Wednesday, December 21, 2016

Slowing Jobs, Lower Unemployment, Almost Always Means Inflation Spikes: 50 Years Of Proof

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*We go through history to see what this strange period of jobs reports resembles.

*When unemployment is going down yet non-farm payrolls slows it almost always means inflation spikes.

*We take you through a quick 50-year tour of this phenomenon.

*Buckle up.

Fast inflation along with slow jobs is not a good market setup. It means we have rising rates with slowing earnings. Markets (NYSEARCA:SPY) have risk in that setup. We show a quick review of history to say that we are early in a potential inflation spike. Given the enormous bond buying and global easing, inflation would cause everybody including central banks to sell.

Let's Go To The "Video Tape"

Source: St Louis Fed with some Elazar circles.
Fun chart we know.
Hang in there with us and we think we're about to show you something amazing. You can go to the link here and see for yourself.
The blue line is unemployment.
The red is year-over-year change in non-farm payrolls ("NFP").
The greenish/yellowish is CPI.
Here we go.
When unemployment (blue line) is low or dropping but the NFP turns down (red line) you soon have a spike in CPI inflation (greenish/yellowish line).

We drew some semi-semi circles to show you where we spotted a similar setup to today's environment.
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