Gold Videocast: America’s New “Job-Sharing” Economy (Video)

Gold surged more than 10% in January, but lost a lot of ground on news of continued strong jobs growth. Peter argues that Obamacare is skewing the employment data. To avoid the additional costs of full-time employees, businesses are cutting workers to part-time hours while hiring additional staff. But “job sharing” is a double-edged sword that will mean even bigger lay-offs when the market retrenches.

Follow along with this full transcript.

“Well, the price of gold has been under some pressure ever since last Friday’s release of the better-than-expected non-farm payroll number for January. Gold dropped $30-$35 an ounce right away in response to that release. More important than the 25,000 or so jobs by which the forecast beat the expectations, what traders were really looking at were the upward revisions to prior months throughout 2014 where the government added a lot of additional jobs. More jobs throughout the year were created, at least according to the government, than was originally expected, and this really emboldened the forecasts of a Fed rate hike later this year, perhaps as soon as June.

“This is seen as proof that the recovery is real and that the Fed is going to be raising rates, and that really pulled the rug out from under the gold price. But more important – let’s look at the jobs numbers, because people are jumping to conclusions. Yes, we have been creating over 200,000 jobs a month for most of 2014. But is this in response to a strong economy? That’s not what the data suggests.

“What is more important, what is more influencing the number of jobs is the quality, the nature of these jobs. It is the shift from full-time to part-time employment driven mainly by Obamacare, or more precisely, the need to avoid the requirements imposed by Obamacare. Obamacare forces employers to provide insurance for full-time employees. As a result, employers are hiring more part-time workers than they normally would and that is substantially influencing these numbers.

“In fact, the real reason that we have such a low unemployment rate and we’re creating so many jobs is because people are, in effect, sharing their jobs. We have a job sharing program. So people don’t have a full job, they have part of a job and somebody else has the other part. If I’m an employer — let’s say I have two workers and they’re each working 40 hours a week — and if I need to cut back on my work force, I can either fire one worker or I can reduce the hours on both. Let’s say I reduce my full-time employees. Instead of them working 40 hours a week, they only work 20. Assuming the rate of pay is the same, I’ve cut my labor costs in half. I have achieved my objective but nobody is unemployed, right? Both of my workers still have jobs. No one’s lost a job but they’re sharing a job. They’re working part-time.

“Maybe I cut their hours back to 10 hours a week and then I actually hire two more guys. So now I have four guys working 40 hours instead of two guys working 80 hours. I’ve cut the hours in half but I’ve doubled my workforce. According to the government, I’ve just created two jobs even though what I have is four people sharing one job. According to the government, I’ve created two. This is what is going on. This is the primary reason that we’ve created so many jobs and that we have so few people unemployed, because so many people have a part of a job.

“I think that people need to look at a lot of other economic data that is more important, that has not been skewed by Obamacare. But the reality is, traders are ignoring all of the bad economic data that they should be focusing on, and instead just remaining fixated on the jobs numbers. And I think they are in a position to be blindsided when the economy turns around.

“If you live by these part-time jobs, you die by the part-time jobs, because it is a double-edged sword. When companies start cutting back on workers because they have to reduce hours, they’re also going to be firing more people. Because they hired more people, they need to fire more people. If I want to cut back on the number of hours that my workers are working and I have a lot of part-time workers, I’m going to have to be sending out more pink slips by numbers than would be the case if I was letting go of full-time workers. So it’s going to work both ways. It’s going to help pad the numbers on the way up, but it’s going to depress them on the way down. So for now, it’s the false belief that the economy is strong and that the Fed’s going to raise rates based on a misunderstanding of what the job numbers really mean that is keeping a lid on the price of gold.

“Of course, one other thing that is happening that should be lifting the price of gold is inflationary monetary policies all over the world. More and more central banks are now reducing their interest rates, launching QE programs. Gold prices are rising in terms of those currencies, but everybody believes the US is going to be the lone holdout in the easy money parade. That is what’s keeping gold prices from really going ballistic. But I think, again, everybody’s got it wrong. I don’t think the US is going to be the holdout when it comes to the easy money parade. In fact, I think we are going to be leading that parade.

“Not only are we not going to raise interest rates or not raise them substantially — maybe we get a trivial rate hike, although even there I think it’s likely that we won’t — but we are going to be launching a new QE program, the mother of all QEs. It’s going to make the Japanese or the Europeans blush, the size of the QE that we’re going to launch. Especially, too, if the Fed is going to be motivated based on jobs. Because I believe the employment picture is going to turn South in a big way and then the Fed is going to have to rev up the presses, and it’s not going to work.

“See, that is the problem. They are going to succeed in creating inflation, but they will not succeed in creating jobs, and so the more money they print to create jobs and the more the printing fails to deliver, the more they print in the future. Because again, they are never going to question the validity of what they’re doing, or the efficacy of their plan.

“So if they do a lot of QE and they don’t get enough jobs, they just do some more. And if the economy gets worse, it must mean we didn’t do it big enough. So that is what’s coming. When the markets realize this, then it’s going to be like taking the lid off the pressure cooker when it comes to the price of gold, and it’s going to be rising sharply.

“In the meantime, I continue to encourage people to accumulate as much physical gold and silver as they can before the rest of the financial community wakes up to this reality and they’re rushing to buy these metals at much higher prices.”

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