Wow! The Bureau of Labor Statistics (BLS) shocked the world today with what might be their first accurate report in years.
The BLS has been inaccurately estimating jobs gains for years now – and one of the effects has been much higher rates.
But today, they came out with huge downward revisions to previous over-estimates and revealed what is a much weaker jobs market than most analysts and Wall Street thought.
Jeff Snider, Stephanie Pomboy, Danielle DiMartino Booth, Barry Habib, and others are screaming “TOLD YA!,” as they have been trying to tell us the labor market is very weak for months now.
Layoff announcements, private sector jobs reports, falling labor force participation rates, and household survey numbers have been telling a much different story for years – and the BLS seems to have finally figured it out.
Why Barry Habib Is So Angry!
Barry is furious for two reasons: (1) The errant BLS reports have been pushing rates up and really harming the mortgage industry; (2) Powell missed the obvious labor market weakness that Barry and so many others clearly saw, but Powell and his team are supposed to be the “experts.” If Powell had seen the obvious, he would have cut rates this week.
Why I Am So Happy!
I am happy for two reasons (1) Rates plummeted today, helping both the mortgage and real estate industries; and (2) The BLS proved that they are incompetent, and not corrupt – given that they released false reports under both Biden and Trump. And I much prefer pure incompetence over raw corruption.
Tariff Damage, Lag Effect, & Trump’s Gamble
Tariffs are an additional tax (and regulation) on commerce/trade, and they will definitely slow the economy, as economist Steven Hanke points out again and again. Mr. Trump’s supporters are gleeful that we have not seen tariff damage yet, but we probably won’t see the full damage for another year because of the “lag” effect I blog about often (it often takes 18 months or more for our huge economy to reflect policy changes).
I suspect Treasury Secretary Bessent and Mr. Trump well know this too. So, Mr. Trump is desperately trying to offset economic weakness with massive capital investments from other countries, and a massive push for deregulation.
Will it work? This very short video by Peter St. Onge – DOGE Guts Regulatory State – explains just how costly ($3.3 TRILLION per year) regulations are. So yes – it might work, but for that pesky lag effect.
If it doesn’t work, the GOP will get killed in the midterms.
0% Rates Coming?
Jeff Snider, despite constant derision by commentators, is still predicting a near 0% Fed Funds Rate – and today he doubled down. It is not just the labor market he’s focused on, but also the overall weakness in the world economy and many indicators he’s seeing in the options/derivatives market. He (like George Gammon) also says that deficits and more borrowing do not increase interest rates (with a lot of empirical proof).
Who will be right? Nobody knows, as we’ve never been in a situation like this before.
