Jobs? Oh My, FED RAISES!
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2022-08-05 09:16 by Karl Denninger
in Employment , 604 references Ignore this thread
Jobs? Oh My, FED RAISES!
[Comments enabled]


Seriously, this one got my attention.....

Total nonfarm payroll employment rose by 528,000 in July, and the unemployment rate edged down to 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care. Both total nonfarm employment and the unemployment rate have returned to their February 2020 pre-pandemic levels.

Oh, The Fed will stop or even reverse its rate-hikes in the next couple of months!

Uh, no they won't.  Volcker has risen from the dead dudes and dudettes, and he's about to tap-dance on your portfolio if that was your investment thesis.  And do remember, he was a big guy too; his nickname was "Tall Paul" and with good reason.

Health care exploded in employment last month, +70,000.  That's more than double the normal run rate.  We'll leave the "what's up with that" question for the -NAD side, but you all know darn well what it is.  By the way that is, and will continue to be, a very nasty net-negative for the economy.

Construction is above the February 2020 level.  Of course the BLS reports this but what's also obvious is that February is.... winter and July is.... summer.  Sigh...

In addition do note that the population has, of course, increased since February of 2020.  The BLS loves to lipstick the "gains" figures, but never adjusts for population changes.  I do, and when you do the employment situation isn't as nice as they claim.  Nonetheless, gains are gains and there were plenty.

More importantly unlike last month they didn't come from schlubs coming off the couch and then failing to find a job.  Not this time.

And expected migration out of the lower-educational brackets upward occurred this month as does every year, usually in the July report.  Nothing interesting to see there except the large gains one would expect being shifted up in attainment did not happen.  The losses of those moving upward did.  That's...... not so good and might be an extension of what I talked about last time around and alarmed me considerably.  Better hope not, but this shall wait for next month for confirmation because one month is a "yeah, ok", two raises eyebrows and three is a trend.  We're at two.

Hours worked were flat  overall, and this is a very large indicator because one tick (that is, one tenth of an hour) is the equivalent of about 600,000 jobs.  That was neutral this month.

A nasty figure is in the average earnings numbers.  Hourly earnings went from $30.67 -> 32.27 over the last year, which is a 5.2% increase.  That is well below the rate of inflation, which sounds not-so-good.

The truth is much worse as the weekly earnings, which is what matters as it captures the hours worked and size of the actual paychecks, went from $1,067.32 -> $1,116.54.  That's less than 5%.

People like to say the "service providing people" got bigger raises.  Balderdash when it comes to inflation; the leisure and hospitality category, which is the bottom of the line in those statistics, were up 5.8% in actual pay terms, not in hourly terms.  Don't wave that 8.7% hourly wage number around in my face what matters is the total size of the check and if you cut hours in response to higher hourly wages, which is exactly what is happening, the wage-earner still gets screwed.

The TNX sits at +5.3% on the day as I write this.

Rates are going higher, and not a little either.

Like it or not.

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Maurevel 1k posts, incept 2009-06-14
2022-08-05 09:32:44

I'm missing something obvious or implicit.

In the current context, higher employment and wages are a bad signals and need to be pulled back? What would be the ideal employment report as of now?
Tickerguy 186k posts, incept 2007-06-26
2022-08-05 09:34:03

@Maurevel - There isn't a "good" report here; much of "employment" right now is and has been a resulted of printed credit that has wildly inflated the economic picture.

From a market point of view (e.g. stock prices) you'd want to see a FLAT report or even a loss. Why? Because it would feed the mentality that The Fed will reverse course.

The law of scoreboards is not subject to repeal.
Fuck around and find out.
New business: Karl's Guillotine sales and repair; you slice 'em, we dice 'em.
Calrissian 101 posts, incept 2021-04-12
2022-08-05 09:52:34

So... another 75bps hike this Sept'21st. This will make for the first higher cycle high in rates since around 1980.

The collapse of the financial markets into 2023.

