It’s always fun to use previous data to predict data.  Humbling, oftentimes. Take this morning’s jobs report, for example.

As you know, I’m one of the most skeptical people in the world when it comes to employment data.  It’s an area where (IMHO) a lot of “economists” and “advisors” really get things wrong.  Mainly, it’s prone to sampling error rate.

A good portion of jobs created is driven by the CES Birth-Death Model (Current Employment Situation)

What most people don’t look at is the size of the annual “corrections” (and today a mid-year million job loss “corrected” in the July CES-B/D Model).  The press doesn’t make a big deal about this, but if you scroll down over here, you can see the “over-estimated” number for last year was 2.9- million jobs.  That’s a correction of 241,000 jobs per month.  But the million job “correction” in July?  More on this in a sec.

As you know, the  only number I really pay attention to is the year-on-year change in total employment.

If your idea of a “good time” is getting plugged in to a Department of Labor dataset and running numbers at 5-freakin-Aye Em, then what you see is some remarkable consistency in job growth despite all the partisan job hype:

As you can see, Obama in 2014 carded best-round with a 2.837-million jobs gain while Trump, last year, carded a 2.88-million job gain.  Once you back out the population growth, unvetted and illegal drive a lot of it, seems to me this is pretty close to a dead-heat.

Oh, and if evenly divided over 12-months, last year’s rate of increase would average about 240,000 per month of job growth.

On average, jobs created each both, above, or below the annualized rate, ought to guide us in our look-ahead view of the economy.  Right?

Enough Data Background…

Here’s the press release opening:

“Total nonfarm payroll employment rose by 130,000 in August, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported
today. Employment in federal government rose, largely reflecting the hiring of temporary workers for the 2020 Census. Notable job gains also occurred in healthcare and financial activities, while mining lost jobs. “

Now, our usual dime’s worth of analysis.

  • The total number of people working increased from 157,288,000 in July to 157,878.000 in August.  Up 590,000.
  • Labor participation rate increased 2-10ths.  Both of these so far indicate a smoking hot economy…why lower rates?
  • Goods producing jobs were up 96,000 jobs, government employment up 34,000.  (A 3:1 ratio explains the tax rates, lol.)
  • Weekly hours worked were up 1-10th of an hour and pay was up 11-cents an hour.

Turning to the “estimated” CES Birth-Death Model?  Trouble!

While it created 348,000 jobs in August – more than the reported increase, July’s employment estimate was revised down by more than a million jobs.  See the yellow highlight:

I makes understanding the “job growth claims” a lot like three-card Monte, doesn’t it?  I may not be the only one to notice, market futures faded a bit, though still up almost 100 on the Dow at press time.

Trump Channeling Cramer

On the Potus tweets overnight, we found this interesting:

““I think President Trump is set in his ways because he doesn’t see any weakening. I mean, look at the joblessness report today. What I’m surprised at is how strong the consumer is. I think the Chinese need it (a deal) more than we do. It’s statistical. I just think…….that our economy is very strong. If the Fed would lower rates to where the bond market says they should be, then I really wouldn’t worry about a recession.” @jimcramer @JoeSquawk”

There is so much cheap money out there, that Velocity of Money at M2 has resumed its death-march to zero:

And since it has turned down again, what Trump is trying to do is get the Fed to act in a historically unprecedented way calling for them to lower rates in advance of a recession showing up.

OK, fine. Jawboning. BUT here’s an important question:  Doesn’t THAT turn American capitalism (free markets, yada, yada) into a Planned Economy and pull the rug out from under “market pricing” if the Fed can act proactively to screw people like (me) who play the short side?

Keep an eye on things around lunchtime when J. Powell, the Fed chief, speaks.  If he hints that rates could come down more, then the market could get deeper into a ’29-like blow-off.  On the other hand, if Powell says “that’s enough free money, for now” that might reignite the gold price which has been coming down quickly in the past 48.

Should be an interesting day, I’m not the only one worried about lower rates: KBW downgrades Bank of America, says Fed rate cuts will hit earnings.  Irony:  Too much of a good thing (rate cuts) might flip around and cause the very problem they’re trying to avoid.

Speaking of Great Inflations, the architect of Zimbabwe’s Bigger than the Weimar inflation has passed: Former Zimbabwean president Robert Mugabe has died at 95.  We wonder if the Fed will send an emissary to the funeral? Making up Money was Mugabe’s road and we’re trying to follow, by the look of things.

