While the survey of businesses reported 206,000 net new jobs in June, the job creation for both May and April were revised down by more than 50,000 each. This left the second three months of the year (April, May, and June) with the lowest average job creation since 2021.

In addition, in the survey of households that is part of the same jobs report, only 116,000 more people were employed, implying that many of the new jobs are part-time jobs and more people are working more than one job to make ends meet. While the two surveys rarely match up, this continues the string of much weaker reports from households. In May, households reported 408,000 fewer people working even as the survey of businesses said that there were 218,000 net new jobs.

The unemployment rate also ticked up to 4.1% from 4% in June. The three-month average also rose to 4%, a 0.4% increase from the recent three-month low of 3.6%. This is very close to 0.5% rise that has shown itself to be a reliable predictor of a coming recession. This is also the first time that the unemployment rate has been above 4% since 2021.

Another sign of weakness was the increase in wages, which was only 3.9% from a year ago. This is the lowest rate of increase since 2021. While it is likely to be higher than the rate of increase of prices as measured by the Consumer Price Index (CPI) report coming out this coming week, the CPI and other measures of inflation do not include interest rates, which are at the highest level in decades. The interest rates on a standard 30-year mortgage are the highest in more than 20 years, as are car loans. Credit card interest rates, at over 22%, are at record highs for the 30 years of data.

This past year hotel and restaurant, health care, and government made up most of the job gains. But in June hiring at hotels and restaurants almost came to a standstill, with only 7,000 net new jobs. There was also a loss of almost 50,000 temporary jobs. Businesses often will cut temp workers at the first signs of sales weakness.

While the unemployment rate for whites was the same from May to June, at 3.5%, it jumped the most for Asian American workers, whose unemployment rate jumped by a whole percentage point. The unemployment rates for women and African Americans also went up, by 0.3% and 0.2% respectively.

Despite the signs of weakness, all the major stock market indices rose in the hope that the signs of weakness will prompt the Federal Reserve to begin to cut interest rates in September. Investors have bought into the story of a “soft landing” where inflation slows without a recession. Despite the fact that this almost never happens, investors have convinced themselves that “this time is different.”

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San José, CA – With Bitcoin now down 70% from its record price in April of 2021, businesses based on cryptocurrencies have started to fold. The latest victim was Celsius, a crypto “bank” which stopped withdrawals from its accounts on Sunday, June 12. Celsius had more than $20 billion in assets at its peak in August 2021, drawing investors with yields of more than 18%. But Celsius is looking more and more like a high-tech Ponzi scheme that only lasted as long as new investors kept buying in.

The collapse of Celsius followed the collapse of the “stablecoin” Terra just last month. “Stablecoins” are digital currencies that are supposed to maintain a value of $1, unlike Bitcoin and other cryptocurrencies whose value can go up and down. But Terra was not backed by assets such as cash or Treasury Bills (short-term U.S. government bonds), instead it was “backed” by another cryptocurrency, Luna. The attraction of Terra was that it enabled investors to put their Terra coins into Anchor Protocol, which was paying interest rates similar to Celsius. But on May 7, Terra slipped below $1, and continued to drop, eventually losing more than 95% of its value.

The losses from Celsius and Terra are in the tens of billions of dollars, but pale compared to the losses by investors in Bitcoin and other cryptocurrencies. Bitcoin is based on solving complex mathematical problems, so it has the scarcity needed for money. The problem is that fundamentally it has little use aside criminal transactions, and even here governments are getting better at tracing and clawing back illegal crypto payments.

For decades low interest rates and low inflation have set the conditions for investors to pursue risky assets. First there was the boom and bust in dot-com stocks in companies that didn’t even have any revenue, not to mention profits. This was followed by bonds backed by risky mortgages which went into default with the bust in the housing market. Most recently there are Bitcoin and other cryptocurrencies, and a number of “DeFi” (decentralized finance) like Terra and Celsius.

But what is different today is that the economic environment has changed. Inflation, running at 9.3% (CPI-W) is the highest in 40 years. The Federal Reserve is raising interest rates to jack up the unemployment rate and bring down inflation. On June 15, the Federal Reserve raised short-term interest rates by three-quarters of one percent (0.75%), the biggest jump since 1994. On the same day, the Federal Reserve also began to reduce their $9 trillion stash of bonds by $47.5 billion a month, which will double to $95 billion a month in September. This will increase the amount of bonds on the market, pushing bond prices down and longer-term interest rates up.

This “double-barreled” increase in both short- and long-term interest rates has never been done in such an aggressive manner by the Fed. These interest rate increases are likely to begin to bring down inflation but are all but certain to bring about another recession.

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San José, CA – On Sunday, March 15, the Federal Reserve bank hit the panic button, dropping interest rates by a full percentage point to near zero. The last time that Fed did this was in December 2008 during the financial crisis. The Federal Reserve also pledged to restart the Quantitative Easing or QE program of longer-term bond buying, first started in November 2008. Trump’s Secretary of the Treasury Mnuchin also vowed to go to congress this coming week to restart emergency financial powers for the federal government in addition to the Fed’s actions.

The stock market did not react well, seeing it as a confession that Trump’s promises for economic action and the weak bipartisan economic package going to the Senate this week were not enough to keep the economy from shutting down. The Standard & Poor 500 (the broadest of the major stock indices) saw its futures fall 5% and trading was halted. The last time this happened a week ago, trading had to be halted on Monday as the stock market fell 7%, to start a week of wild downs and ups.

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Economists usually measure what is called the real money supply. This adjusts the amount of money by the prices of goods and services. In the last three months of the year the Consumer Price Index fell at a 12.7% annual rate, mainly due to falling gasoline prices. When the increase in money is compounded by this fall in prices, the real money supply (or amount of money measured by how much it can buy) is growing at more than a 40% annual rate. When you factor in the decline in the economy as measured by Gross Domestic Product, money (relative to the economy) was growing at almost a 50% rate.

Growth of the amount of money in circulation could increase in the near future. The Federal Reserve is talking about buying more U.S. government bonds to try to lower long-term interest rates (it has already pushed short-term interest rates to almost zero). Since the Fed would be creating money to buy the bonds, there would be even more money in circulation. With the U.S. government budget deficit on track to be the largest since World War II, it should be no surprise that the Federal Reserve is creating more money to help pay for the spending and tax cuts to come.

Conservative economists argue that more money will cause inflation. This is not a big concern right now since prices are actually falling, that is, there is deflation going on. Deflation can be very toxic for an economy, and is one of the factors that made the Great Depression so bad. Deflation makes it harder to pay debts, leading to more defaults, bankruptcies and bank failures, dragging the economy down even more.

Big increases in the supply of money could cause the value of the U.S. dollar to fall. This could help the U.S. economy by making our exports cheaper and easier to sell. However imports would become more expensive. Foreign investors might be less willing to buy U.S. government bonds, which would lead to either higher interest rates or the Fed printing even more money to buy the bonds.

Underlying the growing economic mess is the fact that capitalism is a dangerous and irrational system that is facing a crisis of overproduction, where working people do not have the money to purchase the goods they produced. People are living on the streets and foreclosed homes are sitting vacant.

While the future impact of the surge in money creation can’t be known, one thing is clear: Printing more money is typically only done by governments in fairly desperate straits, when they can’t get the money they need from taxes or borrowing. For example, when the Confederate government was on its last legs during the Civil War, it resorted to printing money. The fact that the Federal Reserve has been forced to crank up the printing press is another reflection of how bad the economy is.

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