This Changes Everything | The Fed Crisis.

how is today's terrible jobs report for

the market going to affect Jerome Powell

in this video I'm going to tell you

exactly and concisely how and it's

probably going to come as a surprise to

you and my guess is if you watch until

the end of the video you're actually

going to learn something you didn't

learn before though some of you who are

in my course member livestream already

know about this because we talk about a

lot more stuff in our course member live

streams linked down below like the

analysis we did today on John Deere and

the Finish analysis we did today on a

crowdstrike we like to do fundamental

analysis and answer q a in the morning

in the live streams every day the market

is open use that coupon code link down

below that expires on December 9th code

PP you can also meet me at the New York

Stock Exchange on December 9th at 5 pm

on Wall Street outside just show up now

with that said let's talk about how the

Federal Reserve is going to react to

today's employment report after all the

employment report came in a lot stronger

than we expected we're expecting 200 000

jobs on Wall Street and we got 263 000

jobs we were expecting 0.3 percent in

inflation wage inflation which would be

annualized to about 3.6 percent we

actually got 0.6 which is about a 7.2

percent annualized inflation which is

dangerously close to 7.7 percent CPI and

one of the conditions for a terrible

wage price spiral which took hold in the

early 80s leading the Federal Reserve to

rug pull markets and cause a nasty

recession was that when wage gains are

above CPI you could be in a wage price

spiral situation and we might see

inflation come down to under the

annualized rate of wage gains in the

next CPI report that's scary so it

absolutely leaves some concern that the

Federal Reserve is going to have to be

more restrictive for longer but wait a

minute how does that align with Jerome

Powell yesterday because Jerome Powell

yesterday turned really dovish we

expected him to turn dovish because he

was so hawkish in the last meeting so

aggressive and he's actually causing

real damage to the economy which is

leading the Futures Market in the bond

market to price in the fed's probably

going to relax the Vets probably

actually going to have to cut rates

substantially in the near future that

would be in the next six to 12 months

maybe that would be more medium term but

either way that's the expectation so how

does that though reconcile if today's

employment report came in so hop well to

understand today's employment report

which came in strong which is bad for

markets and also quite weird because

Tech is laying off like crazy think uh

Twitter Amazon you're talking tens of

thousands of employees uh meta stripe

Salesforce dozens of others freezing

hiring how is it possible that these job

gains are so strong well let's break

down the actual BLS report and try to

teach you something you may not have

heard about before so the most important

thing is that there are actually two

pieces to the Bureau of Labor Statistics

labor report the headline number that

you hear about in the news is known as

The Establishment data and when you

click click on the establishment data

what you're going to see is we had 263

000 jobs created in November and in

October we were at 284 000 and in

September we were at 269

000. okay so in other words we went up a

little bit down a little bit but again

way higher than expectations so how does

that compare to the household survey and

what the heck is the difference and why

does it matter well this right here

highlighted is the labor force which

obviously takes out people who are

retired or children and we actually had

a attraction a negative 186

000 jobs in the household survey how is

that possible if the establishment

survey is growing so much how is the

household survey falling well what if I

told you there were major and critical

differences between the two surveys let

me give you an example and I want you to

see if you realize the difference okay

ready for this here we go ring ring uh

yeah hello it's Kevin hi this is the

Bureau of Labor Statistics we um

we want to know if you have a job yeah

dude I got like five jobs I I work at

this okay thank you very much we'll

write you down as employed that's Sally

that's one more employed

okay so in that survey known as the

household survey the BLS calls me as an

individual at home and asks hey do you

have a job are you fully employed or

part-time employed or underemployed and

uh yeah I got a job

let's now try again ring oh hello this

is the manufacturing company what's up

uh yes Manufacturing Company how many

people do you have on payroll oh I've

got a hundred people on payroll but uh

you know some of those people work

multiple jobs I don't care 100 people

Sally we got 100 on payroll over here

okay notice the difference between those

two surveys one survey calls households

about sixty thousand households the

other survey calls businesses with

payrolls but if you work at like your

home and you work remotely which is uh

pretty unique after the pandemic that so

many people are working remote now right

you work remotely for apple and you work

remotely for Microsoft and you do tech

support for both working two full-time

jobs well guess what

Microsoft and Apple are going to report

you as one payroll each that means you

count twice whereas in the household

survey you might say hey but I work

multiple jobs one you're one person

so the more jobs people get because

maybe they have to because inflation is

so high and things have gotten so

expensive or because they're smart and

they're doing whatever they can to

increase their income because now is the

time to build your Investments and get

ready to buy real estate don't buy real

estate yet in my opinion not Financial

advice but you you want to prepare right

during tough times is when you want to

make as much money as possible so you

