Side Effect of a Red-Hot US Jobs Market
Increased US economic activity begins and ends with the increasing of the money supply. The US monetary policy to stimulate economic growth by creating lots of new jobs has worked. The trade-off is higher inflation…and on one side, all those with jobs and money to spend are doing exactly that.
On the other side, those on fixed income and no job are feeling the squeezed with the cost of goods and services increasing as inflation bites. It is a balancing act that cannot continue forever.
Sharp thinking investors and traders are jumping on the “opportunities” of the current reality that reducing the money supply is the economic policy going forward for the US. Watch those jobs’ numbers and adapt your investment and trading plan accordingly!
Skilling NFP Review for July 08, 2022, Release
Printing Money!
The More Money Printed…the More Jobs Created. Fact!
US Money Supply increased +1,260% since the 1980’s!
- The goals of increasing M2 include creating more jobs.
- Adding “printing” money puts more money in circulation.
- More money in circulation stimulates spending.
- When the economy is weak, governments will lower interest rates to increase the amount of money in circulation.
- The side effect….higher inflation!
United States Unemployment Rate
50% more people in the US are working versus the 1980s.
The above chart puts into perspective the US policy for the last 42 years the effectiveness of increasing the money supply to support economic growth. COVID-19 forced this policy to become even more aggressive and now the effects of higher and faster inflation need to be addressed.
Will decreasing the money supply by increasing interest rates put people out of work and slow down the economy?
Watch the Monthly US NON-FARM PAYROLLS data for clues to answer that question…and you might find an edge when trading and investing!
The June Non-Farm Payrolls (NFP) is due on Friday July 8th, 2022
The latest NFP is forecasted for 300,000 new jobs to have been created during the month of June. This forecast is below the May 390,000 number of jobs created during May.
- If the actual is above the forecast this could be seen as a net positive signal that the US economy is strong and creating more jobs.
- If the actual is below forecast this may indicate that the US employment market is slowing down because less jobs have been created than expected.
Could strong NFP news be bad news for Stock Markets?
Financial markets could cast a negative shadow on risk assets if the NFP is above forecast. This is because of the current high inflation situation. A stronger NFP would add more pressure on the US FED to act more aggressively with faster and higher interest rate hikes. On the flip side, if the US NFP report is negative e.g. less than forecasted jobs created, then the short term reaction could be higher stock market prices as investors might be expected to place bets that the US FED may not be as aggressive with interest rates policy going forward.
The bottom line, inflation is driven by spending and the more people working increases spending which heats up inflation and vice versa. So watch those NFP numbers every month as a tool to help you get a trading edge!
Not investment advice. Past performance does not guarantee or predict future performance.
