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You’re Living In A World Wrought By The Federal Reserve. Notice Anything Wrong?

You’re Living In A World Wrought By The Federal Reserve. Notice Anything Wrong?

Authored by Lynn Parramore via The Institute for New Economic…

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You're Living In A World Wrought By The Federal Reserve. Notice Anything Wrong?

Authored by Lynn Parramore via The Institute for New Economic Thinking,

In her new book, veteran Wall Street watcher and economist Nomi Prins warns that central bank strategies deployed since the financial crisis are destroying the real economy, worsening inequality, and creating societal chaos.

Ever wonder why it is that for most of the 21st century, no matter who is in the White House, no matter the state of the economy, and regardless of what ordinary people are suffering, money travels inexorably to the top?

If you find this baffling, you’re not alone. For many, it seems that the further we travel into this acutely challenging century, the political, economic, and social rules we thought we understood increasingly fail to apply.

Economist, journalist, and former Wall Street exec Nomi Prins is here to explain the inexplicable. Her latest book, Permanent Distortion: How the Financial Markets Abandoned the Real Economy Forever, is a highly readable and clear account of how the financial realm, with its central bank-fueled loose money and mega-wealthy financiers, has split off from the real economy, the place inhabited by regular working people who buy stuff and produce things.

The upshot: the people’s needs are increasingly ignored in favor of market demands.

Prins points to the 2008 financial crisis and the Federal Reserve’s response as the pivotal moment in which we jumped on a tiger that we can no longer seem to dismount. What was supposed to be an emergency response to a crisis ended up turning into an unstoppable addiction to cheap money which, Prins argues, initiated a vicious cycle of pumped-up financial markets, destabilizing inequality, a public left worse off, and a political system increasingly unable to make real progress on long-term priorities like climate change. She spoke to the Institute for New Economic Thinking about who is responsible, what the public needs to understand, and why this tiger will not take us anywhere we want to go.

Lynn Parramore: You’ve written several books about the U.S. economy and Wall Street. Why this new book, focusing on central banks and their influence? Why is this so important to understand now?

Nomi Prins: Since the financial crisis, one of the themes in my books is money and power. There’s a real thru-line from my 2009 book, It Takes a Pillage, which focuses on the financial crisis, to All the President’s Bankers (2014), where I go back into the history of American bankers and their political influence, on up through Collusion (2018), the global analysis of what happened from the financial crisis through the period before the pandemic.

That thru-line concerns this external body - the central banks - which can effectively manufacture money, and how this money, just by sheer mass momentum and the players involved, goes disproportionately to financial markets relative to the real economy. This activity, in fact, is detrimental to the relationship between markets and the real economy, and also to the real economy itself.

I wrote Permanent Distortion because to me, the distortion that money and power have created between markets and the real economy did in fact become permanent. It’s not just something we’re experiencing now, and then can we go back to a more glorious time when it wasn’t like this. It was around July 2020, when we were all locked down and not knowing what was going on with our lives, our personal economies, our health, and our families, when I realized that the Federal Reserve had doubled the size – or even more so — of its book of assets. It had created about $5 trillion worth of money in a very short period of time.

During that time, the markets went from being very afraid and down to being very, very high. A lot of people said, well, we’re all at home using Zoom, so therefore the market just rebounded by so much. But that was just a small part of it. The bigger part was that money became available at such an immense level and therefore the distortion between where money goes in the financial markets and where it doesn’t go in the real economy became permanent. At that moment I saw that this can happen in any amount, at any time. There’s no restriction, no transparency, no responsibility.

LP: You make a strong case that high finance has become unhinged from the economy, and you go so far as to say it has become disconnected from capitalism itself. What exactly does that mean?

NP: When I’m talking about capitalism in that sense, I’m connecting it to the idea of financial markets supposedly being created to aggregate money in order to then funnel it into companies, and therefore into projects, and on into the real economy.

So the idea, technically, from a capital market perspective, is that borrowing money in order to do something, or selling bonds in order to finance something, or selling shares in order to finance something, used to have a particular relationship to each other. If there was a transparent use for a company that had value to shareholders, they would be willing to effectively invest their money in order for that company to do what it does to grow whatever it’s growing. Part of that use could be profits, part could be wages, part could be cars. The point being that the relationship was more or less (though not always) transparent at a theoretical level.