can invest as much money as possible and

reap the benefits later but anyway

the big difference here is that the

household survey says wait a minute we

actually are just counting people who

are working the establishment survey is

counting payrolls which is relatively

misleading if you're counting the same

people multiple times

so now if you consider that the payrolls

survey usually gets a response rate of

70 to 75 percent we only had a 49

response rate it kind of makes you

wonder if companies aren't responding

because they're embarrassed because

they're laying off workers and then

those workers are having to get multiple

lower paying jobs somewhere else

boosting The Establishment survey but

keeping the household survey stable

now let's add some data to this because

so far this is just talk the household

survey in March showed

158.4 million jobs

in November it showed almost the exact

same

158.4 million jobs employed people

employed there was only a 12 000 job

difference in eight months so in other

words in eight months we had 12 000 jobs

but what did the establishment survey

say

that's the one that calls payrolls right

it said not 12 000 jobs but

2.7 million

well damn that number makes politicians

look good why don't we count that number

and always use that number over there

because it's a bigger and bigger is

better

yeah exactly that's what they do the

household survey 12 000 jobs over eight

months The Establishment survey 2.7

million jobs over eight months so

magically there's a huge Divergence here

one that's actually getting worse than

what we've seen historically and it's

probably because of multi-jobbing and

work from home which is so much easier

it's so much easier to multi-job today

than it was then

but what about the second part Kevin

what about the fact that compensation

went up well while we don't know exactly

what we do know is that as people get

laid off they tend to get big Severance

bonuses which could appear like very

large one-time payments and so it might

be too soon to say that a wage price

spiral is taking hold when all of a

sudden the labor market is actually

starting to see substantially more

layoffs but that number could be skewed

by larger one-time transfers for layoffs

so probably too early to tell about

compensation but it's something we want

to keep an eye on I don't think any

conclusions can be made from

compensation I also don't really think

any conclusions can be made from changes

in the household survey because quite

frankly the household survey looks a

whole lot more like the ADP report the

ADP report actually showed us that

people were losing their jobs we had in

Goods producing jobs negative 86 000

jobs and in financial activities and

Professional Services we actually saw

negative jobs

and a lot of people look at this and

they say oh well the ADP report is

always wrong why do we look at it well

again we look at it maybe because it

actually gives us red flags when there

are Oddities in the BLS report which is

starting to seem more and more like the

BS Report but anyway

the next and third thing to remember

because there are three things we're

really hitting in the core here in this

video that we're gonna hit the

conclusion number one household versus

establishment number two the

compensation Boost number three lag

obviously everybody in their grandmother

knows that unemployment is a lagging

result of a recession usually you don't

actually see unemployment go up until

you're already in a recession

that's a very interesting chart you

should pull up in fact why don't we just

go ahead and pull it up right now just

type into Google St Louis Fred

unemployment rate

watch this this is incredible that's all

you have to type into Google

and then you press the little share

screen button and then what you're going

to do is then I want you to do this I

want you to look at the gray bars which

imply recession and I want you to tell

me did the Blue Line go up before the

gray bar or after we were ready to

declare to be in a recession

well it should be obvious so far every

single one of these is showing that

unemployment went up after we were

already declared to be in an official

recession but we don't get declared to

be in a recession until we look back

because of the way the Bureau of

economic research calculates this as

total junk and garbage so can we really

be expecting the unemployment rate to go

up right now when the unemployment rate

is a lagging indicator can we really

tell the Federal Reserve hey you need to

keep hiking because that unemployment

report even though there's you know that

that gap between household and

establishment boy that establishment

number keeps going up you better keep

hiking

probably not in fact I would argue that

Jerome Powell looks at this report and

says look

huge differences obviously between

household and establishment uh it's

possible that the 0.6 is a one-time

thing let's see what happens in the next

Labor report in January this was the

last one we got for this year well the

next one will be in January looking back

towards December uh let's just see what

happens then in the meantime we have a

more important report coming up the

inflation report CPI CPI is going to

give us a lot more insight into actual

inflation that consumers are facing

that's the most important report the FED

wants to pay attention to and because of

the discrepancies in this report and

because well basically unemployment rate

is a lagging indicator this to me is

more of a by the dip opportunity or just

wait bunker down because we'll probably

have quietness between now and CPI

which is

pretty cool what also is pretty cool is

that I will be in New York in one week

at the New York Stock Exchange and I

hope you'll see me there 5 p.m December

9th saying thank you thank you very much

and we'll see you in the next one check

out the courses linked down below as

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YouTube thanks so much goodbye