sunday night in order not to roll back the big move we had. we need to see the german supreme court go with the program. the hey ya outkast program. there's always a bull market somewhere and i promise to find it for you right here at "mad money." i'm jim cramer. see you monday. hey, larry, what do you have for us? all right, jimmy. bad jobs, roaring gold, fed stimulus on the way. good evening. i'm larry kudlow. this is "the kudlow report." our top story tonight -- president obama must have known his sleep-inducing, flat, acceptance speech last night must have been an indication he knew three numbers ahead of time you need to know. 8.1% unemployment, 96,000 nonfarm payroll jobs added -- a terrible number -- and all 60 days before the election. it looks like his goose is cooked on the economy. we'll look at what the president had to say like this mugt.

>> i'm asking you to rally around a set of goals for your country. goals in manufacturing, energy, education, national security and the deficit. real achievable plans that will lead to new jobs, more opportunity, and rebuild this economy on a stronger foundation. that's what we can do in the next four years and that is why i am running for a second term as president of the united states. >> all right. so far as i can tell that's the only time he said the word "jobs." i don't hear growth at all. maybe i missed something. i don't think so. we did hear government spending, i'm sorry, now called citizenship and tax the rich. i can tell you what's coming. like europe, a value added tax. the most insidious tax hike of all slamming the middle class. we'll get into it later on. markets flat but with the jobs numbers, investors are waiting

on the fed meeting next week. gold the big winner up $32. that's a signal fed stimulus is on the way. is that one reason why russian president vladimir putin is reportedly stockpiling gold? later in the show, the convention's post-mortem. who made the better sale to independents. was it republicans in tampa or the democrats in charlotte. first up tonight let me dig into today's anemic jobs report. once again, no joy for the american workforce. let's go to the first one. all right. nonfarm payrolls up 96,000. this was a big disappointment. wall street consensus expected. 125,000 to 150,000. it didn't happen. the last two months were revised down by about 41,000. you heard about the 8.1 unemployment rate. this is the 43rd straight month above 8%. also a disappointment. here is the deal.

it fell slightly for the wrong reasons. number one, household employment. right here. household employment. this fell. this is where the unemployment number comes from. this fell in august. it had fallen about 150,000 or 180,000 the month before. this is a bad signal that people are moving away, getting discouraged. this one is the absolute killer. the absolute killer. i'm going to circle it right here. all right. civilian labor force shrunk by 368,000. discouraged. they are just walking away. so as the household employment went down and the civilian labor force went down substantially for the second month in a row that's why the unemployment went down. this is a very bad omen. all right. next up, average hourly wages. also a very bad omen. we are looking at 0 wage

increases for this month of august. nothing for consumers, mothing for the average worker. this is way below food price increases, oil price increases, and the overall consumer index. it is a bad omen for spending. that's the end of the story. so i'm not thrilled about this. i don't know if it was a disaster, but it was a huge disappointment. once again, the great american job machine cannot seem to get the kind of momentum out's had in past recoveries. let's bring in our distinguished guests. dean baker of the center for economic and policy research. and steefen moore, author of "return to prosperity." dean baker, uh want to start with you. mitt romney said last night was a celebration of failure. today he said if last night was the party, today was the hangover. he was referred to jobs which i

believe are cooking obama's economic goose. your thought, dean baker? >> the republicans know about failure. we are losing 800,000 jobs a month when president obama took office. it wasn't a great report. no two ways about it. i never say that. let's look at the numbers closely. if you want to look at the household survey and make a big deal about employment growth you should have been jumping up and down in may when it showed 420,000 new people working. the numbers are erratic. that's why most people don't pay attention to it. >> i did actually jump up and down. >> i missed that one. >> unfortunately that was may. we are now through june, july -- >> next month you will have occasion to jump up and down again. >> this whole economy looks luke out's going south. steve, what's going on with the jobs story besides the fact that out's cooking obama's economic goose? >> i want to tip my hat to dean bak baker. you are doing a good job putting

lipstick on the pig. the problem is this is a trend where we are seeing a downward trend over the last couple of years. last year job growth was decent. not great for a recovery, but decent. we are seeing a deceleration this year. we're not moving forward to use the phrase that barack obama used last night. we're moving backward. that's the real scary thing. dean, i think the explanation for this is a couple of things. i think the looming tax increase is putting employers on hold. one of the reasons the labor force participation rate is falling is because a this president is president of welfare, president of food stamps, unemployment insurance, medicaid. all of the government benefit programs i believe are holding people out of the workforce. it's a labor supply and demand problem. >> we just don't find evidence for that. a lot of people looked at it in terms of unemployment insurance. most people when they leave unemployment insurance because

