December Non-Farm Payrolls Surprise at 256,000 Jobs; Stocks Headed to End Week Badly; Plan for Inflation or Deflation?

There was a sense of anxious expectation in advance of the December Non-farm Payroll data released at 8:30 am ET on Friday. Stock futures meandered about, directionless, though negative, ahead of the number. By contrast, reaction to the release was swift and decisive. Futures tanked. Straight into the toilet, because if the employment situation is strong, as this release suggests, then the Fed will have less incentive to lower the federal funds target rate at their upcoming FOMC meeting January 28-29. Wall Street doesn’t abide by that.

Right around 9:00 am ET, a half hour after the release, Dow futures were down 330 points, NASDAQ futures fell 215, and S&P futures were down 50.

From the BLS:

Total nonfarm payroll employment increased by 256,000 in December, and the unemployment rate changed little at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment trended up in health care, government, and social assistance. Retail trade added jobs in December, following a job loss in November.

The number was rather large and beyond most expectations. However, it's important to note where the jobs were created: health care, government, and social assistance. Two of those - government and social assistance - actually intersect. Health care also crosses into those areas, so, most of the jobs came from the same basic service area encompassed largely in the public sector. Retail added jobs during the holidays. No, really, they did. Big surpise (Hint: most of those December retail hires won't last through January).

Adding up the largest increases:
Retail: +43,000
Leisure and hospitaolity: +43,000
Health Care: +46,000
Government: +33,000
Social assistance: +23,000

That gives us +188,000 of the 256,000 jobs created in December. Small gains in education, professional and business services, information, financial services, and transportation account for the remaining 68,000 jobs.

Naturally, the numbers ar not reliable, being nothing more than estimates by the fudgers at BLS, but Wall street takes them at their word - probably a mistake. In any case, the end of the week looks bleak.

Through Wednesday's close (markets were shuttered Thursday), the Dow was down 97 points, the NASDAQ off 142, and the S&P was 24 points lower. With Friday's cash session looking like a bummer, the week looks like it will belong to the bears, though there's always the chance of some miracle rally occurring, the cause a report by some "unnamed sources" or maybe a mysterious, deep-pocketed buyer snatching up index options.

Otherwise, it appears everything is going according to plan to dump the stock market and the economy right as Donald J. Trump takes the oath for the Presidency. Some will say, "meh." Others may be just a little more opinionated.

Here's a mental exercise for anybody who is concerned about their financial future, which should be, well, just about everybody. This is something that requires a bit of thought, unlike just popping off an answer to a poll.

It's a simple A-B choice: Which would you prefer, a hyper-inflationary spiral or a deflationary collapse?

There's no in-between. The banking monopolies have seen to that. It's one or the other.

In the hyper-inflation model, prices for everything increase at an accelerating pace with which your wages cannot hope to keep up. You are forced to dip into savings (which become worth less and less every passing moment) or go deeper into debt - at higher and higher rates of interest - in order to survive.

The deflationary condition implies that jobs become scarce, pay is low, you might actually be laid off or terminated. Because a high level of unemployment induces a supply-demand dysfunction. Lower and lower demand pushes prices down, but still, few can afford anything beyond the basics. Again, you have to dip into savings (which may be depleted rather quickly) or borrow to survive.

The time element may be worth considering. A hyper-inflation event - like what happened in Weimar Germany or Zimbabwe or Venezuela ore recently - might last three to five years before currency becomes entirely worthless and a new monetary system is brought to bear. The intervening period, with prices rising at a quickening pace, monthly, then weekly, then daily, results in bankruptcies, high crime, suicides. The endgame produces few winners, but the average Jane or Joe gets a second chance at making ends meet and possibly finding some level of prosperity.

Deflation may last longer, perhaps 10 to 15 years, as was the Great Depression, which lasted from roughly 1930 until 1942-43. The basics of life are less abundant and not easily acquired. Poverty, sickness, and starvation are real concerns. It's the ultimate welfare state, wherein almost everybody outside the ultra-rich, receives some form of government aid. Most will be provided with just enough to get by. Like depression era folks were fond of saying, "we had everything, except money."

It's worth looking into and choosing a strategy that fits one or the other scenarios, or both, because there might be a bit of both. There's already been a good bout of inflation, so, like in physics (for every action there's an equal and opposite reaction), some deflation may be on the menu.

Keep front of mind the sage advice of Benjamin Franklin: "If you fail to plan, you are planning to fail."

At the Close, Wednesday, January 8, 2025:
Dow: 42,635.20, +106.84 (+0.25%)
NASDAQ: 19,478.88, -10.80 (-0.06%)
S&P 500: 5,918.25, +9.22 (+0.16%)
NYSE Composite: 19,240.74, +26.86 (+0.14%)