On Friday, the Bureau of Labor Statistics (BLS) released its monthly “Employment Situation” report. Was the (approximately) $350 billion* drop in the total value of America’s publicly traded equities that day a response to that report? No. It was a response to the market’s fears about how the Federal Reserve might react to the report.
Let’s look at the BLS report itself.
Full-time-equivalent (FTE)** jobs increased by 135,000. However, labor force participation extended its long slide, and wages remained stagnant. In other words, August was a “normal” month for jobs, within the context of President Obama’s slow-growth “new normal” economy.
The financial press is obsessed with the question of whether the Fed will raise its Fed Funds interest rate target at its September meeting. Various members of the FOMC*** have contributed to the public debate over this issue.
All of this talk about “raising interest rates” can only alarm the financial markets, because it bespeaks a frightening disconnection from reality on the part of the Fed. Here is what the markets know that the FOMC obviously does not:
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