Gold News

Ignore US Jobs Data

The latest US jobs figures are at odds with what's going on elsewhere...
IGNORE the worthless US jobs report published last Friday, says Dan Denning at the Daily Reckoning Australia.
We got several reader emails over the weekend asking if the US employment recovery would damage the bid for gold and send the Aussie Dollar lower. Interesting questions, but a faulty premise.
There is no US employment recovery. In fact, everything is getting worse everywhere, at least in financial markets.
Before we dive into the dismal data for the day, a quick word on the collapse of Iran's currency, the Rial. If ever there was a case of currency warfare, this is it. The US has kicked Iran out of the international payments system and made it difficult for the Iranian economy to earn hard currency. The result is a 60% fall in the Rial against the US Dollar and the beginning of hyperinflation.
Now, about this US jobs number. Is it fair dinkum? Well, we have no idea. But remember, all these announcements are usually based on surveys. And surveys, though scientific, can be pretty inexact. It all depends on your statistical methods.
The Friday survey in the US showed the national unemployment rate going under 8% for the first time in President Barack Obama's four-year term (43 months, if you're scoring at home). 
With less than a month to go before the US election, it was a politically sensitive announcement. And if the number is to be believed, the 873,000 jobs added to the US in September would be the largest-one month gain in the 29-year history of the report.
This would be great news for investors, if true. After years of utter depression, the world badly needs some economic signs of life. Unfortunately, the US data are at odds with forecasts from the International Monetary Fund (IMF) and the World Bank. The long-term forecasts of any organisation are almost always worthless. The IMF and the World Bank are no exception, although we're sure both organisations are full of well-meaning and capable statisticians.
Still, what did the IMF have to say about the future? 'It's not yet a lost decade,' said the IMF's chief economist Olivier Blanchard, 'But it will surely take at least a decade from the beginning of the crisis for the world economy to get back to decent shape.' 
Using 2008 as the starting point, Blanchard says the global economy won't get the all-clear signal until 2018.
Not content to ruin the next five years, the IMF has told Australia to expect lower growth starting next year, in 2013. The latest World Economic Outlook says Australia's GDP will grow at 3% next year, not the 3.5% originally expected. And ganging up on us, the World Bank has cut its China growth forecast from 8.2% in May to 7.7% now. Ouch.
But as we said, these forecasts are almost always useless. Big organisations of any stripe have a tendency to discount the probability of really radical outcomes. Maybe there's a self-preservation bias at work. Understandably, it's not pleasant to spend a lot of time thinking about how things could be much worse than your pretty little models predict. But for people who live in the real world, where models don't pay the bills, you have to act as well as think.

Best-selling author of The Bull Hunter (Wiley & Sons) and formerly analyzing equities and publishing investment ideas from Baltimore, Paris, London and then Melbourne, Dan Denning is now co-author of The Bill Bonner Letter from Bonner & Partners.

See our full archive of Dan Denning articles

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