| | | | One of the problems that has flummoxed nearly everyone for the past year is how nonfarm payrolls are rising at the same time unemployment is rising? After all, if more jobs are being created, shouldn’t that mean unemployment is falling?
Well, not so fast. Remember how many foreign-workers have flooded our country in the past four years. Top estimates put the number at 20 million. Despite the best propaganda saying that these people are our future doctors, engineers, and scientists, the truth is, a large majority will end up either unemployed or underemployed.
This of course causes the unemployment rate to rise. But wait! There’s more. You see, the unemployment rate is derived from self-reported data from households. So, the government asks, “Do you have a job?” and takes the data from there.
But the non-farm payrolls report is a survey of business owners — the employers.
So, how could both the non-farm payrolls AND the unemployment increase at the same time? It’s simple, really. Hiring firms have actually been doing not that bad, but the amount of people vying for a job has also increased. This means that even though firms are hiring, they aren’t hiring enough to keep up with the pace of foreign-born workers.
In other words, the economy is still semi-strong which boosts the NFP payrolls. But a large number of immigrants still don’t have jobs, which boosts the unemployment rate.
Why this means rate cuts aren’t coming
I’m happy to eat my words come September 17th. But I don’t think that the Fed will announce rate cuts. Not only is unemployment minus foreign-born workers still not very high, but inflation is still above the Fed’s target rate of 2%.
A cut would risk a reacceleration of inflation. The Fed purports to be independent, but we can’t dismiss the fact that there is political pressure on them to cut rates. However, should Jerome Powell cut and inflation reaccelerate, he will go down as one of the worst Fed chairs in history.
I think that the Fed is a human institution, vulnerable to the human fragilities that affect all institutions. And Powell doesn’t want to be remembered poorly. He wants to be remembered as a successful Fed chair. Hence, why he will be loathe to cut rates.
LEVELS:
Onto the levels I’m eyeing for the week
SMCI
SMCI bounced off $387.84. I think it has room to run, likely to $440. I like the 11 OCT $430 CALL options for this week.
AAPL
AAPL had its biggest product reveal in years on Monday. Big things are coming to iPhone 16, and combined with the largest stock buyback program in history, Apple will likely retouch ATH. For this week, I wouldn’t be surprised if it hit 222.50 by week end.
Tomorrow, I’m hosting a popup training where I’ll explain what I think will happen to Apple long term. You can register for that here.
SPX
Fed meeting is coming up next week. SPY will likely boom until then. SPX could easily hit 5530 by week’s end. We’ve been cleaning up on our SPX trades recently with my Bargain Bin Trader strategy. To see how I trade it, click here. | | | | |
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