Non-Farm Friday – Finally Good News Can Be Good News Again

Previously in the market, bad news has been good news as poor jobs growth has put the Fed "on the table" but now that the Fed has committed to QE, more QE and, failing that, MORE QE – it's finally OK to have a good jobs report. 

Last month we had terrible August Job numbers with just 103,000 jobs created in the US and it was very "disappointing," even though Aug 2011 was 96,000 jobs and Sept 2011 was even lower at 85,000 jobs.  So what we have this report is very low expectations of 115,000 jobs for this September and anything over 150,000 jobs will be an upside surprise and anything over 200,000 jobs, or unemployment going below 8%, will be big trouble for Mitt Romney, who's hitched his wagon to people believing Obama is not creating jobs. 

The reality is, we are currently creating jobs at a pace not seen since the first half of the last decade before the Bush/Romney tax policies kicked in and shifted capital investing away from production and into financial instruments and commodities.  

Perspective is very hard to come by in America and we have very short memories – especially when it comes to jobs because 30M Americans didn't lose their jobs overnight.  Even with the monthly job losses of over 400,000 a month during the crash – it still took YEARS of losing 100,000 here and 200,000 there coupled with anemic gains for us to get into the mess we're slowly working our way out of today. 

Since January, 2011, over 4M jobs have been added in 20 months but, unfortunately, we need 3M jobs just to keep up with normal population growth (1.5%/yr) over that time so the extra 1M jobs is just a drop in the bucket when it comes to reversing the damage that's already been done to America.  This is why it terrifies me that Romney wants to go back to "the good old days" – they weren't actually very good for middle-class Americans, were they?  

Barack Obama is about 300,000 jobs away from avoiding being the second President in 50 years to have a negative jobs number for a full term – considering the month he took office we lost 900,000 jobs that were charged to him, that's pretty good but, as I said, not good enough – we need Bill Clinton numbers (22.7M jobs in 8 years) just to get America working again.  

8:30 Update:  This is interesting, only 114,000 jobs were created yet unemployment has plunged to 7.8% as the number of unemployed people dropped by over 400,000.  The number of people who are employed rose by 879,000 but the U6 Unemployment rate is flat at 14M.  The employment-population ratio increased by 0.4 percentage point to 58.7 percent, after edging down in the prior 2 months. The overall trend in the employment-population ratio for this year has been flat. The civilian labor force rose by 418,000 to 155.1 million in September, while the labor force participation rate was little changed at 63.6 percent.

Obviously, some of the revisions to March unemployment (300,000+ improvement) are filtering through to this report so our overall civilian workforce is up nicely (155.1M/63.6% of adult population working) and, although it's not being counted as jobs created, the effect on unemployment is severe.  This is not, as far as I can tell, a BS number – this is a fairly significant improvement in our overall jobs picture.  The biggest flaw I can find is a disturbing 600,000 increase in people working part-time for economic reasons (they would rather have a real job) – now at 8.6M.  

As I write this (8:55), money is flying out of bonds and will likely plow into the market today – essentially we just found 873,000 more people who can afford an IPhone – and that's going to count for something in the Appleconomy.  We've been leaning bullish but maybe not bullish enough – we'll have to see if the Dow can clear 13,600 and hold it on this news – at the moment, the Futures are up 50 points.  Europe is loving the numbers and EU markets are up about 1% and trading at the day's highs into the US open and, even better, the BOJ has switched to buying Euros today and that's keeping the Dollar low despite the jobs gains (more demand for dollars to pay people with) and the Yen is at 78.77 with the Euro at $1.304 and the Pound at $1.621 and that leaves the Dollar in the dust at 79.30, down 1% for the week and helping to lift stocks and commodities, which are priced in Dollars. 

Although more jobs should be good for oil, we lost interest on yesterday's bullish oil plays (see morning post) as our USO calls tripled and, of course, the Futures trade (/CL) took us from $88.50 to $91.50 and $3,000 per contract is A LOT of money to make in an oil trade – especially as it's the second time this week as we caught it going the other way as well so not worth the risk into the weekend.  

Gasoline (/RB) is our normal weekend play and we bottomed out at $2.75 on Wednesday, got back over the $2.80 line yesterday morning and just tested $2.98 so that should be it for that play too at $420 per penny per contract because $3 is just too painful at the pump – even with a few extra people driving to work.  

Another trade idea from yesterday's morning post was BBY at $17.50, already at $18.50 this morning and those TNA weekly $61.50s should be about $2.50 this morning after dipping back to .84 yesterday morning.   AAPL was disappointing so we sold calls against it but we're going to buy them back this morning and give our long positions room to run in case money starts pouring into the market.  

Next week things get very serious indeed with earnings season kicking into high gear but today can give us some good momentum leading up to it. 

Have a great weekend, 

- Phil