I mentioned Global Currency battles in Thursday’s column.  Today see China Cuts Required Reserve Ratio Releasing $126BN In Liquidity; Yuan Surges.

Unit-Price Thinking

A ramble here, but the of our the core philosophies of UrbanSurvival is “If you want to get ahead, live below your means.”  Worth mentioning to young people who have a hard time with the concept.

Watching the recent discussions arising from our Comments section (end of each report), seems this would be a fine time to mention that readers here seem to have one thing in common:  A clear understanding of unit/price thinking.

If there’s one key to “living happily ever after” (and within your means) it’s understanding that when you spend money, you are buying a  function.

Take cars:  If you buy a car, you are buying safe, reliable transport from Point A to Point B.  We drive a 14-year old Lexus and it still provides dandy service, so we don’t plan on buying a new car anytime soon.  Since it has been paid for more than a decade, essentially our A to B cost is whatever oil, tires, water, and gas amount to.  Car’s fully depreciated and being mint and one of the last Japan-made imports, it may actually go up in future years.

Other people like to “buy new” and impressive cars.  I totally get that since there are a ton of professions where “success” is judged by the trappings including the car.  Which has to be  perfect and in alignment with the customer values.

Same in housing:  You are buying functionality and basic comfort.  Which is why we live in a double-wide, highly made-over trailer in the woods with a $10,000 a/c system.  It’s the most functionality for the price.

When we bought this place in 2003, the first 13-acres with house on it was only $72,500. Land prices at the time were $2,500 per acre,  Since we’ve tuned that and added on, that’s 2,450 square feet under air for what works out to $40,000 for a house (and outbuildings).  Our basic “cost” is $16.32 per square foot of house.

Now, the other day, we caught an ad on WOAI (San Antonio) and the pitch was for a 2-acre lot in a “rustic setting.”  $59,900 each.

Quickly, I set about figuring what this place will be worth (all 28.82 acres) should such astronomical land prices ever show up here.  $1.7  million? And that’s  land price only. Can that be right?  Our hard land costs figure up to be about around $63,000 so the return at those prices is simply  insane.

Of course, they will never get  that high.  But, the point is we are riding a wave.

Any idea how much the construction cost would be for a new home that’s 2,450 square feet?  Construction prices around here are in the $125-$200 per square foot range.  Using the lower number, a new home would be $$306,250 plus the land price of $60,000.  Call that $367,000 and then tack on selling costs and now you’re looking at a lifestyle of the $385K to $395K area on a chunk of land that’s 1/14th the size of our yard.

Anyway, wanted to mention the ad.  Shocking.  Elaine and I think about moving back to a city, but the “cost of function” discussion keeps coming up.  Oh, and we keep not moving, as a result.

Live below your means, separate the “cost of function” from the specious “cost of status” and you’d be surprised how much stress you can avoid.  And how you can still build net worth, even on a budget.

Worth Knowing

Former Starbucks CEO Howard Schultz ends presidential campaign.  Damn shame, he was the closest thing to a rational candidate on that side.

Cold War II, Arctic Watch: New Russian Nuclear-Powered Sub to Be Delivered to Northern Fleet.

“4-Hour Workweek” fan?  Check out “Tim Ferriss, the Man Who Put His Money Behind Psychedelic Medicine.”

I’ve mentioned that “Summer is 4-weeks late” in East Texas.  Apparently not just here as Tenaja fire rages through southern California: “They don’t know which way it’s going to go” We forgot to mention August 30th was “National Toasted Marshmellow” day (ISYN).  California’s running late.

Can you be replaced by a robot?  Better read Global Robotics Revenue to Reach $248.5 Billion by 2025, as the Market for Non-Industrial Robots Maintains Strong Growth, According to Tractica.  That means a hell of a lot of jobs are “dead paychecks walking.’

Oops  du jour: Fighter jet accidentally fires rocket near Tucson.

Coming Attractions:

Peoplenomics tomorrow: “Time Machine Engineering Notes” (No, it’s not a joke.  Even good reviews from the prepublication peer review group…Thank last Friday’s time slip for the adventure.)

And Sunday, a prepping discussion centered on The “Donner Party” Garden…complete with a picture of my $500/pound tomato…

Write when you get rich,