The Empire Strikes Back! Empire State Manufacturing Survey Falls 14.7 Percent AGAIN, Back To Great Recession Level

The Empire Strikes Back!

The Empire State Manufacturing Survey of General Business Conditions fell 14.67% in September. the second month in a row for -14+% declines.


The rest of this morning’s economic news was pretty …. meh. Industrial production fell by the most in three years.


And the 30 year Treasury bond yield broke through 3% this morning.


I wonder what Lockhart, Fischer, Yellen and Dudley are thinking right about now?


Bad To The Bone: Employment Growth Less Than Expected, Not In Labor Force Breaks 94 Million

Today’s jobs report is bad to the bone.

How can it be bad to the bone if the U3 unemployment rate fell to 5.1%? That number is music to The Fed’s ears in their quest to raise their target interest rate!


But what is bad to the bone? How about “not in labor force” exceeding 94 million and labor force participation at 62.6% (meaning that NON-participation in the labor force is 36.4%.


Average wage growth rose to 2.2% YoY, but is still almost half of what is was in 2007. The “good” news is that while still considerably lower than in 2007, average wage growth and the employment to population ratio are SLOWLY rising.


And jobs added (173k) was less than the expected 217k.

But the Richmond Fed’s Jeffrey Lacker says it is time to raise rates anyway!

Here is Lacker’s speech entitled The Case Against Further Delay.

Economic data suggest that an increase in the Fed’s target interest rate from near zero is warranted sooner rather than later.

With nominal short-term interest rates close to zero and inflation of at least one percent, real interest rates have been negative for the better part of the past six years. But with rising growth in personal consumption and income over the past couple of years, negative real rates are unlikely to remain appropriate.

The unemployment rate has declined nearly to pre-recession levels, and research suggests that there is little if any excessive slack in the labor market. Consistent with the Fed’s forward guidance, many labor market indicators support the case for an increase in interest rates.

Inflation has been below the Fed’s 2 percent target since early 2012, but has been running slightly above target over the past half year. Because inflation is a lagging indicator, maintaining low interest rates poses serious risks.

Recent financial market volatility is unlikely to affect economic fundamentals in the United States and thus has limited implications for monetary policy.

Hmm. Core inflation, The Fed’s preferred measure, has been falling since 2012 despite The Fed’s 3rd round of quantitative easing.


The Dow dropped like a rock after the jobs report (down over 250 points).

This is the “good news” that may lead The Fed to raise rates at the next meeting.

wtf 2

Fed’s Yellen: “We Don’t Need No Stinking Wage Growth!” Despite Not in Labor Force Rate at 37.3 Percent

Well, the Federal Reserve Chair Janet Yellen didn’t exactly say the famous line from the Humphrey Bogart/Tim Holt film Treasure of the Sierra Madre, “We don’t need no stinking wage growth.” But according to the Wall Street Journal’s Jon “The Omen” Hilsenrath,

“Ms. Yellen said explicitly in that March speech that she is prepared to start moving interest rates up even before she sees sure signs that wages are rising faster. “That said,” she added, “I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken.”

Given her stance, Friday’s employment cost report doesn’t look like a deal breaker for the Fed in its long-running debate about when to raise short-term interest rates. Wages appear to be stagnant but not clearly weakening, which is what she set out as her threshold for not acting. Still, it creates new doubts for officials and doesn’t help them build the confidence they’re hoping to build that the job market is nearing full employment and inflation rising toward 2%.”

True, the Employment Cost Index is at an all-time low. But the percentage of people NOT in the labor force is now 37.3%.


The NOT in labor force rate is the number of those NOT in the labor force divided by the sum of those in the civilian labor force and those NOT in the labor force.

StinkinBadges (1)

Hey Bartender! Fed Looks To Raise Rates In Face of The Great Bartender Recovery

This has been a SLOWWWWW economic recovery. Full-time employment is ALMOST back to 2007/2008 levels of full-time employment. However, average wage growth is almost 50% lower than in 2007 despite The Fed not having raised The Fed Funds Target rate since 2006.


One reason that wage growth is so slow is that many of jobs added post-2007 have been lower wage service jobs (e.g., bartenders).


Here is a chart courtesy of Zero Hedge showing bartender growth versus manufacturing job decline.

Mfg workers vs waiters_0

Someone sent me an email repeating the common meme: “But wage growth will remain slow until unemployment bottoms out!” Not true. The toxic green line shows today’s unemployment rate compared to average YOY wage growth. This “recovery” is the lowest wage rate given the current unemployment rate.


So, let me get this straight. The Fed wants to raise rates in the face of stagnant wage growth and a surge in bartenders.

Even Goldman Sachs CEO and Chairman Lloyd Blankfein sees a jolt when The Fed raises rates.

Here is a photo of Fed Chair Yellen and former Fed Chair Bernanke sharing a beer in front of their favorite bartender.


Hey bartender! This is your recovery!