But now there is more money being thrown into the markets from an outside source. It’s not money from the actual profits of a company or its long-term strategy, or the productivity of workers, or the creation of long-term things. You end up getting an unmooring between what markets are theoretically there to do in a capitalist society and from a capital-raising standpoint. There’s this other source that comes in and kind of turbo-boosts and distorts all of those relationships.

LP: You place the roots of this trouble in 2008, a year which, you point out, increased the power of central banks. Yet, Ben Bernanke, the very economist in charge of the Fed at that time, just won the Nobel Prize. As some have pointed out, we are living in the world he created, and many hail him as the guy who prevented the second Great Depression. How did he contribute to the alarming picture you paint of an economic system gone off the rails?

NP: I thought the Nobel Prize for Bernanke was a bizarre choice, although it made sense if you believed the narrative that attributed to him the power to save the economy. And he also happened to have written a lot of things historically about depressions. But if you actually dig into both what he did and what he wrote to win that Nobel Prize, you find a concerning story. To understand it, you have to go back to before the crisis was apparent to everyone — both during the Great Depression and during the 2008 financial crisis.

Back before it became apparent that a financial crisis was happening, there was an immense amount of leverage in the banking system over which Bernanke had a responsibility to regulate. There was also an immense amount of assets being created off the back of a very small amount of interest coming in from subprime loans. Those subprime loans themselves had issues, and Bernanke knew it because the banks knew about the interest payments, and their rising delinquencies, and defaults. A small amount of subprime loans were structured to feed into a large amount of other assets by said banks. As this was happening, either he didn’t want to pay attention or he thought looming problems would just go away as many banks did. But Bernanke had information from the banking system in his position at the top of the Fed and certainly through his connection to the New York Fed. He was deeply connected to those banks and their liquidity and rising delinquency and default problems and he just chose to say that everything was effectively fine.

He did that even before the crisis became apparent. Then, in 2007, when things were absolutely crumbling and even the shares of real estate developers were plummeting, when there was so much information all over the place and reports from the FBI were going into the Fed telling them there were issues, what did Bernanke do? He did nothing.

So when the crisis did occur, Bernanke ultimately used the tool of quantitative easing, which is basically creating electronic money in return for taking out that debt from the market and putting it on the Fed’s books for safekeeping. He put it there and most of it stayed there. Later it manifested a larger crisis, or a looming crisis, by injecting all that money into the market on the auspices of saving the real economy.

What actually happened was the markets rose precipitously over all of the ensuing years. There’s one or two years where they wobbled a bit, but, in all the period of time during Bernanke’s chairmanship of the Fed, the real economy stumbled. To me, the narrative that he saved things from being worse is a false one. Yet that narrative was perpetuated and is still believed today by the majority of people who care to think about it, like the Nobel Committee, apparently.

And what about Bernanke’s writing on the Great Depression that he had done back in the day – as supposedly the main reason he got this prize? Well, he’s had an aura of having such great knowledge of the Great Depression. He was the man who wasn’t going to let it happen again. Yet he forgot, or didn’t recognize, that one of the reasons the central bank did what it did from 1929 to 1931, a time when many banks collapsed, is that there was a housing bubble. There was also overleverage and a situation where Wall Street banks had been doing nefarious things with money. So one of the reasons that the crash happened and so many banks went under afterward was because of what happened before. The banks had become over-extended, over-leveraged and Fed wasn’t paying attention at the time.

Bernanke didn’t write about this. He wrote about what happened when the Fed tightened too much too quickly and caused another leg of the Great Depression. That strategy was something he wasn’t going to have happen on his watch, but he forgot or didn’t pay attention to anything that had actually caused the crisis, to what led to Great Depression. He showed the same blind spot in his approach to the financial crisis. To me, that’s like two negatives, two false narratives. The consistency in those two false narratives is that they are both related to over-leverage in the housing market, to Wall Street taking advantage of it, and to the Fed not doing anything.

LP: Let’s talk for a moment about economists and economic advisers that influence our political system. What can you tell us about their relationship to power? Does it cause them to have these blind spots?

