Employment Report and More Fed Actions

Due to the fiction that is the monthly employment report I won't mention it except for 2 things

#1 the economy continues to build jobs almost solely on the backs of healthcare and government. Here are my comments on this (if you are new to blog - this link is critical to read) [Apr 2: The Underemployment Rate is Rising]

we have 2 huge beaurocracies - federal government and healthcare. To keep the government from going even more insolvent we should in theory be cutting jobs from these 2 white elephants. Healthcare costs spiral out of control and we hire more people - I believe healthcare is now 16% of GDP. But how do you cut costs without cutting jobs? Thats the other dark secret - most of our recent gains in jobs are either government or healthcare related. So how do you fix the long term problems in either? Chicken or egg? They are sapping our national wealth away by their huge excesses/costs BUT they also provide the main job growth as well. As with everything my expectation is the "kick the can down the road" theory will continue - keep growing these massive beaurocracies (create more jobs and costs now) and let another generation pay for it.

#2 the Birth Death model is continuing to account for most of job "creation" - this is an utter joke. [Jan 27: Monthly Jobs Report & Birth/Death Model]

In brief the government guesses how many jobs were created by companies too new/too small to be calculated. So they have major leeway in "creating jobs" out of thin air.

This is how many jobs they created out of thin air this month: 267,000 (of which are 45,000 jobs in construction...)

Again folks, this is all fiction to reassure the American people everything is fine; tell me in what world the US is adding 45K construction jobs in the past month? Maybe in Walley World. Without the birth death model our -20K turns into nearly 300K jobs lost. But don't worry - be happy.

EDIT: I walked over to Mish's website and he says you cannot add -267 to -20 and get -287K so I'll take his word for it... he does berate this labor report for about 35 reasons however :) He calls the data from Bizarro World.

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As for the Federal Reserve... what can I say - they continue to create liquidity any way possible. They have been doing historic things for months now... they even took the steps of taking mortgage backed securities on their books at the last ebb in the crisis. Today's move? They will now be taking bonds backed by auto loans, credit cards, and student loans off the banks books as loans in return for Treasuries. Basically the Federal Reserve balance sheet is now an open flea market.

But again don't worry - EVERYTHING is fine - that is why they are taking these historic steps... I mean these once in a lifetime steps are just part of a normal, orderly (did I mention healthy?) market and it's all good. Just buy stocks.

And again this is how they are "fighting inflation" - creating more paper money to flood the system... if this is fighting inflation I am scared to see what happens when they stop fighting it. There is only 1 quote in this story you need to know, and why inflation is ramping worldwide

• ``The world is awash in liquidity, it just isn't reaching the right financial borrowers,''

Yes it is going into all commodity and assets instead - (including equities) - pumping them higher and higher. You will see this at the grocery store, and gas station in months and months to come. (but hey your Ameritrade account will also be pumped up as speculators can use this money to chase a fixed amount of stock with an apparent unlimited amount of US Peso) Enjoy.