Learning Experience?

We have the key employment report on Friday, this for the month of August. The near term value of every 401K or small business hangs in the balance. We better take a look at this thing.

Formally known as the Non-Farm Payroll report, the BLS gives us a monthly read for payroll in all categories except farm, domestic help, general gov’t employees and some non-profit employees. Why BLS types are afraid of cows or maids, we’re without a clue.

Past years, the market-moving potential of this release was huge. We know. We used to trade each release. With the general dampening of bond-price change, past decade, interest rates are not so vulnerable. Stock prices have replaced bond prices in that regard.

First, the likely result. Let’s take a layman’s look at the components: 1) Overall Payroll is expected to have dropped by 100M, due primarily to census bureau layoffs. Private sector employment is expected to have increased by some 40M. 2) The Average Workweek and Total Hours Worked are expected to be unchanged. 3) Unemployment is expected to hit 9.6%. 4) Hourly Earnings rose a tad, maybe 0.1%.

That’s the guts of the thing. Anything a lot worse and your 401K will tank. Any discretionary spending that might have been coming your way will vanish.

Now let’s think with our pocketbooks. We know that employers are scared to death of Obama. We know this because they’ve told us so. Witness Paul Otelinni, head of Intel, two weeks ago at the Technology Policy Institute’s Aspen Forum. From the IBD, “The Intel chief was harsh on the massive spending by the White House and Congress — and on the failure to extend the Bush tax cuts, the takeover of the health care industry, and the threat of new taxes on businesses to remove carbon from the atmosphere. ‘I think this group does not understand what it takes to create jobs,’ he said. ‘And I think they're flummoxed by their experiment in Keynesian economics not working.’”

OK, that is established, and, it is key to the prolonged slowdown.

And so this reading carries double the horsepower. Not only is it a reading on an economy in isolation, but a reading of an economy, for the first time in our lifetime, hanging on the whim of hamstrung employers (who by the way are cash rich).

So here is what you do, all our lefty-small-business-owner pals out there. If this release blows through estimates to the upside, you can celebrate. Buy a new Volvo or tie-dyed shirt. It means more discretionary spending in the future; folks will buy your flowers and spend for new breasts once again. If the release is below or at expectations, then be prepared to vote Republican in November. You don’t have to tell a soul, not even your spouse. But if you care about the bottom line, it’s a good move.

Face it lefties. You screwed up big time. Before you were insulated - ok for everyone else but you. It felt good to talk up the typical abstract notions. Now the hens have come home to roost because for the first time in recent memory, you guys actually gained traction by the way of BO.

How’s it feel now, making the personal sacrifice?

Try making it a learning experience while you’re at it.

Robert Craven