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The Bureau of Labor Statistics released some interesting results on Friday, claiming the nonfarm payroll employment increased by 255,000 in July alone. That’s a remarkable number, but the unemployment rate remained unchanged at 4.9%. Even though that’s relatively low, you should keep in mind the labor force participation rate is also very low at just 62.8%, which obviously helps to keep the unemployment rate limited.
The majority of the jobs were created in the healthcare industry as well as in the business services and leisure/hospitality sector. The latter took care of almost 20% of the newly created jobs, but there might be some external reasons for this as the seasonality factor will most definitely play a role in the job creation numbers. More people are going on a holiday in July, so it’s only logical hotels and touristic attractions are hiring people on a part-time and limited duration basis.
Source: Bureau of Labor Statistics
On top of that, approximately 38,000 of the newly-created jobs were generated by the government. This does mean that approximately 30% of the new jobs were based on just seasonal effects and Big Government.
The real backbone of the economy, the sectors that are effectively producing things are doing worse. The mining industry continues to lose jobs, whilst there also was a negative job growth in the construction sector, which still hasn’t recovered from an outflow of 18,000 jobs in May alone.
Source: BEA.gov
With over half a million new jobs being created, it’s surprising to see the GDP is increasing at just half the expected rate, but this job report does explain a lot. A lot of the jobs that were created in the past 3 months were actually created by the government, which added almost 100,000 jobs in the May-July timeframe. This boosts the job creation numbers and reduces the unemployment rate, but has little impact on the economic situation considering the government is actually subsidizing the jobs.
Right across the border in Canada, approximately 31,000 jobs were lost during the same time frame. More importantly, approximately 71,000 full-time jobs were erased, and 40,000 of them were replaced by part-time jobs. So the job loss in full-time equivalents will very likely be north of 50,000 in Canada, predominantly caused by fewer people being employed in the public administration domain.
Source: tradingeconomics.com
Is Canada the exception? We don’t think so. The Bank of England has now cut the interest rates to 0.25% and will inject an additional $80B in the economy as part of (yet another) Quantitative Easing strategy. On top of that, the BoE will make an additional $130B+ available for its banks to enforce them to pass the lower interest rates onto the effective borrowers of the cash. This basically means the total amount of cash that will be handed out on the street will be in excess of $200B. This comes on top of the continuously increasing M3 Money Supply (see the previous image).
That’s a very aggressive program and this does confirm the numbers coming out of the United States are definitely suspicious. The world economy is falling apart and central banks need to take several measures just to keep their economies performing at the level it’s performing now.
Source: CME Group
Are the United States the unicorn of the world, where everything always is improving? Probably not, and we think the country is just in denial. According to the futures of the 30 day Fed Funds, there now is a 54% probability the Fed won’t dare to increase its benchmark interest rate, despite having flexed its muscles lately, by hinting at a September rate hike. It’s just not gonna happen, as it would be economical suicide.
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