"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 6 hours The FANG Stock Investors Should Avoid
  • 1 day Is This The Death Of The iPhone X?
  • 1 day Is London Still The Financial Capital Of The World?
  • 1 day Is Gold Staging A Comeback?
  • 1 day The $200 Million ‘Golden Parachute’ For Rupert Murdoch
  • 1 day Bitcoin’s Breakout Is Not As Bullish As it Seems
  • 1 day Farmers On Edge As Trade War Hits U.S. Grain Shipments
  • 2 days Is Silver Poised For A Massive Break Out?
  • 2 days Meet The Hedge Fund Billionaires Club
  • 2 days The Next Housing Crisis Could Be Right Around The Corner
  • 2 days Cartel's, Pirates And Corruption Cost Mexico $1.6 Billion Per Year
  • 2 days Africa’s Fastest Growing Economy
  • 2 days The Blockchain Boom Hits The Utilities Sector
  • 2 days Why Smart Money Is Selling Off Right Before The Bell
  • 3 days Tech Giants Rally Ahead Of Earnings Reports
  • 3 days Global Debt Hits 225% Of GDP
  • 3 days The World’s First Trillionaire Will Be A Space Miner
  • 3 days How Student Debt Could Cause The Next Real Estate Crisis
  • 3 days This $550 Billion Industry Is Betting On Bitcoin
  • 3 days One Commodity Set To Soar On Russian Sanctions
Is This The Death Of The iPhone X?

Is This The Death Of The iPhone X?

Apple’s stock has slipped more…

3 Stocks to Watch This Earnings Season

3 Stocks to Watch This Earnings Season

Stocks began Friday with a…

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