The U.S. economy has now become completely dependent on monetary stimulus from the Federal Reserve to support anemic GDP growth that is arguably below the rate of inflation.
While some are convinced that the Fed is ready and willing to remove the economic "training wheels" of quantitative easing, in truth these are the only wheels that are keeping the data from revealing the obvious: that the United States is currently in recession.
As a result I expect additional bouts of "QE" to be unleashed this year. A weak jobs report tomorrow will cement this likelihood. In the end I think we are likely to get QE III and QE IV. Eventually we will get more QE's than Rocky movies!
When analyzing the report, it is also important to look at what types of jobs are being created and destroyed. Without meaningful improvement in the goods producing manufacturing sector, any uptick in hiring should be viewed with a good deal of skepticism. Expansions in public sector employment, or gains in health care, education, or the service sector, will not create the wealth needed to reverse our current economic malaise.
However, those assuming that a weak jobs report will definitely result in a Wall Street sell off fail to understand the dynamics of our current market. As weak employment numbers raise the chances of a quicker dose of Fed liquidity injections, some investors may be encouraged by the bad news.
The opposite may be true in the wake of a strong number. This is what happens when money printing replaces production as the true driver of an economy.
Even if numbers are strong, I do not believe that it will alter the underlying economic drift.
The American economy is too weighed down by debt, regulation, and inefficient taxation to grow spontaneously. When the numbers falter, we will fall back on our unhealthy dependence on cheap money.