Government Goes On A Hiring Spree To Pump Up Jobs Numbers - Gold Not To Be Fooled

Day traders make their moves based on headlines, but the trends are spotted by looking beyond the headlines. So when the BLS numbers on Friday soundly beat the consensus estimates of analysts, the US dollar (USD) bulls ran up the price. As is always the case the devil is in the details and digging deeper into the jobs numbers paints a much different picture.

For a few days prior to Friday, the USD index had rallied as the traders were starting to buy into the Goldilocks economy narrative that the Fed has been pitching since the September Fed meeting. Then on Friday when the BLS reported the September jobs numbers, they pumped it up some more.

Prior to the Fed’s half-point cut, the USD index had been going through a significant correction in anticipation of the Fed entering into a rate cutting cycle. Naturally, the next question is which trend is correct, the one prior to the Fed cutting rates or the recent rally in the USD.

The financial media isn’t much help because they report on whatever narrative the Fed is selling. When the Friday report came out, of course they came out with the cheerleading that the Fed is correct after all and their Goldilocks narrative is just right.

But is it? I think not.

The analysts that make up the consensus estimates have a tough job. A key reason is that they are estimating what the highly unreliable BLS will report. Then in September they had another factor to deal with when the government went on a hiring spree. These factors are why the Friday report significantly beat the estimates.

For several months, I have been reporting the alarming trend of workers losing full-time jobs to take on lowering paying part-time jobs. This is a clear signal that the jobs market is weak and by extension the economy is as well. 

When the BLS dramatically revised their numbers prior to the Fed meeting in Jackson Hole, they came clean that they had been manipulating the numbers that portrayed a stronger jobs market to the tune of 818k jobs evaporated into thin air. Confirming the trend I had been reporting on was that almost half those revised jobs that never existed were in fact in higher paying jobs.

Instead of the BLS learning from their mistakes, they kept right on making them and had to revise two more months of their jobs numbers down and will likely have to do it again with the September numbers. We are at a crucial juncture in the economy as it is without a doubt slowing and could see either a soft landing or a hard landing. So it is inexcusable that they are getting things so wrong, so often.

They are fudging the numbers enough that even the Fed admonished them at the September meeting when Powell said the BLS numbers are artificial and that members of the Fed are taking them with a grain of salt. This is a nice way of saying the numbers are highly manipulated and unreliable. 

Economists and analysts have a way of looking at a myriad of statistics to come up with their conclusions. I’ve always believed that this kind of analysis leads to paralysis and makes for suspicious conclusions.

When I try to analyze the jobs market, I try to put myself into the minds of the workers. I consider what it means to lose a full-time job with benefits, to take on one or more part-time jobs at lower pay, with no benefits to make less money. Which makes it clear that the jobs market is in trouble and by extension the economy is as well.

The jobs market didn’t all of a sudden get stronger in September, despite the BLS report. Not only are their numbers artificially inflated, they don’t differentiate between a worker losing a full-time job to take on two part-time jobs, it is counted as a one job gain. They don’t ask the worker if that suggests a strong jobs market, if they did they would get an ear full.

I’m sure that the answer amongst many workers would be, are you (insert expletive) kidding me.

A jobs market is not strong when it is shedding full-time jobs and increasing part-time jobs. Which is not good for the current government's election campaign. Creating a bunch of government jobs may help with the headline jobs numbers to create a sugar high for VP Harris’ campaign, but everybody and their dog knows government jobs are an economic drain.

It can also help the Fed sell their Goldilocks narrative and give the obedient financial media types fodder for them to put lipstick on Goldilocks. But, it certainly doesn’t make it truly depict the trouble the jobs market is in.

The Fed can play the smoke and mirrors game all they want, actions speak louder than words. Which is why after selling the higher for longer stories for so long, they went with an emergency cut of a half-point at the September meeting. Then they went with the Goldilocks narrative, when the jobs market and economy are looking more like Humpty Dumpty falling from the wall.

If things are so rosy, why did they need to cut interest rates by a half-point? The reality is they know the chances of a soft landing are decreasing while the prospects of a hard landing are increasing.

The Fed is always behind the curve, and have never been able to thread the needle to go from hiking rates to cutting so precisely that they orchestrate a soft landing. Is this time different, I highly doubt it. 

One artificial BLS report does not make a trend. The jobs market is in trouble which means the economy is as well, creating a bunch of government jobs does not change this trend one iota.

Will it allow the Fed to only cut a quarter-point at the November meeting, probably. I will keep watching for economic signals between then and now to get a clearer picture on that topic. One thing I am certain of is that the Fed has entered into a rate cutting cycle.

The trends in the jobs market are suggesting that the economy is heading toward a recession of some sort, probably closer to a hard landing than a soft one.