Time to order more popcorn, and plan some strategic short-side positions.
Superdude 1k posts, incept 2009-06-16
2022-08-05 09:52:52

Some of those jobs are from this:

Pritzker removed his vaccine mandate for college and hospitals in Illinois. Which means you can go back to work where they fired you for not taking the shot. Who would do that? I guess lots of people. I don't get it. But then again, if you were injured would you want someone who was fired and then rehired with a grudge watching over you?
Dxd1200 19 posts, incept 2021-05-01
2022-08-05 09:53:51

I honestly have no idea what to think of this report. I have peers that just recently lost their jobs at big tech companies (Oracle, et al) and within the mortgage/banking industries. Also, the company I work for is now beginning to 'pause' hiring to the point some internal transfer offers are being rescinded. This is truly a non-sensical circumstance from my boots on the ground perspective.
Nashville 84 posts, incept 2018-02-27
2022-08-05 09:54:00

"TNX sits at +5.3% on the day as I write this".... did you mean it has risen 5.3% (to 2.82-ish% area) for the day so far? I've been curious why it has dropped so much fro early July peak. Also, gas at pump down 50 straight days during the heavy driving season. You'd almost think this was an election year or something? Go Brandon Go!
Tickerguy 186k posts, incept 2007-06-26
2022-08-05 09:54:07

Correct @Nashville.

Gas prices are down because demand has collapsed. It is down 14% from the same week last year. The collapse initiated first week of July and has continued since with no evidence of a reversal thus far.

The law of scoreboards is not subject to repeal.
Fuck around and find out.
New business: Karl's Guillotine sales and repair; you slice 'em, we dice 'em.

Calrissian 101 posts, incept 2021-04-12
2022-08-05 09:57:13

Give me a monthly settlement in TNX >$32.50... aka... US 10yr >3.25%, and it will offer 5.0%.

... and that won't help equities into/across Q4.
Kennington 296 posts, incept 2013-09-12
2022-08-05 10:09:24

"Gas prices are down because demand has collapsed"

Demand destruction...while many will parade this around as something good it's anything but that!!!
Kennington 296 posts, incept 2013-09-12
2022-08-05 10:23:00

Retail traders buying this news off the opening dip...wouldn't be surprised to see reversal after the first hour of trading.
Prof_dilligaf 337 posts, incept 2021-09-02
2022-08-05 10:23:04

"Both total nonfarm employment and the unemployment rate have returned to their February 2020 pre-pandemic levels."

I love this kind of "EVERYTHING IS AWESOME AGAIN!" sort of balderdash. Sure, to the average chump it sounds nice that we've "recovered", but if you have the slightest understanding of the "growth at any cost" economic system that is our current lot, that really means we're two and half years behind schedule!

Now it can quite successfully be argued that such a system is an idiotic house of cards and doomed to disaster, but it's what we got, and clearly the consumption carousel is still wobbling quite badly.
Seektruth 1k posts, incept 2007-09-01
2022-08-05 10:50:22

Yes, release the Volcker!

Truth is out of style.
Jtmo3 747 posts, incept 2009-07-31
2022-08-05 10:50:26

Tickerguy, what was the adjustments on this report. I read the seasonal adjustment was large.
Rollformer 1k posts, incept 2013-02-13
2022-08-05 10:50:33

The demand destruction in gasoline actually scares me. Because the crack is largely fixed, you need to have a relatively correlated demand for all products. Unsold products have to be stored, and that storage capacity is not infinite. If it winds up full of gasoline, you can't produce any more diesel because there is nowhere to put the gas.
Tickerguy 186k posts, incept 2007-06-26
2022-08-05 10:51:02

@Jtmo3 - I don't care; I don't use the seasonally adjusted numbers.

The law of scoreboards is not subject to repeal.
Fuck around and find out.
New business: Karl's Guillotine sales and repair; you slice 'em, we dice 'em.
Tickerguy 186k posts, incept 2007-06-26
2022-08-05 10:51:12

@Rollformer - Ticker in queue on that.....

