporary jobs created by the government in the form of census workers.  I suppose I am doing my part to “help” the economy by hiding from these people, thereby attempting to offset spending as population is under-reported giving the government one less reason to spend my hard-earned tax dollars.  In addition, the longer it takes to track me down, the longer one of these workers may be employed!  It’s a win-win for everybody.  But seriously, I try not to rail on politics but this is a disaster on so many levels.  Massive deficits, tax hikes coming down the pike, and the private sector unwilling to create jobs out of FEAR that their taxes will be going up to pay for massive entitlement plans are going to be the economic death of this great nation.  But the Dollar is higher on risk-aversion, so that means that the masses can be placated by still being able to afford cheap foreign stuff, while government fat cats finance new beach houses (yes you Al Gore) paid for by my yet to be born grand-children.  A sad day for Amerika.

Yen (JPY):  The Yen is higher on risk aversion and the unwinding of carry trades.

When bad economic policies are put in place by cowardly government figures, bad things will happen.  The government has been the largest creator of jobs for some time, and most of these are unproductive, and do not contribute to economic growth.  I have nothing against government workers, and I believe everyone who wants a job should have one.

But the insidious transfer of wealth from the private sector to public sector weakens our economic strength.  I’m tired of hearing about the “failed economic policies” of the past and the need for “change”.

These policies are NOT failed; they were under-regulated.  The same people trumpeting this mantra are also some of the same people responsible for those policies.  Excessively low interest rates and the housing bubble are the root cause of our economic problems, not free market principles.

The sooner people start to wake up and understand this, the sooner we’ll be able to get out of this mess.  Of course you have to pull them away from their cheap plasma TV to care for more than half a minute.

Nevertheless, the forex market trades on and there are tremendous gains to be made by those brave enough to understand what is going on and how to profit from it.

Are you one of those people?  If not, become one!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

To follow these events live with a free, real-time practice account, click here!  Don’t miss out on the world’s fastest growing market!

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