Friday, June 7, 2013

Finally Good News on Jobs

The headline number on unemployment went up last month to 7.6 percent.  But it went up for a good reason.

Let's take a look at the BLS numbers.  The unemployment rate went up because the Civilian Labor Force went up faster than Employment.  That means that more people are entering the labor force.  That is very good news.

The Civilian Labor Force went up by 420,000.  The Employment level went up by 319,000.  That will make the overall unemployment rate go up.

However, all is not copacetic.  If you look at the Labor Force numbers, you see that it has merely recovered from a three month dip.  What we need to see is continued growth in the Labor Force.

The question for us gamblers and speculators is what this does to the Fed.  Does it mean that the Fed will now slow its money printing operations and return to normal interest rates?  Does that mean that the bull run in gold is over?   Gold was down a couple percent this morning.

My guess is that the Fed will start gradually returning to normal operations, but that as in the past it will be too little too late.  By the time that the Fed gets to a genuinely balanced monetary policy it will find that inflation is roaring, real assets are booming, and a credit crunch will be needed.  Then it will have to really put on the brakes.

Why does it always go like this?  It's because the Fed is a creature of the government, and it will almost always do what the government needs to keep paying its bills.  The Fed does not conduct monetary policy for the benefit of the American people.  It conducts it for the benefit of the US government.  Then there is the dual mandate, for the Fed to target prices and employment.  And then there is Keynesianism, which encourages inflationary money printing in a recession, well after the credit crisis has passed.

We aren't going to get a sensible monetary policy until the prestige of the current ruling class is utterly destroyed.

But meanwhile, we see a healthy uptick in the employment indicators, despite the headwinds of big government spending, big government regulation and the looming threat of Obamacare.  This is good.

1 comment:

  1. Deflation is coming. Look at the velocity of money.