NP: The National Economic Council is generally made up of senior business leaders and bankers with current jobs, so a lot of them tend to lobby for certain policies that benefit them. In this last go-round, there’s been an oddly exorbitant amount of lobbying to the Fed directly. There are about 120 different lobby groups that lobby the Fed directly, even beyond lobbying respective politicians and on behalf of respective companies or sectors! So “the economy” is really convenient as a funnel for any policy that has to do with money going in and out of anywhere. If policies are being formulated or explained by self-interested people or people that work for self-interested companies or parties, then they’re going to be skewed toward those people or companies. You don’t have Joe the Plumber hanging out in the middle of the Economic Council saying well, here’s what’s going on with my building and my house, now what are you going to do about those? That’s not how it’s structured. It ensures a very top-heavy approach to economics.

Take, for example, how the Fed views statistics, such as employment numbers, when it’s thinking about inflation or raising rates so quickly, which is really constraining to people on an actual budget facing other inflationary pressures, and, by the way, not actually doing anything about inflation. They’ve got the Executive Survey and the Household Survey. The Executive Survey counts every single job somebody has as a job in the economy, even if it’s the same person, whereas the Household Survey only counts one job per human. So those numbers are disparate. There’s a lot that can be interpreted in different ways and the framework has been formulated, generally, by economists who accept certain narratives, who tend to confirm or to say what needs to be confirmed or said to keep the status quo. They’re the ones that remain in those advisory positions. You do get people who might try to push the envelope a bit in terms of definitions and policies, but they don’t tend to stay around.

LP: You note in your book that our whole society has become alarmingly top-heavy due to these top-heavy approaches. I was struck by the statistic that in a single year of the pandemic, 2020, there were 500 new billionaires created, just as regular people were losing their jobs, losing their health, and many were losing their lives.

NP: Yes, that statistic gets people’s attention. My other favorite is from the 2022 Oxfam report, which says that the top 10 billionaires were making $15,000 per second. When I do talks on the book, I make everybody imagine that, to think about the speed of what’s going on here. It’s because those billionaires are invested in markets that their wealth is propelling up so much. All the speculation, though, is driven by this excess amount of available money, by what the Fed has done.

LP: You refer to this as wealth accumulation without accountability. In what sense?

NP: If you’re participating in a market that’s going up, obviously the more you’re participating, whether as the head of a company that has options for stocks, or as an investor, or as the retail person who is placing just the little bit they have on it, then you’re going to benefit from that proportion of upside because you’re in it. If you’re not in it, you’re not going to benefit from the upside. That’s just the math.

What we’ve seen is actually more money created than what was sensibly needed to save the economy, and it’s obviously not going into the real economy. I’ve gone through the stats of the Fed’s books related to the $600 stimulus payments, the extra unemployment insurance, and even the PPP loans. The remaining money was leveraged into the financial system. What was on offer to the markets from the Fed dwarfs what actually went into the pockets of real people in the real economy.

As a result, the money just tsunamied upward in a very short period of time. That money unmoored from the real economy and did nothing for it. There were a lot of narratives flying around and guesswork on why the markets ballooned so quickly. What you didn’t have to guess was that trillions of dollars were created, not just by the US central bank, but by central banks around the world. And this was accumulated into the financial system and financial markets.

LP: How does this distortion impact our ability to confront long-term challenges, such as climate change?

NP: This goes back to the question of accountability. If money is being drawn into one place or one set of financial assets, the financial markets, it doesn’t go into preserving the social contracts or the Main Street economy or the fractures in Main Street economics. I think that as a result, government leaders of both parties get lazy about pushing through longer-term strategies. Because there is this external force of money, it distorts all of the decisions. Parties argue back and forth about where money should go where and so forth, but it distorts all that just that much further because of the ease with which money can be created and multiply and go elsewhere. The idea of long-term strategies, like fighting climate change, suffer.

Yes, we recently had a bipartisan infrastructure act passed, and that was positive (though it’s taking quite some time to actually agree on where that money’s going to go). But going back to what capitalism could be, what if that money that went to financial markets had gone to directly build solar or wind energy? Or the electrification of manufacturing plants? Or water purification?

If it could have gone to these areas more quickly, then you would see more of a shift. The pace of getting what’s needed to fight climate change would be faster if it weren’t way easier for money to flit about, especially when created in abundance, into areas where it can just multiply itself more easily rather than in awaiting to build a whole new production center and or new energy strategy. The fact that money can multiply so quickly in the markets makes it harder for it to stick around in one of those lasting areas —to build necessary, physical things, like new or upgraded power mechanisms.

LP: You write about developments in cryptocurrencies and the metaverse as responses to this distorted situation. How do you see them evolving in relation to it?

