subject: Day Trading Alert - Don't Buy the Unemployment Hype! Day trading success secrets that you MUST know [print this page] Day Trading Alert - Don't Buy the Unemployment Hype! Day trading success secrets that you MUST know
If you're a long-time follower of The Guerrilla Trader, then you already know how I feel about the legitimacy (or lack thereof) of the Unemployment Data that gets released in various announcements on a monthly or weekly basis.
You know that I personally believe that the Government manipulates this data, using seasonal adjustments, ignoring specific categories of unemployed or underemployed workers, etc.
Well, sometimes the government can manipulate this data without adjusting anything - just by increasing its own employment.
And that's exactly what happened last week when the Unemployment Rate and Non-Farm Employment Change data were released.
While most investors and traders were basking in the glow of the single largest monthly job growth in over 10 years (431,000 in May), others who were skeptical of these results started to dig beneath the surface (such as myself).
And just guess what I found...more government manipulation. But this time, not by adjusting data, but by inflating it with temporary hirings.
You see, of the 431,000 "new" jobs announced for the month of May, 390,000 were from the Federal Government! That means that only a paltry 41,000 came from the private sector, which is far more telling about the current state of the "economic recovery".
So where did all of these new government jobs come from? Well, think about what year it is.
It's 2010. And what happens in our great country once every decade?
That's right - the Census. So where did these new workers come from?
The United State Government actually created 411,000 TEMPORARY Census jobs in May. This means that outside of these once-in-a-decade job positions, the government actually CUT 21,000 jobs.
And also, these jobs are TEMPORARY - once the Census has been completed, we'll no longer need these positions - and so these employees will be dumped back into the pool of the Unemployed.
So...surprise, surprise, the U.S. Gov't was the driving force behind the surprising surge in job growth.
But when you dig beneath the surface, you quickly discover that where job growth really matters (in the private sector), new jobs are NOT growing on trees.
In fact, considering the staggering job losses this country has absorbed over the past 2 years, 41,000 new private-sector jobs in May is just an itsy-bitsy drop in the bucket.
Also, what was very interesting to me personally was the Market's reaction to the announced employment data.
The unemployment rate dropped by 0.2% (a HUGE drop, all things considered), and we "added" 431,000 "new" jobs in May.
All of this should have been considered excellent news, and the markets should have rallied to the moon...right?
Not so fast, my friend! (to quote my pal Lee Corso)
Instead, the market PLUMMETTED! For example, the S&P 500 Future market was down over 20 points in a matter of mere minutes.
So why did the market drop with all of this supposedly good news?
Well, part of the reason was many leading economists were expecting over 500,000 new jobs in May, which would explain an immediate negative reaction in the Markets - anytime you see over a 90K difference between expectations and reality, you'll see massive market movement.
However, after a minute or two, you would have expected cooler heads to prevail. You would have expected Traders and Investors alike to realize that the unemployment rate was down 0.2% (0.1% more than expected), and even though we didn't hit the economists lofty expectations, we did show an on-the-surface job growth of over 400,000, which can only be considered good news...right?
Well, not according to the Markets. I can only surmise that Traders and Investors are starting to catch on to the Governments hand in the employment data, and are no longer just taking everything at surface value.
That being said, when you're ready to discover how YOU can take advantage of market insanity like the 20+ point drop we experienced before market open last Friday...
