Today’s “jobs report” shows the economy is still quite strong, and that’s bad news!
Expecting that 225 thousand new jobs were produced last month, we actually produced 311 thousand – GOOD NEWS!
That makes the Fed more likely to raise interest rates significantly next week – BAD NEWS!
The average hourly earnings dropped slightly, which indicates inflation may be subsiding. The size of our labor force has returned to pre-pandemic levels, which reduces upward wage pressure going forward.
One of the problems with the monthly “jobs report” is that it shows the economy in the rear-view mirror.
For the first time since 2009, I’m concerned about a financial crisis, instead of a mere recession — not predicting one yet but concerned. A financial crisis is much worse that a normal recession. While a small bank that specialized in cryptocurrencies has fallen, our large banks have become fortresses since the Todd-Frank Act in 2010. We may see contagion among small banks but unlikely among large banks. If we do see a large bank stumble (bigger than SVB), you might appreciate the cash in your portfolio.
More than anything else, my confidence in the Fed has slipped. They are reacting to short-term data, not trends. “Think ahead, not behind!” A mistake is more likely now than before.