TREND ALERT®: Fed Chair touts "optimism": Recovery or recession?

Posted 6/8/16

 

TREND ALERT®: Fed Chair touts "optimism": Recovery or recession?

KINGSTON, NY, 8 June 2016—Over the last few weeks, Federal Reserve Chair Janet Yellen and fellow Fed members …

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TREND ALERT®: Fed Chair touts "optimism": Recovery or recession?

Posted

TREND ALERT®:
Fed Chair touts "optimism": Recovery or recession?

KINGSTON, NY, 8 June 2016—Over the last few weeks, Federal Reserve Chair Janet Yellen and fellow Fed members bombarded the business media with the refrain that America’s economy was strong, and to expect an interest-rate rise “in the coming months.”

The Street bought it and the markets believed it. Gold prices, for example, on a 20 percent upward streak since the new year, sharply dove on the pending interest-rate-hike hype. Since the great criticism from the “investor” world is that gold yields no interest, with interest rates among developed nations in negative or near-low territory, and holding cash yields nothing, holding gold was deemed safer than holding cash. But with the Fed signaling rising rates, that rationale for owning gold no longer held and a selling wave ensued.

What a difference a day makes

However, following May’s US job report last Friday, in which only 38,000 jobs were added to the economy – the fewest in five years – gold spiked some $30 per ounce on the realization that there would be no rate hike “in the coming months.”

Among the major data points Fed officials have been long touting as evidence for economic growth are the Labor Department’s monthly employment reports. Indeed, in her speech Monday at The World Affairs Council of Philadelphia, Yellen stressed that economic “gains have been impressive. In particular,” she said, “the job market has strengthened substantially,” while suggesting that May’s dismal number was an “aberration” and “one should never attach too much significance to any single monthly report.”

While May’s job number may be an “aberration,” what the Fed Chair failed to acknowledge is that the job slowdown is greater than “any single monthly report.” Since January, the economy has added 125,000 jobs per month compared with a monthly average of 229,000 last year. Also not an aberration is that the labor force participation rate had decreased to nearly a four-decade low of 62.6 percent and some 460,000 people left the workforce in May.

In addition, as for the unemployment rate dropping to a nine-year low of 4.7 percent from 5 percent in April, economist and Trends Journal Contributing Editor Dr. Paul Craig Roberts noted it dropped “
because people unable to find jobs ceased looking and are no longer counted as being in the labor force. If you are unemployed but not considered part of the labor force, you are not included when unemployment is measured. The Bureau of Labor Statistics says that in May there were 1.7 million Americans who ‘wanted and were available for work,’ but were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.”

Trend Forecast: While Yellen states “the economy has registered considerable progress over the past several years toward the Federal Reserve’s goals of maximum employment,” hard data dispute her jobs-progress claim. In fact, since 2009, 95 percent of all income gains have gone to the richest 1 percent while median household income remains below 1999 levels. There is no recovery. We forecast recession.
©MMXVI The Trends Research Institute®