Gartman Weighs In On The Fed
September 8, 2015
Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.
Our focus is on the employment data in North America, for both US and Canada at the moment. Ahead of last Friday’s employment report there, Bay Street expected a net loss of perhaps 4,500-5,000 jobs in August but instead Canada created 12,000 jobs while at the same time the unemployment rate rose from 6.8% to 7.0%. Further, and as has been the case over the past six months or so, the numbers were juggled about rather materially as part-time vs. full time jobs were erratic in nature, with the number of fulltime jobs having grown by 54,400, thus offsetting the loss of 42,400 part-time jobs. Further, the unemployment rate rose because there was enough growing confidence in the Canadian economy that many who had taken themselves out of the jobs market put themselves back into the market and began looking for work once again.
On balance then, this was really quite a good report, and to bring it into equivalent terms with the US non-farm payrolls report, the expected loss of 4,750 jobs would have been a loss of approximately 44,000 non-farm payroll jobs here in the States, while the actual gain of 12,000 is the equivalent of non-farm payrolls rising 111,500 here in the States. Indeed, the only “bleak” part of the report, in our opinion, was that “public sector”… government… jobs rose by 27,200 last month while “private sector” jobs…the real world… rose 6,300. We are always dismayed when public sector job creation is larger than is that of the private sector, but we are especially so when the ratio is more than 4 x’s as great.
The Bank of Canada has already moved to cut its key interest rate twice this year in an effort to provide a cushion for the economy, but Friday’s report puts any further rate cuts all but effectively off the table. The Bank’s monetary policy committee shall meet next week and in all likelihood shall vote to keep rates steady. Regarding the US and the Employment Situation Report, we had warned that the August number is erratic in nature; that historically it is well below the trends of other recent months but that the revisions to the data are the largest of the year, thus requiring that we… and the FOMC… take this number with a great deal of suspicion. We feared that the actual increase in non-farm payrolls would be low and would be well below consensus expectations, calling for an increase of 195 thousand when the consensus going into the report was for an increase of 220 thousand. We were high despite the fact that our “guess” was amongst the lowest on The Street for the actual number was +173 thousand. At the same time, the unemployment rate fell to 5.1%. Further, private payrolls rose by 140 thousand or 4.3 x’s that of the “public sector” and were very strong when compared to the Canadian figures reported above.
Further, and perhaps most importantly for the FOMC which meets next week, average hourly earnings rose 0.3% and this was nicely above the consensus expectation, and further still the average workweek increased from 34.5 hours to 34.6, which is the equivalent of several tens of thousands more workers at work. Further even still, there is almost universal expectation that when the August figure is revised one month hence it will be revised upward sharply, and may be revised upward by more than 100 thousand. Indeed, as we noted here on Friday the average upward revision to the August data over the past decade is +90 thousand.