No Job Creation - As in None, Nada, Zip, Forget About It!!

A bit ironic that going into Labor Day weekend we have zero growth in non-farm payrolls for the first time since 1945 (though you have to acknowledge that there was a bit of a major strike in the cards here distorting the figures).

http://www.msnbc.msn.com/id/44370462/ns/business/

And the numbers for job growth the past two months were decreased somewhat significantly.

http://www.calculatedriskblog.com/2011/09/august-employment-report-0-jobs.html

This is shocking - not that it happened, just that it is shocking that many did not expect it. I have done this drill a lot, but let's repeat. Government stimulus is gone and dead and, like it or not, the Tea Party is forcing us into a deficit reduction mode whether this makes present sense or not. Deficit reduction reduces GDP - it does not increase it. And while I agree it is necessary, I recognize a genuine debate on whether right now is the time. Like it or not, I think it is happening.

QE2 also dead, and no QE3 yet announced, though I still expect it to happen. EU on the ropes (a bit more below), States cutting back, China cutting back and a bunch of other cut-backs around the globe. While I agree most U.S. companies are sitting on a lot of capital and are not going belly up, they are also not hiring as they do not know where their sales growth is coming from enough to support hiring. And I do not either.

And so we get to Europe. Oh my dear Europe. I personally do not see any realistic global recovery until the EU gets past its problems and I do not see that happening any time soon. Greek bonds, again moving sharply higher and what else would anyone expect. Just a matter of time before the EU takes its medicine and we may (as in undoubtedly will) get a foul taste from the same medicine in the U.S.

http://www.calculatedriskblog.com/2011/09/europe-update-greek-bond-yields-move.html

Now the rumors were in the market on this today and now it is news. The Federal Housing Finance Agency (FHFA) has sued 17 financial institutions over losses to Fannie and Freddie, including some officers and other individuals. Now I am sure you may have heard of a few of the institutions, such as Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, HSBC and the like. If you need it, here is the news release giving details:

http://www.fhfa.gov/webfiles/22599/PLSLitigation_final_090211.pdf

One might say that this is not a good time for this suit. I do not have the details but last I heard Fannie and Freddie (as in us taxpayers) were out about $200B on the situation, but still, many might say with the economy suffering this is the wrong time for this suit. I, on the other hand, think it is long over due. We built major moral hazard saving these institutions over the past three years and putting them to task for what they did is well over due. It may delay a recovery, but well worth the pain for the gain of damping down moral hazard of them continuing their reckless ways. Sure, they have gotten their act together on not lending to those with no credit but me thinks they are still playing fast and loose with the derivatives game and I am all for them paying the price on this. Lest you missed it the Madoff Trustee filed an $19B suit against JP Morgan Chase seeking to hold it liable for the losses to the Madoff Ponzi scheme. No comment on who wins, but moral hazard is something we need to cure before we can move forward.

Disclosures: None. Though I do personally bank with a subsidiary of RBS, which is one of the aforementioned defendants.