Suffice to say, this morning’s US Employment report for the month of October was not good.
So why is the stock market up? Answer: The US Dollar. The US Dollar is down for the 4th week out of the last 5. The Buck continues to Burn.
What’s negative for the US economy is negative for the US Dollar. What’s negative for the US Dollar is positive for most things priced in dollars. If you didn’t know about this perverse relationship between the price of the US Dollars and everything else, now you know.
Put another way, if the Federal Reserve’s Pander Program hinges on “the data”:
- Bad economic data = Fed stays at ZERO
- Good economic data = Fed signals their 1st hike
That’s why we are so focused on this dynamic relationship between the Fed and the Dollar. The politicization of the Fed perpetuates US Dollar weakness.
In the charts below, Matt Hedrick and I show both the size and context of this morning’s jump in the unemployment rate. The most important takeaway, as always, is what we observed on the margin. On the margin, the rate of US unemployment accelerated sequentially. You can see this in the bar chart below (the red arrows are accelerations; the green ones are decelerations).
The unemployment rate accelerated its recent monthly pace of gains to +40 basis points month-over-month (from 9.8% in September to 10.2% in October). You have to go all the way back to May of 2009 to find a monthly acceleration in the employment rate that surpasses October’s.
In Q1 our call was that the unemployment rate would decelerate in Q2. It did.
In Q4 our call is that unemployment will remain pinned up in no man’s land. We don’t think we’ll see another 40 basis point acceleration in November’s unemployment rate, yet. We need more data on November jobless claims to make that call just yet.
The Fed will use this data point to justify their pandering to a perpetual policy of ZERO return on the American citizenry’s savings. The only thing worse than being unemployed in this country, is being unemployed with a savings account.
Keith R. McCullough
Chief Executive Officer