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UST Yields, Reverse Repo, and…Payrolls

February’s cold winter blast throughout the Southern United States was supposed to have been the extent of the weakness. The unusual and unusually severe freeze caused a great deal of havoc, making its way very quickly into economic data. The recovery…

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February’s cold winter blast throughout the Southern United States was supposed to have been the extent of the weakness. The unusual and unusually severe freeze caused a great deal of havoc, making its way very quickly into economic data. The recovery was said to have been on a winning streak (vaccines, gov’t payments, etc.) so it seemed the easiest correlation more likely the explanation.

In terms of the Establishment Survey, or payroll report, this didn’t really happen. The low-point ending up having been December, last year’s summer slowdown combining with second (or third) wave pandemic fears caused employment to shrink significantly (currently believed to have been -306,000) in that month.

From that ebb, the labor market roared back barely stopping in February (+536,000) before the big jump in March (since revised downward to a still impressive +785,000). The trajectory seemed clear enough once employers nationwide cleared the cold snap. Normalcy within perhaps a few months, maybe half a year.

The “whispers” for April were talking like in exactly that way, that the monthly employment change might come out better than a million. It didn’t. Instead, the BLS said the labor market severely underperformed at (since revised) +278,000.

Not to worry, all would be made up in May, with rumors pegging the monthly gain again into seven figures while mainstream estimates were hoping for between +650,000 and +700,000 (strengthened by ADP’s private figure from this past Wednesday which was much better than expected).



Today, the BLS did it again. At +559,000, just +492,000 private, this makes two in a row when reopening appears to be the only factor at work (pun intended). That’s not what’s supposed to be happening right now, instead the combination of those non-economic impediments being removed so that the rest of the economy fully set free to recover actually does.

Because of this repeat, now explanations are being demanded and given out in typical (2018-style) fashion. LABOR SHORTAGE!!!!

The recovery would be doing so much better, very much like what had been projected starting from February and surging into March’s headline estimate, except, so the story goes, Americans have grown too fat and lazy on the government dole. Unemployment bonuses and the like, helicopter payments with more promised, closed schools, why work when the feds will pay you as much possibly better to sit home?

Companies would hire more, evidently, if more would show up for interviews.

Undoubtedly, this situation applies to perhaps millions. It cannot, however, explain a few facts. The first is how more American workers have been pleading with their local authorities to more completely open everything back up so that they can go back to work. There’s even be a modicum of protestation on this point. However many might not want to go back, there’s been more who would like nothing more than the opportunity.

Second, notice the timing here; where have we seen a transition from reflation-like as in the job market to curious, “unexpected” not reflation-like, and this taking place in that same February to March timeframe? Yes, the Treasury market. Reverse repo and all that fuss.

LT UST yields which had been very much onboard with the more robust reflation trajectory spelled out in the progression of jobs reports up to March abandoned it in the middle of that same month. Just random coincidence? Not likely at all.

Finally, we all should be quite familiar with this sort of economic “mystery” – the enlarging distance between expectations for recovery and its strength and reach versus lack of recovery which turns out little better than some unnatural, insufficient reflation-ish rebound.

The economy should be doing better, the labor market should be coming back quicker; but it “somehow” doesn’t. Again.



This, I believe, is how we reconcile the labor statistics (including another drop in the unemployment rate, down to 5.8%) with, well, pretty much everything else globally including global bond yields that haven’t been reflation in more than three months (including real yields in UST’s). The recovery or at least rebound got going again after last summer’s slowdown extended all the way past autumn and into winter, but then…

Therefore, the recalcitrant level of labor force participation isn’t fat and lazy workers who have no intention of coming back from their taxpayer-funded vacations, or at least it’s not all or mostly that, the labor force dropping slightly in May so that the participation rate remains stubbornly 61.6% is, like the prolonged aftermath of GFC1, workers who are very acquainted with economic as well as non-economic pandemic reality and aren’t even bothering to look for a job because they know there really aren’t enough of them.

And won’t be anytime soon.

To demonstrate this point, the consistency over the long run again emerging toward the middle of 2021, we can dice up these data series any number of ways and it still works out in this fashion. I’ll compare them to October 2008, the very month when the labor market changed, so that you can more easily see the long run fit of employment dynamics unable to fit enough workers into the mix.


The Civilian Non-institutional Population, this being the total of all potential workers, has increased by 26.6 million between October 2008 and May 2021. As the results of the Census Bureau’s latest decennial census (2020) had shown, this period includes the lowest rate of population expansion since – imagine this – the 1930’s. So, the labor market hasn’t exactly been flooded by young labor eager to get working (who can’t seem to find gainful employment, and therefore put off if not give up on having families in the first place).

Even as 26.6 million more potential workers arrived, given last year’s deep recession there were in May 2021 only 6.5 million more payrolls than there had been in October 2008. Where does that leave the other twenty-some million? Enjoying themselves on a beach somewhere cursing reopening and the end of $300 worth of unemployment generosities?

Again, not likely for the vast majority. Instead, the labor force total matches up all-too-closely with those others; the civilian labor force is up just 6.1 million in those same 151 months, including the last fourteen That’s twenty million who are pretty well assured there’s just not enough economic growth producing job opportunities for them to even bother looking for work.

And this is where inflation really comes into it. It’s not about consumer prices, per se, it’s what consumer price acceleration – sustained increases beyond a few months – would confirm one way or the other. In 2018, that purported LABOR SHORTAGE!!!! ended up being no such thing, no inflation pressures emerged whatsoever which only proved the macro slack remained too large and unfilled.



