{"id":90927,"date":"2016-06-06T12:48:59","date_gmt":"2016-06-06T16:48:59","guid":{"rendered":"http:\/\/countingpips.com\/?p=90927"},"modified":"2016-06-06T12:48:59","modified_gmt":"2016-06-06T16:48:59","slug":"dont-bank-on-rate-hikes","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/06\/dont-bank-on-rate-hikes\/","title":{"rendered":"Don\u2019t Bank On Rate Hikes!"},"content":{"rendered":"
June 6, 2016<\/div>
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By Chris Vermeulen – www.TheGoldAndOilGuy.com<\/a><\/strong><\/em><\/strong><\/p>\n

This past Friday, June 3rd, 2016, The Bureau of Labor Statistics released their most recent report regarding new employment data and nonfarm payroll employment which indicates that during May of 2016, it was the smallest increase seen in 28 months.<\/p>\n

During May of 2016, there were 144,592,000 payroll jobs within the US, which was up by 1.6 percent, or equivalent to 2.3 million jobs, from May of 2015 (These are all not-seasonally-adjusted numbers).<\/p>\n

That represents the smallest year-over-year increase that has been reported since February of 2014, at which time payroll jobs increased by 1.57 percent. The largest year-over-year increase, in recent years, was reported during July of 2015, when it was up by 2.18 percent:<\/p>\n

\"jobs1\"<\/p>\n

Since July of 2015, the general trend in growth has been down. This 1.6 percent remains well below where growth was during most of the 1990\u2019s.<\/p>\n

I am not fond of using the seasonally adjusted numbers, since they add an additional layer of \u2018needless manipulation\u2019. I do prefer to compare job growth, from the same time of year, over several years.<\/p>

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When I do this, I find that the job growth from April to May of 2016, was the lowest April-May growth total since 2009:<\/p>\n

\"jobs2\"<\/p>\n

From April to May of 2016, there were 651,000 new jobs added, which is a significant drop from that same period of time, last year when 947,000 jobs had been added. Over the past decade, this current year of 2016, in this measure, beats out only 2008 and 2009, both of which were years of \u2018economic decline\u2019.\u00a0 Therefore, May of 2016 was the weakest May on record, for job growth, in eight years.<\/p>\n

The Secretary of Labor, Tom Perez attempted to blame everything on the Verizon strike<\/a>. That is a nice \u201cspin\u201d, however, the strike does not explain the obvious \u2018decline\u2019 in the year-over-year numbers! \u00a0The strike might explain why the May numbers dropped off as much as they did, however, it cannot explain the \u2018trend\u2019. It is a bit of a stretch to blame this drop from April-May of 2015 to April-May of 2016 on the Verizon strike.<\/p>\n

Mr. Perez, however, attempted some other, even less convincing, claims as well, stating that the U.S.\u2019s insufficient mandates on paid family leave means that fewer women are entering the work force, and therefore pushing down the jobs totals. Is this IMPORTANT?<\/em><\/strong> The answer is NO!<\/em><\/strong>\u00a0\u00a0 \u00a0These bad numbers merely reflect our current poor economic situation, today!<\/p>\n

In any case, the overall trend should not\u00a0be a big surprise, as it has always has been weak. It has been dependent on the FED and their low interest rates. In recent quarters, the FED has finally been backed into a corner and has become hawkish<\/a>.\u00a0Realizing that more rate cuts are unlikely to occur any time soon, the economy is not receiving the usual FED-manufactured stimulus which investors and companies have both become accustomed to. With the FED talking about the need to raise \u2018rates\u2019, who can be surprised that the \u201crecovery\u201d is nonexistent?<\/p>\n

\u00a0<\/em><\/p>\n

The financial news, of the past few weeks, had its cadre of regional FED Presidents attempting to sway markets into believing that the Central Bank was sure to \u2018hike\u2019 interest rates during this current month of June 2016.<\/p>\n

The jobs report sent \u2018shock waves\u2019 throughout the entire financial system. The report printed a jobs number of just 38,000 new employees, which is the lowest single month since the height of the \u201cGreat Recession\u201d.<\/p>\n

What is even more ludicrous than this, is the fact that the unemployment rate fell to 4.7 percent seeing as 664,000 workers are no longer being counted and included, by the government, within the labor force.<\/p>\n

The FED relies heavily on these \u2018manipulated\u2019 government jobs numbers, the idea of \u201cdata dependency\u201d being used to determine when to \u2018hike\u2019 or \u2018drop\u2019 interest rates shows the incompetency<\/em><\/strong>of a body that supposedly employs hundreds of economists who are dedicated to discover the true state of the economy and of its\u2019 economic data. \u00a0This in turn, should provide Americans with the reality that not only does the Central Bank have any idea what they are doing, but, more often than not their policy decisions are based on \u2018incorrect\u2019 and \u2018outdated\u2019 models which have only served to make matters worse, since the \u201cCredit Crisis of 2008\u201d.<\/p>\n

