Market Reaction To Jobs Report Confirms My Hypothesis – Ep. 180

The Peter Schiff Show Podcast

Today we got the Non-Farm Payroll report for the month of June Remember the last 2 reports were quite weak and everybody was hoping for a rebound in June to prove that April and May were a fluke and not a new trend In fact the Fed talked about that in their last FOMC meeting minutes The consensus was for 180,000 jobs to be created and the range went from a low of 130,000 to as high as 235,000 The consensus average of that range was 180,000 The actual number came in at 287,000, over 100,000 jobs above the consensus Now we did revise down the really bad number from May, and made it even worse Initially that number was 38,000 jobs and now we know it was just 11,000 jobs So about 70% of the jobs disappeared I have a good feeling that the reason June's number is so high is that it's just wrong, and we'll see what kind of revision we get to it next month Remember, a good chunk of these numbers are jobs that the government assumes were created without evidence, based on the birth-death model I would suggest that far fewer businesses are actually being formed than the government believes In fact, its possible that more business are shutting down than are hiring Given the economy and the minimum wage, those business that are starting up are hiring fewer people than start-up historically hire I think these guesstimates are wildly optimistic and skewing all the numbers Unemployment rate, which was 4.7 last month and expected to notch up to 4.8, instead notched up higher to 4.9 Private payrolls which were expected to rise by $170,000 jumped by $265,000 But last month they revised a $25,000 gain to a $6,000 loss Why did unemployment move up? Because the labor force participation rate notched up from 62.6 to 62.7 Obviously not all the people who re-joined the labor force could find jobs Average hourly earnings were expected to rise by .2% Again they disappointed; they rose by just .1% Overall, a mixed picture, but the headline number, the 287,000 vs 180,000 consensus That's normally the number the market trades off And that is exactly what happened - as soon as the report came out we had a big jump in the dollar index and we had a big selloff in Gold Gold started out largely unchanged, went down about $22 on the news Silver sold off, it was down about 40-50 cents That was the knee-jerk reaction: strong dollar, weak gold, weak silver Why? A strong jobs number means the Fed is more likely to raise rates, right? Rate hike is coming, good for the dollar, bad for gold But what did I say on Wednesday's podcast? I said that it didn't matter what the jobs number was That gold was not going to go down, and if it was a weak number, I expected a big rally in gold But I also said that a strong number would not hurt gold Earlier in the year, a strong number would crush gold I said that what's going on, and based on the latest FOMC minutes, I don't care what the jobs number is The Fed is not going to raise rates Jobs have nothing to do with it, Jobs are the excuse The Fed can't raise rates now because of the fragility in the banking system, all the things that were revealed by Brexit The market is sensing that and that's why within the first hour gold reversed all of its losses and finished the day up about $5.60 at $1365.40 The highest close of the year on a day when we had a huge beat in the Non-Farm Payrolls Silver had an even more impressive reversal; it rallied over $1 Stocks really broke out; the GDX was up over 30% today to close at $30.54 Not quite the highest close of the year Many silver and gold stocks hit 52-week highs today, some hit 2 or 3-year highs The overall stock market was also up just under 80 points; the Dow was up 250 We have now recovered all of the post-Brexit losses The Dow now back up around 18,000 The foreign markets have done so much better, particularly the markets I'm involved in