Well… We’re not seeing a change in the dollar/euro pair this morning, as the dollar beats on the euro (EUR) for having countries like: Greece, Italy, Ireland, & Portugal as a part of their mix… Of course, as I’ve pointed out many times in the past, the US has states like: California (the 8th largest GDP in the WORLD!), Illinois, Michigan, New York, and now add Minnesota.. The story I saw said the euro was losing ground to the dollar because the debt crisis is entering an “acute phase”… Whatever the heck that is!
The European Central Bank (ECB) did hike rates, as I expected them to do, and had told you a couple of months ago that July would be the next rate hike… The interesting thing was the price action in the euro after the rate hike announcement… The euro fell against most currencies, including the dollar, in an obvious case of: buy the rumor, sell the fact…
ECB President, Trichet, was avoiding talking about the rate hike, and the opening statement focused on the problems of the peripheral countries (as mentioned above)… Very little was said about the rate hike, so we don’t really know what the outlook for any future rate hikes is… But we do know that the ECB is willing to support Greece even if it goes into a “selective default” (SD)… That’s all good, but I want to know about what Trichet is thinking here, as I’ve already told you that I thought the ECB would hike rates two more times this year, a long time ago… July, and then again in October… So, just like when I was an elected official in my little river town, hearing no dissenting votes, the call for another rate hike in October, passes…
Hey! Today is a Jobs Jamboree Friday! Yes, the June employment data courtesy of the Bureau of Labor Statistics (BLS)… The “experts” are thinking that about 130,000 new jobs were created in June, with the unemployment rate remaining at 9.1%… Of course, a quick trip over to Shadowstats.com tells me that John Williams believes that the unemployment rate, if calculated the way it was before the hedonic adjustments were added in the ’90s, that the unemployment rate is really 23%… Now… Doesn’t that sound more like what’s really going on here in the US?
I used to give my thoughts on the number of jobs created, but then the BLS began fudging the numbers each and every month; and not knowing what the BLS is going to do ahead of time, it just isn’t worth my effort to make a forecast… I now… I should just say whether I feel the number will be disappointing or not… And I have this feeling that the BLS was given the marching orders to make the total jobs created look good this month… The government needs the good press, folks… So, with that in mind, I’ll say that after the BLS has its fun, the media will be whooping it up over the so-called “improvement” in the jobs picture…
Yesterday, we saw the ADP employment change data, which surprised the markets with a +157,000 number when only 70,000 was forecast… I was reading a story on this over at MarketWatch, and I couldn’t believe my eye; it sounded like I wrote it! Regarding the ADP number, it goes like this: “But better-than-expected data doesn’t mean good data. It would still take years of 200,000-plus-per-month jobs creation to make a serious dent in the unemployment rate, and the private sector will have to compensate for lower spending by federal and notably state and local governments.
The other key labor-market metric that has largely been overlooked has been the muted wage growth. If average earnings start to pick up, then the average American will really begin to see the fruits of a recovery that for most has largely been in name only.”
Yes… Haven’t I always told you to look at the Average Hourly Earnings each month, along with the Average Weekly Hours. And those Average Hourly Earnings haven’t budged for years…Nnot the way they need to, that is!
So… If the BLS has its way, and the June numbers look good, then we can expect more dollar strength today…
The dollar’s strength has really only been against the euro and euro alternatives, like Norway (NOK); the Asian and Pan Asian currencies have held their own this week against the dollar, and in some cases – like the Aussie dollar (AUD) and kiwi (NZD) – they’ve turned the tables on the dollar, and gained versus the green/peachback.
The price of oil continues to edge higher and closer to $100 once again… This morning, the price of oil is $98… And with that the Canadian dollar/loonie (CAD) is seeing what life is like in the $1.04 handle… Canada will also print their June jobs data, this morning… Their report is like “off Broadway”… But that’s OK… I’ll still catch it, and place it on my ledger that tracks the Pros and Cons of data that would move the Bank of Canada (BOC) to another rate hike.
Remember the other day, when I told you the Brazilian government was talking down the real (BRL) again, and making threats of further measures to stem the real’s gains? Ahhh… And here we are two days later, and the Brazilian President, Roussef, was backtracking BIG TIME!
Brazilian President, Roussef told reports yesterday that she was “more worried about inflation than the real’s gains” And went on to say that she, “wasn’t authorizing any real measures now.”
HUH? Did I hear that correctly? After two years of introducing one measure after another to stem the real’s gains, She’s now more worried about inflation? Memo to the Brazilian President… IF you had allowed the real to gain and move in the direction the markets wanted to move it, the strong currency would have gone a long way toward helping you with your inflation problem! These are simple, basic, economy theories that sometimes, third world countries, don’t grasp… But, this is Brazil, you would think that they would have this down pat… Well, I have warned you over and over again that Brazil is an emerging market, and volatility is its middle name!
OK… Back to the Eurozone for a minute – specifically, Germany… German exports posted a very nice increase this morning for May… German Factory Orders and Industrial Production posted gains in May… So, one has to believe that the debt problems of Greece, et. al, haven’t been affecting the German economy… The largest economy of the Eurozone, I might add. Without the Greece, et.al. problems, the euro would be flying high on economic data like this from Germany… And then add in a rate hike? Darn peripheral countries…
Gold (and silver) posted nice gains again yesterday… The gold price is off about $4 this morning, so, hopefully, it can erase that loss, like it did yesterday! The silver price is back to $36, so these two are cooking with gas, this week… And of course long time followers of gold and silver know that it’s not just been this week, but for the last 10-years! You know… I’ve long said that gold was money… True money… It can’t be duplicated; alchemists have tried for 2,000 years… And one day, rather than asking for the price of gold, people will be asking for the price IN gold… Think I’m off my rocker? Well… Remember that you thought that about me, when your dollars are losing even more purchasing power, and gold is climbing higher and higher…
Oh… And this showed up today… The Swiss Parliament is expected later this year to discuss the creation of a gold franc… Think that might garner some attention and investment? I think so!
Then there was this… Yesterday, I told you that there was a news report that the president was offering cuts to Social Security as part of his deficit cutting requirement to get the debt limit raised. Since I’m nearing a retirement age, I want to know if the money that I paid into the fund since I was in 7th grade, going door-to-door selling subscriptions to the Globe Democrat is going to be there… You know, I’m not expecting the government to “give” me anything… I don’t want the government in my personal life… But I do want my money… That’s all… Nothing more, nothing less, when it runs out it’s gone, and I won’t ask for more! Unfortunately, I’m not expecting to get back one single dime…
To recap… The dollar still holds the hammer versus the euro and euro alternatives this morning, but the Asian and Pan Asian currencies are gaining versus the green/peachback. It’s a Jobs Jamboree Friday, which should prove to be a good data report for the dollar today. The ECB did hike rates yesterday, and then proceeded to talk about the peripheral countries problems. The price of oil continues to inch toward $100 again, and gold and silver post another day of gains…
Chuck Butler
for The Daily Reckoning
The True US Unemployment Picture originally appeared in the Daily Reckoning. The Daily Reckoning provides 400,000+ readers economic news, market analysis, and contrarian investment ideas. The Daily Reckoning features articles by Addison Wiggin author of Empire of Debt and Bill Bonner author ofFinancial Reckoning Day and The Idea of America.