The majority of jobs created were either part-time or low-wage service sector oriented. \u00a0\u00a0You can bank on the fact that the FED is now more likely to lower \u2018rates\u2019 than they are to raise them, going forward!<\/p>\n

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Today, it is both unlikely and irrational for the FED to raise interest rates either now or in the near future, despite the Central Banks\u2019 recent \u201cmoral suasion\u201d on mass media, of a potential rate \u2018hike\u2019 occurring as early as this month or possibly next month. The FED continues to create policies in an attempt to protect the economy and stock markets through November of 2016 so as to \u201cspin\u201d the election in favor of Hillary Clinton. \u00a0This is due to the uncertainty from the presumptive Republican candidate, Donald Trump, who may force the Central Bank into ending its\u2019 mission to fuel \u2018stock and housing bubbles\u2019. \u00a0I, myself, as well as many economists, are seeing the \u2018Summer of 2016\u2019 as a dangerous period of time where and when a financial, economic, or monetary \u2018collapse\u2019 could take place from any number of \u2018flashpoints\u2019.\u00a0 The actions that are now taking place, in the equity markets, are an indication that these \u2018fears\u2019 may very well be arriving much sooner than most analysts expect<\/a>.<\/p>\n

\u00a0<\/em><\/p>\n

\u00a0 The economy is still performing \u2018significantly\u2019 below its\u2019 potential:<\/em><\/h2>\n

The problem is that the FED, including other Central Banks, have waited too long and gone too far in their \u2018zero interest rate\u2019 policies and \u2018quantitative easing\u2019 programs. \u00a0With all of this nonsensical talk coming from the FED, the debt default levels, especially for credit default swaps on the 10-year Treasury are NOW<\/em><\/strong> at their highest level since the FED raised rates by a quarter of a point, back in December of 2015.<\/p>\n

The probability of\u00a0a U.S. default of\u00a0its\u2019 debt has hit its\u2019 highest point since\u00a0the FED has hiked rates in\u00a0December of 2015.\u00a0 This is indicated by\u00a0the recent dynamics in\u00a0credit-default swap (CDS) agreements.\u00a0 The\u00a0expectations that the Central Bank may raise borrowing costs still further, in\u00a0the coming months, will set off this \u2018time bomb\u2019. Since the FED has turned increasingly hawkish of\u00a0their policy outlook since\u00a0late April 2016, market volatility has increased, with\u00a0stocks swinging between\u00a0gains and losses and U.S. Treasuries sliding along slide\u00a0with the dollar. \u201cSystemic risks\u201d stemming from\u00a0the CDS transactions are rising amidst\u00a0the unfavorable global financial environment.\u00a0 This is not only true in the U.S., but\u00a0its\u2019 counterparts are also subject to\u00a0greater turmoil in\u00a0the coming months, as\u00a0possible FED hikes, \u201cBrexit\u201d concerns, U.S. elections and faltering global growth are all interconnected factors thereby contributing to\u00a0the recent spikes in\u00a0U.S. CDS spreads.<\/p>\n

If things follow the FED script, I imagine that next months\u2019 payrolls will exceed \u2018tapered down\u2019 expectations and consequently, there will be an upward revision of Mays\u2019 numbers.\u00a0 Will this continue sending the market into exuberance? \u00a0NO!<\/strong> \u00a0However, the FED officials will then restart the rate \u2018hike\u2019 talks with just enough offsetting uncertainties to mislead everyone while trying to keep the market \u2018bubble\u2019 from \u2018bursting\u2019.<\/p>\n

The financial system is like a giant game of poker with all the major player holding a seven and two off suite (worst hand you can have), yet they are all-in with their chips (money & policies) trying to bluff their way out of this mess.<\/p>\n

Things are going to be very crazy over the next 6-12 months and beyond, but until the US large cap stocks breakdown and start a bear market expect tough trading and investing.<\/p>\n

Find out what I think the market is doing and where its headed with my ETF Trade Alerts:\u00a0www.TheGoldAndOilGuy.com<\/a><\/strong><\/em><\/p>\n

Chris Vermeulen<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Chris Vermeulen – www.TheGoldAndOilGuy.com This past Friday, June 3rd, 2016, The Bureau of Labor Statistics released their most recent report regarding new employment data and nonfarm payroll employment which indicates that during May of 2016, it was the smallest increase seen in 28 months. During May of 2016, there were 144,592,000 payroll jobs within […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-90927","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90927","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=90927"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90927\/revisions"}],"predecessor-version":[{"id":90928,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90927\/revisions\/90928"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=90927"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=90927"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=90927"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}