The law of scoreboards is not subject to repeal.
Fuck around and find out.
New business: Karl's Guillotine sales and repair; you slice 'em, we dice 'em.
Cwatson1982 215 posts, incept 2017-05-07
2022-08-05 10:55:56


I'm not sure I entirely buy the gasoline demand drop (at least to the degree they report). Per EIA's own data, refinery production is in the middle of the 1,250-1,500 MBPD range of the last year+, gasoline exports are near the bottom of the April onward range and gasoline stocks are nearing 5 year lows. Where is it going?

Coupled with GasBuddy tracking, which has only shown one weekly drop in demand over the last 10 weekly reports and refiner statements, EIA demand numbers are starting to seem a little fishy to me.
Flappingeagle 4k posts, incept 2011-04-14
2022-08-05 11:21:40

The Fed needs to schedule a meeting for August, August 6th would be a good choice, and raise rates 1%.


Here are my predictions for everyone to see:
S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu.
No sign that housing, equities, or farmland are in a bubble- Yellen 11/14/13
Trying to leave the Rat Race to the rats...
Lazydaizy316 219 posts, incept 2016-10-21
2022-08-05 11:22:48

Lipstick on a pig doesn't hide the truth.

God is great!
Beer is good!
And people are stupid!
Ncrown 8 posts, incept 2021-07-24
2022-08-05 12:14:54

Perhaps only peripheral...

Finally got the RV out this week to one of our local favorites (Inks Lake State Park). It's great all year round, but especially with a Texas summer that is booty-crack-nasty hot like this one. Because of it's central location, amenities, etc., it's one of the top 3-5 in annual reservations (Garner is the most popular) for parks here.

Anywho, the park was about half full! I've never seen it that empty and we usually visit it 1-3 times per year. I did see more RVs on the road than I expected, but still down and the gas prices, and inflation in general have certainly placed some of our plans on hold. Extrapolate that out, and yeah, demand has been and will continue to be crushed.
Dji 1k posts, incept 2009-04-21
2022-08-05 12:14:57

Aug 10th is CPI bet it is still "smokin".
Verizon just increased my monthly phone bill up 15% that won't be counted until sept. powell better get his big boy pants on and try and fix the "cost of living crises"

When do they change the meaning of stagflation smiley

Don't be a bag holder-Me

What goes up Must come Down- Alan Parsons Project

Kirklandguy 24 posts, incept 2022-02-14
2022-08-05 12:15:14

I -do- buy the gasoline demand destruction numbers. (and I agree it's not-so-good...)
Anecdotally, pretty much every family I've talked to this summer in our neighborhood has drastically reduced their summer driving/vacation plans.
This is not some lower/middle-class neighborhood either, my suburb is one of the highest income suburbs of Columbus and has a median household income of almost 150k.
We've drastically cut back our own driving - our one week trip to the U.P from Columbus in July cost approx $300 in gas for the round-trip plus the several hundred miles we drove around while there.
(Lincoln Navigators don't get great mileage, but we need the cargo room for that trip).
My own health care tech company is putting the squeeze hard for margins/employment now after being guns blazing hiring the last 12 months.
Rest of 2022 and 2023 is going to be brutal I suspect.

Pilot 2k posts, incept 2008-10-15
2022-08-05 12:15:29

Vehicle miles traveled is lagging right now, but into June showed little drop. I also think there is some Hinky shit going on with EIA numbers and "demand destruction". It IS happening, but I dont believe...yet...its significant.

"Alas, alas, that great city of Babylon, that mighty city! for in one hour thy judgment come"
Ajc1970 1k posts, incept 2008-03-05
2022-08-05 12:15:33

This isn't terrible news for everybody

Wife and I are looking to leave Oregon for a free state, buy a few acres and homeschool our kids free from the influence of teacher's unions. And we're sitting on cash.

We'll just wait a wee bit longer.
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