Forex and the August NFP

A shock to the system!

Amid prognostications for a better than expected employment report...on hopes that the private sector had done enough hiring to offset the 150 census jobs lost in the government...believing that the stimulus was finally settling in and having it's effect...we get a whopping surprise to the downside with only 70K private hires (versus 90 expected) and -131K jobs (versus the 65K expected).

Recovery? Doesn't look like it here from my view in the cheap seats. In my private alert service this morning I outlined several reason why we could have gotten a strong surprise to the upside in the jobs report today.

1. Planned layoffs fell by nearly 60% from the previous month according to Challenger Gray and Christmas.
2. ADP (the private payroll people) reported an increase of 42K private sector jobs, well above the 19K for last month. Also, as ADP has undershot the private sector hiring from the government report for 7 of the last 10 months, we had a good "bet" that they did it again!
3. The service sector of the ISM data jumped from 53.4 to 54.8, a big move, and the employment index broke above the 50% expansion figure!

So I asked my readers..."does this guarantee an upside surprise in the NFP?" The answer? NOT HARDLY. And not hardly is what we got.

The real question that traders will be asking themselves now is, What does this mean for the "recovery". I have maintained loud and long that I believed this recovery was more shadow than substance. You can't have a recovery without jobs. And while it appeared for a while that the economic jobs engine might be sputtering back to life, the last two months have given us an entirely different picture.

So back to the real question. If the US is not recovering, and it is becoming clearer that China will not take its' place (as it has followed the same failed economic policies), will we be in for another turn down in the depression? Yes, rates will stay low. But that has not helped the stock market with its relatively thin run up. Will the Fed issue more stimulus? How can it not? It shouldn't, but NO ONE there has the backbone to say what needs to be said and do what needs to be done. It is the massive debt, public and private which has brought all this upon us. And the only way out is to work off the debt. And that does not mean by raising taxes on an already overburdened capital system. The very best thing that the government could do, right now, to effect a change, is to bring home all of our soldiers (each one overseas cost more than 1 million dollars per year), cut the federal bureaucracy in half, cut spending by 50% across the board for everything, eliminate the progressive income tax (for starters), and cut 50% of all other taxes and fees, eliminate the multitude of wasteful programs and departments that are NOT mandated by the US Constitution, and stop welfare entirely. Lots of folks think that would lead to riots in the US. And they're right. So we'll have to put some of the savings into law enforcement. But rioting people eventually stop. At some point they have to eat. And in order to eat, they have to get a job. And believe me, when people and corporations are saving under my plan...jobs will explode! There will be plenty of work for any one who wants it. The problem remains that there are plenty of people who DON'T want to work. St Paul offers this government free solution; "If a man doesn't work, he does not eat". Cruel? No. Effective? Yes. Of course, the government may have to have a gun giveaway program so that homeowners can protect themselves. It might be the only government giveaway I would ever support.

Granted, this is a pretty broad outline, and very basic. It requires a tough on crime approach for those who still refuse to work and would rather steal and pillage for a living. The 3 time loser law of the old west would be effectively restored. It means the gov't would live on a fixed income, while the rest of us have the chance to earn as much as we want without being penalized for it.

To make a long rant short, the gov't had better cut the private sector loose if they want to see job creation. Eliminate ALL taxes on business. Only individuals would pay, and everyone would pay an equal amount. Period. This is the only way out from where we are.

All that being said, we are now looking to see if the rest of the world is going to sell off the dollar in the weeks to come, or if fear of another leg down is going to enter the market. Exciting times!

Happy Trading!

Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com