Larry Kudlow: There are numerous issues with the November jobs report

So, on the surface today, the November jobs report looked pretty good, with a gain of 263,000 non-farm payrolls. But then, if you look under the hood, there are a number of problems with this report. 

Perhaps the biggest is that the household survey, which picks up small owner-operated businesses – well that thing fell 138,000 after an October drop of 328,000. So, in the past two months, the household survey has lost 466,000 workers. 

I’ll tell you, at turning points in the economy, the small household survey–type businesses are frequently the leading indicators, and in this case, the trend is worsening. Now, the unemployment rate, which comes from the household survey, held steady at 3.7%. But, again, that's because of the drop in the labor force. 

Now, back to the corporate payrolls, over the last three months, they’ve increased an average of 272,000 compared to a six-month average of 323,000, compared to a 12-month average of 408,000. So, clearly, there is a slowdown trend.

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Now, for Jay Powell's Fed, there are significant wage inflation pressures that may be a big issue.  Production workers' average hourly earnings jumped seven-tenths of 1% and stand 5.8% above a year ago. Now, that's still below the 7.7% October CPI, so more wages earned are buying less food and groceries or gas at the pump or home heating oil. But Jay Powell has indicated several times, including this past week, that he is concerned about sticky inflation, predominantly in services, because of rising wage costs. So, caveat emptor.  

The Fed will do a 50-basis point hike this month, which is lower than the last many upward moves. But, by the way, they see the world — this is how they see the world — wage inflation remains a big threat and that strongly suggests that they are going to keep tightening interest rates well into next year.

I don't have to agree with their model. OK? I have no problem with rising wages, as long as the workforce is generating the productivity to pay for it. OK? Heck, I'm even in favor of seven days of paid sick leave, contra Joe Biden and the congressional decision to jam an unfair union-busting agreement down the throats of the railroad workers. But I digress. 

Last week, I talked about three important economic indicators that still spell recession for next year. One: conference board's index of leading indicators, which is plunging. Two: The Federal Reserve’s M-2 money supply has crashed from 30% growth down to below zero, and the third is the so-called "inverted" yield curve — folks stay with me on this, we’re in the weeds a little bit — but this is the three-month Treasury bill rate. It is higher than the 10-year bond yield. It's the classic New York Fed model that has an incredibly accurate batting average. When the curve inverts, it predicts recession in the next year. Right now, the bill rate is four-thirty, 4.30%, the 10-year note is 3.5%. So, it’s an ominous sign. 

Meanwhile, congressional Democrats want to launch a lame-duck spending spree. How about that? Tragically, it looks like Republicans, including the Republican Senate leadership, is going to go along with it and unbelievably — this is just an aside — House Republicans, apparently, are restoring pork-barrel earmarks. What? Anyway, this is all exactly the wrong medicine for an ailing economy suffering from high inflation. It is exactly the wrong medicine. 

In a smoke-filled room, out of sight of the public, in the basement of the Capitol, we could be looking at a so-called omnibus bill that would put up at least a couple of hundred billion dollars of various social and pork-barrel spending plans. On top of this, the $5 trillion already spent by the Biden crowd in the last two years, which is what caused inflation in the first place, and by the way this omnibus spending spree could be worse. There's a lot of talk about adding on a child tax credit — that would run about $1.5 trillion and there’d be no work requirements.  

There’s a lot more money coming for Ukraine. Who knows, they might even stuff John Kerry's global warming climate reparations into this monstrosity. Nobody knows. And by the way, there's still a $100 billion bill outstanding for Joe Biden's beloved Paris Climate Accord back in 2015.  

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It's wonderful to see the Biden-Kerry "America Last" policy of paying hundreds of billions of dollars to bribe poorer countries never to use fossil fuel. Meanwhile, the Bidens are still doing the best they can to stop any fossil fuel production here in the U.S., which of course would bring prices down by boosting production and would end shortages. Every household would benefit.

Look, with the country on the edge of a high-inflation recession, this is a time for free-market, supply-side economic growth policies. How about ending the war against fossil fuels, keeping the Trump tax cuts in place, stopping the jihad — the regulatory jihad against businesses and cutting federal spending and re-imposing work requirements. What about that? Now that’s an agenda for economic growth. That's the kind of stewardship that the Republican Party should be touting, in both the Senate and the House. 

So, I’ll just say, wake up, fellas! Please, wake up! And that's my riff. 

This article is adapted from Larry Kudlow's opening commentary on the December 2, 2022, edition of "Kudlow."