NP: When I wrote about crypto, I also wrote about decentralized finance. They’re not necessarily the same thing, though they do share commonalities in that Bitcoin, for example, was created off of blockchain technology, which has been around for decades. But let’s just focus on the fact that crypto grew exponentially in the wake of the financial crisis. That’s when the famous Bitcoin white paper came out. That’s when the idea of fighting against the bailing out of banks spurred this vision of having some way of financing, borrowing, lending, and keeping money outside of the auspices of the more centralized financial system, which had shown itself to be a) reliant on the Fed and the government and b) not particularly stable.

Even though we’ve got, obviously, centuries of the establishment of different currencies, including the dollar (with the dollar becoming stronger and the reserve currency in the last century), the idea that something else can compete on a currency basis, or at least be another avenue if it were to be regulated and safer, was a direct result of what happened and how it was handled by central banks in the wake of the financial crisis. It’s also why that idea grew exponentially again in the wake of the pandemic, when the same things happened. Instead of saving the economy by saving Wall Street, the idea was that the Fed was saving the economy by — we don’t even know what — but ultimately money gushed into the markets again. That was one thing. But the decentralized aspect of it is also an interesting area of transformation and will be for some time — the idea of using technology to do financial transactions of all kinds away from the auspices of your Chase account or your Bank of America account.

In terms of the metaverse, I’m not talking about gaming and that type of thing, but of using technology to share, more directly, things like medical treatments or surgery secrets or what have you, across countries without everybody physically being in the same place, or engineering techniques that can allow easier fabrication of potential problems in new bridges that could be ironed out before the bridge is actually built or engineered so that you have more efficiency in the use of material. This is about pushing technology into something helpful for the building of real things and the creation of better and healthier lives for people through the auspices of virtual reality techniques.

LP: Some of that sounds hopeful, yet you use the word “permanent” in the title of your book. It sounds like we have no way of correcting this distortion between the financial markets and the real economy.

NP: I chose the term “permanent” specifically. It’s a big word. Given what happened in the wake of the pandemic and the fact that central banks could create so much money so quickly facing a crisis showed me that this can happen again and again. Not necessarily that big of an amount for that big of a crisis, but that we would have this unhinged, uncapped, untransparent process that can occur repeatedly.

Since I wrote the book, we have this high inflationary environment. The Fed is raising rates quickly, as are other central banks around the world. I think that’s creating a looming debt crisis for consumers, in particular, in the process, with the cost of money becoming so high for them so quickly. We’re starting to see delinquencies, defaults, and other problems arising as a result.

But be that as it may, in the U.K, the Bank of England, when faced with a pension crisis recently, was “forced” — as described by articles associated with it — but actually chose to create 60 billion pounds worth of money in order to buy gilts [the equivalent of U.S. Treasury securities] and to give a bid to the gilt market to raise the level of gilts. They chose to do that because gilts were declining precipitously and over-leveraged by a contingent of the pension fund community. The idea was that, as with any pension fund, you invest and the return that you get on that investment is part of what the pensioners needing to draw on their pensions get. But when there’s too much borrowing or there’s too much of a depreciation in the assets, then there’s a problem. You can’t pay what is owed to the pensioners.

That’s what happened in the U.K. As a result, the central bank is still raising rates – tightening policy — and on the other hand, they’re creating more money — loosening policy — in order to buy those gilts. I think we’re going to continue to see these types of situations. That’s what I mean by permanent. There’s always going to be this possibility of money coming into some part of the market when it needs it because (particularly in developed countries) central banks can do that.

How do we get out of it? We can’t. First of all, it’s important to note that this is happening and not to accept false narratives, like the story that a host of $600 stimulus checks paid out two years ago is causing inflation today. That’s just really annoying and stupid. We need to understand that the Fed didn’t inflate money in order to pay people those $600 checks or help fund the PPP loans and whatever else was going on at the time. That’s not what’s causing our inflation. There’s a bigger picture. One of the things I think we can do is literally ask ourselves the question, do you think that this monetary body in Washington has the ability to do anything that can actually make my electricity bills go down by virtue of raising the cost of my credit card debt or my personal loans or my mortgage? The answer should be no. We need to understand and think about these relationships so that at least we don’t accept what’s false and we don’t become blind, to what’s going on. The public needs to know this. Congress should know this. That’s what I hope my book can do: educate people. 

Tyler Durden Sat, 11/19/2022 - 17:30

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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