November 9, 2010 – Don’t Pop the Champagne on Those October Nonfarm Payroll Figures


1) Don't Pop the Champagne on Those October Nonfarm Payroll Figures. Poor Obama. The guy just can't catch a break. A day after the midterm election delivered a 'shellacking' to the once, and possibly future, community organizer from South Chicago, Ben Bernanke announces one of the greatest economic stimulative efforts of all time. Two days later, and the October nonfarm payroll comes in at a rollicking +151,000, one of the best reports of the year.

Would it have been enough to tip the election outcome in his favor? It certainly might have in the closest run races, such as for his old Senate seat in Illinois. A state with a population of 12.9 million, it took only 71,501 votes to deliver it to Republican Mark Kirk. We shall never know for sure.

Sifting through the data, it is clear that this was a good report. Private employment jumped by 159,000, and there were sizeable revisions upwards in the July and August numbers. Unfortunately, 150,000 jobs a month is precisely what we need to tread water, in order to accommodate population growth and immigration. That's why the unemployment rate remained unchanged at 9.6%.

The number that jumped off the page, grabbed me by the lapels, and shook me until my Japanese gold inlays fell out of my teeth was the 35,000 in gains in temporary help. I predict this will be a large element of future positive employment reports. It is proof that corporate managers have absolutely no confidence in the future, will only hire full time workers at the point of a gun, preferring to add only part timers without benefits that can be dumped at the first sign of trouble.

Also of note is the 14,000 in losses in local government workers. Local school districts have taken the cue from the corporate world by firing teachers and rehiring them as substitutes at one third of their old pay, with no benefits. This is a continuation of a new, major long-term trend for the economy, which I believe will be a decade long affair. Local governments are sucking money out of the economy as fast as the federal government is shoveling it in.

The bottom line for you and me is that American economic growth will continue poking along at a subdued long term average of only 2% a year, that US assets should continue to under-perform, and you should get your money the hell out of the country into foreign markets where you can earn real returns.