US Economy: A reality check

Market was a bit disturbed last week Friday when the Non-farm payroll data was released which unfortunately came below expectation.  Nonfarm Payrolls measures the change in the number of people employed during the previous month, excluding the farming industry. Market was expecting the US economy to have added more than 200,000 jobs which is above the previous month of August (136,000). The figures eventually came below expectation at 142,000 and the previous month (             August) was also revised down.

It was a bit worrisome to see a lot of analyst disappointed at the NFP figures especially those bullish on the NFP data to be really positive.  The reality is, if we take a critical look at the US economy, we could actually see a lot of weaknesses which fundamental economics is not even applicable anymore. Firstly, we have more than 45 Million people on food stamp in the United States that shows the real state of the economy. Food stamp is not dropping, it is on steady increase. Last month, Unemployment dropped to 5.1%, that is pretty much close full employment but this month we saw a big drop in labour force participation rate from 62.60% to 62.40%. Average hourly earnings (MoM) also dropped from 0.4% to 0.0% likewise average weekly hours dropped to 34.5 from 34.6. All these factors, if put together and analysed critically from a fundamental view, there is no reason to be bothered about the US labour market. There are a lot of slacks in the economy at the moment which is likely to affect FEDs decision regarding raising rates.

However, I remain bullish on USD and bearish on commodities. Eventually, the USD will be the ultimate safe haven when all central banks are done messing up the economy.