To get a clearer picture of how long the rate cutting cycle will last and how low they will cut the rates needs one to consider the Death Spiral of Debt. Harris and Trump have already proven themselves to be massive spenders. Will they change, no way.

President Obama was the biggest two-term spender. Trump came along and almost beat Obama’s spending in one term. Biden-Harris got in and will likely beat Trump’s prolific spending. The insane spending of these politicians, has helped create a massive problem which is the cost of servicing the debt. Which is now consuming a big chunk of the money coming in annually from taxes.

The cost of servicing the debt has surpassed military spending, next it will surpass Medicare and then Social Security. This issue will be made worse by the spending habits of whichever candidate wins in November, which puts the Death Spiral of Debt on autopilot.

I firmly believe that by the time the next president finishes their term of four years, the debt will reach $50 trillion. It is not complicated math, if the deficits average a bit over $3 trillion, then it gets to $50 trillion years ahead of the Congressional Budget Office's projection. 

The only way that this can be avoided is if the government dramatically cuts spending, the chances of that are zero. In addition, the Fed would need to cut rates back toward the Free Money Era to slow down the costs of servicing the debt. This is a highly likely outcome.

The supply of debt instruments is at record levels and about to get much worse. Foreign central bank buyers are on a buyer’s strike and some are also selling their positions. If the supply is huge and they are getting paid in a declining currency, it begs the question of who will buy the debt. 

Enter the buyer of last resort the Fed. When they went into the rate hiking cycle they also said they would normalize their balance sheet. It was around $9 trillion then, and they failed miserably by not being able to get it below $7 trillion. 

Even if they can avoid a hard landing, which is becoming more difficult, even a slight recession will mean they have to increase their balance sheet. I have little faith in their chances to maneuver into a soft landing, as I said earlier they have never done it before.

A hard landing means they will have to dramatically increase their balance sheet. A soft landing means their balance sheet goes back to $9 trillion and higher. A hard landing means it goes much higher and probably goes to the range of $15-20 trillion faster than many imagine.

Which brings us back to the trend in the USD index. Was the significant drop prior to the Fed cutting or the recent action on the Goldilocks narrative the correct one? If you believe like I do that the Fed is heading back to the Free Money Era on rates and increasing their balance sheet, then the correction in the USD index is just warming up.

The debt crisis is not only a US problem, it is a global issue as worldwide government debt is nearly $320 trillion and growing. The debt system is broken and the same can be said for the fiat currency system. The global destruction of purchasing power is happening globally which has been caused because the world left the Gold Standard.

For much too long the world has been depending on debt and money printing. To the point now that there are only two solutions, default on the debt or go back to the Gold Standard. Either one is extremely bullish for gold.

Politicians and central bankers can not be trusted to show discipline. They have created a Death Spiral of Debt and destroyed purchasing power of fiat currencies.

Fortunately for the global economy, the central bankers in the BRICS nations see the writing on the wall. Which is why they are decreasing their US debt holdings and selling USD to buy gold. They are putting themselves back on the Gold Standard but have a long way to go.

Retail investors in China and India own a lot of gold and are increasing their ownership and holding onto it for dear life. Even western investors are joining the golden party. They have been buying a lot of gold and Costco, despite having their purchases throttled to only a couple ounces per member. Despite the throttling, Costco sells out quickly every time they put more gold on the shelf.

Money in the gold ETFs was flowing out until recently when the trend flipped and now money is flowing in. Which is a clear indicator that retail investors in the West are starting to get the bullish story for gold.

The physical buying of gold from the central bankers in the BRICS nations, combined with retail buyers in the East and West is happening while physical gold from mining is peaking and about to go into long-term decline.

They are collectively taking a lot of physical gold off the market. This makes me very happy because it will help them protect their wealth and their purchasing power.

The biggest benefactor of the return to the Gold Standard will be the high-quality gold miners, gold mine developers and gold explorers with important discoveries. My next report will be updates on my top mining stock picks in gold, silver and copper.

At the end of the day, we are having a global economic transition from the broken debt and fiat currency system to the modern Gold Standard. This is very bullish for gold as can be witnessed in the trends in gold.

You can see a very bullish story evolving in the gold chart. On the yearly chart it is going from the bottom left to the top right. Looking closer we have been seeing a series of higher highs and higher lows, with each new high a new record high. Basing periods are getting shorter in duration and tighter in range.

No matter how you look at it, either from the physical supply and demand perspective, or from a technical analysis of the chart, the gold bull market is getting more and more powerful.

The gold stocks have only started getting into the game since around February, 2024, when we saw a transition from a long-term bear market to them getting off the canvas. They have a lot further to go, just to catch up to the current gold bull market, they haven’t even started to price in that gold is on a path to going multiples higher from its current price.

Welcome to the renaissance of gold as the world returns to the Gold Standard. 

All the best,

Allan Barry Laboucan