• 6 hours Putin Signs “Digital Iron Curtain” Into Law
  • 9 hours Russian Metals Magnate Sues U.S. Over Sanctions
  • 12 hours Tesla Looks To Jump Into Indian Market
  • 14 hours Global Banks Lay Groundwork To Re-Inflate Asset Prices
  • 1 day Homeowners Experiment With Risky New Investment Trend
  • 1 day U.S. Tech Stocks Look Increasingly Vulnerable
  • 1 day De Beers To Expand World’s Most Profitable Diamond Mine
  • 2 days Ford CEO Gets Raise After Massive Layoff Round
  • 2 days Germany’s Flirtation With Recession Could Cripple The Global Economy
  • 2 days Where To Look As Gold Miners Inch Higher
  • 3 days Google Faces Billions In Fines From European Regulators
  • 3 days The Energy Industry Has A Millennial Problem
  • 4 days Russian Banks Scramble For Sanction Loopholes
  • 4 days Gold ETFs Take A Hit After Four-Month Run
  • 5 days European Union Takes Aim At Ten New Tax Havens
  • 5 days Goldman Defends Trillion-Dollar Corporate Buyback Spree
  • 5 days $600 Billion At Risk As Boeing Fallout Continues
  • 6 days Venezuela Has Yet Another Crisis Developing
  • 6 days Wells Fargo Accused Of “Ongoing Lawlessness”
  • 6 days Hollywood Agency Returns $400M Investment To Saudi Wealth Fund
Lending: The Good, Bad, And Ugly

Lending: The Good, Bad, And Ugly

Aristotle said, “The most hated…

The Chatroom Cartel Running Global Bond Markets

The Chatroom Cartel Running Global Bond Markets

Eight major banks have been…

  1. Home
  2. Markets
  3. Other

Currency Wars and a Job Gain Recession?

I am entertaining the notion of a "Job Gain Recession".

A chart of year-over-year nonfarm employment shows that's nearly what happened in the 1970 and 1980 recessions.


Nonfarm Payroll Job Losses

Nonfarm Payroll Job Losses 1960-2016

Jobs a are a horribly lagging indicator. Recessions invariably start with the economy adding jobs as noted by the red squares in the above chart.

Job losses in recessions vary widely. At the deepest point of the 1980 recession, the maximum year-over-year loss in nonfarm jobs was only 378,000. In contrast, the economy shed 6.8 million jobs in the 2007-2009 "great recession."

The peak of the job losses in most recessions is after the recession is over.


What Would a Job Gain Recession look like?

  1. Reduced hours, especially for part-time employees.
  2. Workers might lose just one of two part-time jobs making them ineligible for unemployment insurance.
  3. Corporate earnings take a huge hit as companies cannot shed enough employees.
  4. Stocks get trashed in the earnings hit.
  5. Yields on government bonds sink to new lows.
  6. Yields on corporate bonds rise with increasing default risk.
  7. Consumer price deflation would again come into play as consumers further cut into spending.
  8. Rate hikes would be the last thing on the Fed's mind. Cuts would be likely.
  9. The Fed would strongly consider negative rates even though negative rates would make the situation worse.
  10. In terms of job losses, this would look like a "mild recession", but it would wreak havoc on the financial system, especially leveraged players.


Serious Risk of Major Currency War

The Fed not hiking as much as expected would pressure the US dollar, at least in isolation. But the ECB, Bank of Japan, and Bank of China do not want to see their currencies rise.

The other central banks would likely counter with beggar-thy-neighbor devaluation tactics to weaken their currencies. And the risk of an all-out currency war of some kind would certainly come into play.

Gold would rate to do very well in such an environment.

 

Back to homepage

Leave a comment

Leave a comment