Bond yields absolutely got that one right.

Now in June 2021, especially after today’s payrolls numbers, where are bond yields again? Distinctly lower and less buoyant than even Reflation #3. They’re quite consistently describing the same lack of inflation (actually more lack) ahead along with what sure seems to have been a prescient rethinking of the most recent reflation trajectory. Both those things are pricing growing, not shrinking, potential for a(nother) failing recovery.

Which puts them on the same side of the labor force itself.

Like 2018, this latest LABOR SHORTAGE!!!! stuff is the same wishful thinking, a way to try to preserve the idea of a paradigm change into inflation after more than a decade of disinflation if not, at times, outright deflation; doing so because the evidence keeps lining up in the wrong way. A shortage of workers you can’t see against another growing pile of evidence you really can.

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Government

Survey Shows Declining Concerns Among Americans About COVID-19

Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…

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Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.

(SARMDY/Shutterstock)

What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will  catch the disease and require hospitalization.

"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.

According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.

What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.

"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.

More via the Epoch Times;

The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.

Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.

“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.

COVID-19 No Longer an Emergency

The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.

The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.

“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.

The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.

Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.

The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.

According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.

Tyler Durden Sun, 03/10/2024 - 22:45

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International

Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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Government

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While “Waiting” For Deporation, Asylum

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several…

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The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several months we've pointed out that there has  been zero job creation for native-born workers since the summer of 2018...

... and that since Joe Biden was sworn into office, most of the post-pandemic job gains the administration continuously brags about have gone foreign-born (read immigrants, mostly illegal ones) workers.

And while the left might find this data almost as verboten as FBI crime statistics - as it directly supports the so-called "great replacement theory" we're not supposed to discuss - it also coincides with record numbers of illegal crossings into the United States under Biden.

In short, the Biden administration opened the floodgates, 10 million illegal immigrants poured into the country, and most of the post-pandemic "jobs recovery" went to foreign-born workers, of which illegal immigrants represent the largest chunk.

Asylum seekers from Venezuela await work permits on June 28, 2023 (via the Chicago Tribune)

'But Tyler, illegal immigrants can't possibly work in the United States whilst awaiting their asylum hearings,' one might hear from the peanut gallery. On the contrary: ever since Biden reversed a key aspect of Trump's labor policies, all illegal immigrants - even those awaiting deportation proceedings - have been given carte blanche to work while awaiting said proceedings for up to five years...

... something which even Elon Musk was shocked to learn.

Which leads us to another question: recall that the primary concern for the Biden admin for much of 2022 and 2023 was soaring prices, i.e., relentless inflation in general, and rising wages in particular, which in turn prompted even Goldman to admit two years ago that the diabolical wage-price spiral had been unleashed in the US (diabolical, because nothing absent a major economic shock, read recession or depression, can short-circuit it once it is in place).

Well, there is one other thing that can break the wage-price spiral loop: a flood of ultra-cheap illegal immigrant workers. But don't take our word for it: here is Fed Chair Jerome Powell himself during his February 60 Minutes interview:

PELLEY: Why was immigration important?

POWELL: Because, you know, immigrants come in, and they tend to work at a rate that is at or above that for non-immigrants. Immigrants who come to the country tend to be in the workforce at a slightly higher level than native Americans do. But that's largely because of the age difference. They tend to skew younger.

PELLEY: Why is immigration so important to the economy?

POWELL: Well, first of all, immigration policy is not the Fed's job. The immigration policy of the United States is really important and really much under discussion right now, and that's none of our business. We don't set immigration policy. We don't comment on it.

I will say, over time, though, the U.S. economy has benefited from immigration. And, frankly, just in the last, year a big part of the story of the labor market coming back into better balance is immigration returning to levels that were more typical of the pre-pandemic era.

PELLEY: The country needed the workers.

POWELL: It did. And so, that's what's been happening.

Translation: Immigrants work hard, and Americans are lazy. But much more importantly, since illegal immigrants will work for any pay, and since Biden's Department of Homeland Security, via its Citizenship and Immigration Services Agency, has made it so illegal immigrants can work in the US perfectly legally for up to 5 years (if not more), one can argue that the flood of illegals through the southern border has been the primary reason why inflation - or rather mostly wage inflation, that all too critical component of the wage-price spiral  - has moderated in in the past year, when the US labor market suddenly found itself flooded with millions of perfectly eligible workers, who just also happen to be illegal immigrants and thus have zero wage bargaining options.

None of this is to suggest that the relentless flood of immigrants into the US is not also driven by voting and census concerns - something Elon Musk has been pounding the table on in recent weeks, and has gone so far to call it "the biggest corruption of American democracy in the 21st century", but in retrospect, one can also argue that the only modest success the Biden admin has had in the past year - namely bringing inflation down from a torrid 9% annual rate to "only" 3% - has also been due to the millions of illegals he's imported into the country.

We would be remiss if we didn't also note that this so often carries catastrophic short-term consequences for the social fabric of the country (the Laken Riley fiasco being only the latest example), not to mention the far more dire long-term consequences for the future of the US - chief among them the trillions of dollars in debt the US will need to incur to pay for all those new illegal immigrants Democrat voters and low-paid workers. This is on top of the labor revolution that will kick in once AI leads to mass layoffs among high-paying, white-collar jobs, after which all those newly laid off native-born workers hoping to trade down to lower paying (if available) jobs will discover that hardened criminals from Honduras or Guatemala have already taken them, all thanks to Joe Biden.

Tyler Durden Sun, 03/10/2024 - 19:15

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