Executive Summary

• Anemic employment & wages growth depresses the odds of near-term interest rate hikes
• Why energy costs increases are experiencing a lull, keeping inflation lower than many expected
• The demographic arguments for deflation
• Why the US is becoming more vulnerable to a repricing of natural gas -- vs oil -- in the coming decade

If you have not yet read Part I: When Every Country Wants to Sell, Who Buys?, available free to all readers, please click here to read it first.

The most recent US jobs report was once again a disappointment, despite the headline number of 192,000 jobs created. Over the past two years, the economy has reliably created about 150,000 jobs per month. This has been just enough to keep up with population growth, but alas, not enough to put the long-term unemployed back to work. The concerning data in the report came in the details of the jobs created: as usual--and this has been a trend for several years now--mostly in the lower wage sectors. A few wrap-up tweets from Dan Alpert of Westwood Capital summed up the facts rather nicely:

#BLS OK, here's the result: 49.21% of all jobs created in March were in the low wage sectors - reverting to situation we saw last year (1/2)

— Dan Alpert (@DanielAlpert) April 4, 2014

#BLS ...and, in March, hourly wages FELL...down one penny overall and down 2 cents for production and non-supervisory workers. NOT GOOD.

— Dan Alpert (@DanielAlpert) April 4, 2014

Other notable observations from recent trends in US jobs reports include the fact that job creation in 2013 was no higher than in 2012. Not exactly an encouraging trend for those who would be looking for inflation risk, or strong growth in 2014.

But perhaps worst of all has been the number of workers leaving the workforce. Part of this can be explained, of course, by demographic retirements. It's no secret that the US has an aging population, and there's a bulge of retiring workers that will admittedly create some gaps in the labor market over the next decade. But the large numbers of workers exiting the workforce is also explained by discouraged workers, and that unemployment benefits for many have started running out.

What many in the public do not understand, is that workers taking unemployment checks are counted as active seekers of employment. They are added to the composition of the workforce, and when they continue to take unemployment checks but do not find work, they serve to keep the unemployment rate elevated. But when unemployment benefits expire, and workers leave the workforce, the unemployment rate may... » Read more

In this week's Off the Cuff podcast, Chris and Mish discuss:

• Sanity on Syria?
  • The rush to war may be slowing down
• Markets a-bubblin'
  • Irrational valuations everywhere
• Japan's woes
  • Bug, meet windshield
• The disability disaster
  • The new – permanent – form of welfare

This week, Chris and Mish look at the sorry cards on the table and wonder why anyone wants to play this game.

Stock market valuations are back to non-sensical levels. Even members of the Fed are beginning to admit that their liquidity policies are creating an ongoing stream of asset valuation bubbles. » Read more

The stock market blasted higher, with the Dow crossing the 14,000 mark because the jobs report came in well under expectations.  In today's world, one follows the other.

In yesterday's world, the one where logic and reason ruled the day, that first sentence would not have been written.  Economic weakness would not have been rewarded with a big surge in stocks.

But this all makes perfect sense in today's world, once you tilt your view to the "new normal" and get with the program.

I titled this piece 'running on fumes' because, in one very real sense, that's exactly what this current market is doing.  The fumes in this case happen to be thin-air money that the Fed is injecting into the financial markets to the tune of $85 billion per month, or roughly $4 billion per working day.

When an engine finally runs out of gas and turns to fumes, the last act of that engine is to run really hot – to race for a while – before finally quitting. » Read more