Peter Schiff: Traders Still Getting Jobs and Inflation Wrong

The dollar rallied and gold sold off on Monday after the March labor report came in at expectations and comments by the new Bank of Japan governor indicated he plans to continue the country’s ultra-loose monetary policy. In his podcast, Peter explains how traders continued to get both jobs and inflation wrong.

The non-farm payroll numbers came in pretty much in line with expectations. According to the Bureau of Labor Statistics, the economy added 263,000 jobs in March. Although it was the smallest number of jobs added since December 2020, it was enough to drive unemployment down to 3.5%.

As Peter pointed out, the report was generally well-received because it wasn’t worse than expected, especially considering other labor force data last week, including weekly unemployment claims came in worse than expected.

I think the markets may have expected, OK, we’re going to get some bad news from the official non-farm payroll, and at least superficially, we didn’t get it. But if you look below the surface, you can see a lot of the bad news.”

Peter noted that the only reason the number of new jobs didn’t drop more significantly was because governments added 47,000 jobs. Private sector payrolls were 30,000 to 40,000 below expectations.

So, the only reason we met expectations was because these governments went on a hiring spree. But there’s a big difference between private sector jobs and government jobs. Private sector jobs, by and large, are productive because they’re created by for-profit enterprises that wouldn’t be hiring people unless doing so was making their businesses more profitable, and therefore they are adding some benefit to the economy based on their contribution to generating profits. Profits are a good thing because it means you are adding value to your customers.”

Peter said, if anything, government workers subtract from productivity.

The more government bureaucrats are on the job, the less productive everybody else is because what they’re doing is regulating and trying to micromanage and getting in the way of the productivity of the private sector. So, the more government workers we have, the worse off we are.”

And of course, taxpayers have to foot the bill for all of these government workers.

It would be relief if governments fired some people and freed up that labor to be employed productively in the private sector, and free up the taxpayer of the obligation of having to cover the cost of their salaries and their benefits.”

Peter pointed out that when you look at the categories that added the most jobs, most of them were in lower-paying sectors.

The good jobs are going away and they’re being replaced by bad jobs. And in many cases the numbers are going up because somebody loses one good job and they replace it with two or three bad jobs.”

The jobs report came out when the markets were closed, so we didn’t get the market reaction until Monday when the dollar spiked and gold dropped back below $2,000 an ounce. As usual, the markets concluded that a “strong” labor market means the Federal Reserve will continue to hike rates. We’ve seen this knee-jerk reaction to employment reports for well over a year.

There was also another factor that moved markets Monday. Kazuo Ueda, the new governor of Japan’s central bank said it was appropriate to maintain the bank’s ultra-loose monetary policy. As Peter put it, instead of fighting inflation, the BoJ is pretending it’s not a threat.

It’s like you’re getting chased out of town, so you pretend like you’re leading a parade. And that’s what the Bank of Japan is doing. They’re leading the inflation parade.”

Peter said the market reaction was the opposite of what it should have been.

The dollar shot up as the yen weakened. Of course, the minute the dollar shows any strength, people start selling gold.

Stop and think about what actually happened. A major central bank said it was OK with inflation. That should create an incentive to own gold instead of that currency.

The more central banks that are acting recklessly and accepting high inflation as a way of life — that is bullish for gold.”

And as we’ve discussed, none of the central banks are going to be able to beat inflation.

But Peter said a lot of these traders don’t know what they’re doing. They’re trading based on algorithms. “Dollar up – sell gold.”

They’re on autopilot. But that simply gives smart people the opportunity to buy. Because I think any dip below $2,000, that’s your buy.”

In this podcast, Peter also talks about Bitcoin’s rally and a dumb new government housing program in California.