Strong employment numbers
aren't good news
Peter Schiff
Archives
March 4, 2005
As crazy as this may sound, not all employment is good employment.
Today's labor department release of a larger than expected 262,000
increase in February non-farm payrolls, heralded by Wall Street
as evidence of a vibrant U.S. economy, actually confirms the
reverse: a dangerously imbalanced economy moving further off
kilter.
The over-bloated service sector
added another 207,000 jobs, with construction, no doubt mostly
residential, adding 30,000. The beleaguered manufacturing sector
did manage to add 20,000 jobs for a change, though half of that
gain resulted from temporarily laid off auto workers returning
to their job. In other words, the wealth producing sector of
the economy added few workers, while the wealth consuming sector
provided over 80% of new jobs.
The basic problem with service sector jobs is that they produce
few tradable goods. As a result, the added incomes associated
with such jobs create upward pressure on our nation's trade deficit,
as service sector workers use their additional incomes to buy
more imported products. In addition, such jobs provide more workers
with the means to qualify for home mortgages, which require additional
borrowing from abroad, and provide the basis for future cash-out
refinancing, requiring still more foreign financing and resulting
in additional purchases of imported products.
In other words, the last thing the U.S. economy needs is more
non-productive service sector jobs, which only lead to higher
trade deficits as Americans import more goods that service sector
workers do not produce, and larger current account deficits,
as greater interest payments become necessary to service growing
external liabilities.
While this reality may have
been lost among U.S. investors, who reacted foolishly by buying
stocks, it was not the case among currency traders, who despite
their initial, almost reflexive action to buy dollars on apparent
"good" economic news, quickly re-evaluated the data
and sold, sending the buck sharply lower against all the world's
major currencies, and to a new twenty-three year low against
the New Zealand dollar. Is this simply a case of buying the rumor
and selling the fact, or is it an actual epiphany on the part
of currency traders with respect to their understanding of the
true nature of the fundamentally flawed American economy? If
it is indeed the latter, our bubble economy may have finally
found its pin.
March 4, 2005
Do
not wait for pull backs that may never come. Buy gold at current
prices and do not look back. I still believe the best way for
average investors to participate is though the Perth Mint in Australia.
For more information on their unique, safe, private, low-cost
program visit www.goldyoucanfold.com.
In addition, as the dollar's
value is likely to sink far faster than those of other fiat currencies,
investors can learn strategies to protect wealth and preserve
purchasing power by downloading my free research report on the
coming collapse of the U.S. dollar at www.researchreportone.com
and subscribing to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp.
Peter Schiff
C.E.O. and Chief Global Strategist
Euro Pacific Capital, Inc.
1 800-727-7922
email: pschiff@europac.net
website: www.europac.net
Archives
 Mr. Schiff is one of
the few non-biased investment advisors (not committed solely to
the short side of the market) to have correctly called the current
bear market before it began and to have positioned his clients
accordingly. As a result of his accurate forecasts on the U.S.
stock market, commodities, gold and the dollar, he is becoming
increasingly more renowned. He has been quoted in many of the
nation's leading newspapers, including The Wall Street Journal,
Barron's, Investor's Business Daily, The Financial Times, The
New York Times, The Los Angeles Times, The Washington Post, The
Chicago Tribune, The Dallas Morning News, The Miami Herald, The
San Francisco Chronicle, The Atlanta Journal-Constitution, The
Arizona Republic, The Philadelphia Inquirer, and the Christian
Science Monitor, and has appeared on CNBC, CNNfn., and Bloomberg.
In addition, his views are frequently quoted locally in the Orange
County Register.
Mr. Schiff began his investment career as a financial consultant
with Shearson Lehman Brothers, after having earned a degree in
finance and accounting from U.C. Berkley in 1987. A financial
professional for seventeen years he joined Euro Pacific
in 1996 and has served as its President since January 2000. An
expert on money, economic theory, and international investing,
he is a highly recommended broker by many of the nation's financial
newsletters and advisory services.
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