Saturday, July 9, 2011

Jobs Disaster!

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By Mike Conlon | July 8, 2011

All eyes were on the US Non-Farm Payrolls Report and boy did it disappoint! After yesterday’s ADP employment change, the market consensus rose to the 100-125K range for new jobs added. The report came in showing a paltry 18K and the unemployment rate went higher to 9.2%.

This is the most dismal report I may have ever witnessed, with expectations gaining that perhaps the economy was going to navigate the quagmire that is bad government policy. It is could not be more clear that government needs to get the heck out of the way of business and create a climate of confidence and stability. The difference between “soft-patch” and potential for “double-dip” is starting to become more apparent, and Obama’s speech later this morning about the report should be his last.

Lead, follow, or get out of the way is the mantra I’ve learned to live by, and if self-serving politicians can’t comply than maybe it is time to move on. This also changes drastically the debate over the debt-ceiling and the political worming around the issue is going to be sickening. This also puts further Fed monetary easing back on the table, as they do their “best” to counter-act horrible fiscal and government policies.

Obviously the markets have sold-off after this figure, and the caution to start the morning was rightly justified. Nevertheless, we are in a situation where the Dollar has sold-off and the Euro has strengthened despite the risk in the markets. Yen and Swiss franc are the beneficiaries of the safe haven play, as the market is disgusted with the US dollar right now.

In the forex market:

Aussie (AUD): The Aussie is mixed to lower as the market tries to discern whether the real risk in the market place is whether or not to own US dollars.

Kiwi (NZD): Extreme volatility exists in the Kiwi for the same reasons as the Aussie, though minus the benefit of the higher Australian interest rate.

Loonie (CAD): The morning started off looking pretty good for the Loonie after the Canadian employment report showed that some 28K jobs were added to the economy vs. an expectation of 15K, nearly doubling the expectation. However the Loonie took a nose-dive when it became apparent that a weaker US economy will affect Canada more negatively. (Click chart to enlarge)


Euro (EUR): The Euro took off on the NFP report but is giving back gains as the correlations come back into play. Earlier in the morning, Germany reported a greater than expected trade surplus on higher exports. The IMF is expected to approve the bailout payment to Greece today. (Click chart to enlarge)


Pound (GBP): The Pound also has rocketed higher as it is not the Dollar, and earlier this morning mixed PPI data showed the prices are still rising, albeit slowly so there may be stronger calls for the BOE to act if inflation rises dramatically.

Swissie (CHF): The Swissie also popped after the NFP as it is a more desirable safe-haven than the US dollar. Earlier this morning, the Swiss unemployment rate came in at 3%. While Switzerland is a much smaller economy than the US, their economic might cannot be denied.

Dollar (USD): The markets are showing their displeasure with the current trajectory we are on and I’m tired of pulling punches, not that I ever have. This administration needs to goâ€"now. Playing games on twitter and trying to be cool is no longer working and we need a change of leadership that can act with pragmatism and not ideology. Overspending, uncertainty, higher taxes, regulation, unclear healthcare mandates are all causing businesses to ride out this failed liberal economic reign of terror.

Yen (JPY): The Yen is higher across the board as the most-desired safe haven going into the weekend. The current account total came in better than expected, as did two measures of economic confidence.

This failed experiment should be over and done with. As I look at my current tax bills and contemplate my future tax bills, I have to ask: what the heck am I paying for? I would much prefer to raise a private fund to support Sasha and Malia’s world travels, and give Obama a sit-com where he can be on TV as much as he wants and a life-time membership to a fancy golf course so he never has to pay greens fees again!

But just go… and I mean now! If you are one of the lucky 18K who found a job last month, congratulations! The US economy is now adding fewer jobs than Canada, and the US dollar is less desirable than the currency of a region that could possibly have 20% of its members default!

So like a bad gambler, I’m sure the next move is going to be to double-down, to raise the debt ceiling, more Fed easing, maybe get some temporary tax relief (which will have to paid for later through higher taxes) and any other band-aid type approach that will slow but not stop the bleeding.

Its time we bring a real doctor into the ER to revive the health of the US economy, and not just a guy who plays one on TV.

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