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 well. We don't have external sponsors so that's the way Ahmed Dallas to help continue to bring you value for free on YouTube Thanks so much! Goodbye.