Markets reacted strongly to the June jobs report on Friday. Stocks fell. Bonds and gold got clobbered. The dollar got a boost.
In his latest podcast, Peter Schiff said the markets overreacted to the report. In fact, he said the jobs numbers were “no big deal.”
The jobs report was far better than analysts expected. According to the Labor Department, the US added 224,000 jobs last month. Economists had projected a 165,000 job increase. Average hourly earnings were up 0.2, rising 6 cents to $27.90. The annual wage growth remained unchanged at 3.1%.
The headlines declared the jobs report “dampened recession fears” and muted expectations that the Federal Reserve would cut interest rates during the July FOMC meeting.
The price of gold plummeted on the news, dropping as low as $1,386 per ounce as bond yields went up and the dollar gained strength. Gold has since recovered a big chunk of those losses and was trading above $1,400 again on Monday morning.
Peter said he still thinks the Fed will cut rates because the markets are still expecting a cut (about a 91% chance).
“But the Fed is going to have to do a lot more than just deliver a cut because the markets need a lot more than a 25 basis point reduction because this is a bubble. This is a bear market in disguise event though we made new record highs this week in some of the averages … They’re only up here on life support. But for actions of the Fed, we would be much lower. And the economy is weakening, this June jobs report notwithstanding.”
Peter said the 224,000 added jobs were really “no big deal.” He noted that the May number was revised down even further to 72,000 jobs. And if you look at the year as a whole, jobs growth in 2019 is on pace for its worst year since 2010.
“So, this is just one month in a very weak year.”
This latest report showed a large increase in the number of people taking on second jobs.
“A lot of these new jobs went to people who already had a job. Now, what does that mean? … Why would somebody who has a job get a second job? Well, because they’re struggling to make ends meet with the job that they have.”
Peter said these are the same lousy jobs that were being created under Barack Obama.
“The trend has continued under Trump. Trump was criticizing all these crappy jobs when he was running for office and promising something better, but now he’s heralding these same crummy jobs. Of course, he doesn’t admit they’re crummy anymore, but nothing has really changed.”
Peter said everything that happened in the markets on Friday in reaction to the jobs numbers was basically just noise.
“I don’t think today’s report changes anything. I don’t it evidences that the economy is any stronger, or any weaker for that matter, than anybody might have believed prior to getting this number. I think the economy is still weak.”
Peter noted that overall growth looks pretty anemic despite record fiscal stimulus in the form of deficits and government spending, along with implicit monetary stimulus by the Federal Reserve. The “Powell Pause” and the expectation of rate cuts has tanked mortgage interest rates and long term interest rates have gone down.
“That is a massive monetary stimulus even though we haven’t had a rate cut yet. So, the economy is getting all this monetary stimulus. It’s getting all this fiscal stimulus and it’s barely growing. Of course, it’s not even growing at all. It’s simply a bubble.”
Peter went on to talk about Judy Shelton, a Trump nominee to the Fed board of governors who has expressed support for a gold standard.
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