the benefits expire, they drop out of the workforce. if anything out's keeping people in the work force because you have to keep looking for work to get benefits. there are positive signs in the economy. i'm not a big cheerleader but we have seen upticks in residential construction. house prices are on the way up. you guys dug a big hole. when the republicans make a mess it's a big one. it's going in the right direction now. >> here's the problem with it. i don't think -- look, everyone agrees barack obama inherited a crisis. 800,000 lost jobs. we have heard it over and over again. the president was elected to solve the problem. you look at the numbers and say, my goodness, the numbers are lousy. i bet a lot of people watching the show think the numbers are much worse than 8%. you know the numbers meaning people can't find a full-time job and people dropped out is closer to 15%. >> that fell .3% this month. >> a little bit.

out's still very near 15%. >> going in the right direction, down. >> it went down -- >> it was 16%. >> dean baker, look, i think the economy is going the wrong way. uh think it is actually slowing this year. that's not supposed to happen. that's why the jobs are slowing. here is my basic point. if the fundamental obama policy which he repeated last night in his convention speech. he ain't changing it. if the keynesian spending, government dependency and federal reserve pump priming. if that was going to work, dean baker, it already would have worked. >> out did work almost exactly by the textbook. >> it ain't -- if it was gonna work it would have worked. it ain't working and it's time to change it. >> if you look at what they said the stimulus would do they said it would create 3 to 4 million jobs. the problem is we needed 10 million to 12 million. read what they wrote.

3 million to 4 million. they got somewhat less. number of estimates from the congressional budget office. they say 2 to # 3 million jobs. worked like a charm. problem was we needed two or three of the stimuluses. >> i read the report. they predicted by now the unemployment rate would be 5.6%. >> they underestimated the severity of the downturn. >> here's the other problem. are you saying we have to keep borrowing a trillion, trillion, trillion every year? you're going to bankrupt the country. >> our interest as a share of gdp is near a post war low. out's about 1.5%, lower than it was at any point when reagan was in the white house. >> that's because the interest rates are low. if you look eight, ten years ahead you are looking at interest expenditures on the debt, larry, being the single biggest expenditure item in the budget. >> they will be back where they were in 1992.

>> we are still 5 million jobs below. >> exactly. >> we have to put up with over 20 million people either unemployed, underemployed or have marginal numbers. >> absolutely. >> these aren't good. the same come praability, over 9 million jobs over the same period. obama produced 4.5 million. the numbers are cherry-picked but reagan was stronger by twice. >> because he cut tax rates. >> it was a different recession. he came in following the collapse of the housing bubble. >> that's what obama is missing. he has to change the policy to put america back to work. dean, thank you for coming on. steve moore, great to see you. why are the jobs numbers always so disappointing and what can we do? distinguished stanford university professor ed lazeer of president bush's economic advisers.

he wrote "there is no structural unemployment problem." ed, it's good to see you. i heard you put up a hell of a fight in jackson hole. i heard you won. your point is, if i get out right, correct me -- the problem with the lousy jobs numbers is the economy is not growing. it's not a structural problem. we are suffering from lack of growth. >> right. this is not good news. in some ways this may have been misinterpreted. people thought this suggests that we have policies that we can implement that will turn things around. there are policies that we can implement to turn things around. unfortunately they are the kind of things that happen over the long run, mott the short run. the evidence is close to what you guys were talking about earlier. this is not a jobless recovery. the problem is it's not a recovery. if we go back and look at the numbers, our difficulty is the dpap is widening.

we are not coming back to where we should be. we are getting further away. with 2.2% growth per year when we should have 4.5% growth per year we are not going to come back to where we should be. it's not the labor market. it's the economy. >> you are saying there may not be a real recovery. everybody said if you have deep recessions and out's not just 81, 82 under reagan. we had deep recessions in the 70s. here's the deal. the worse the recession, the bigger the springback. >> right. >> why didn't we get the springback in jobs, capital goods investment and gdp? this should be obama's trump card, but there ain't no springback. >> you're right on. as an empirical statement we know the deeper the recession, the more rapid the recovery. that's true in general. it's even true in the great depression.

if you go back and look at the first four years, which were terrible. lost 40% of output, that all came back in the next four years and then there was another recession. there is a rebound generally. there hasn't been this time. there are explanations for it. i believe the problem is the policies. the policies tended to be short-run. you know, some are caricatures like cash for clunkers. moved car sales up for one month. more to the point and getting to what dean talked about earlier. even if you believe the stimulus was effective, the problem with the stimulus is that you get a bump but you pay it back later when you contract the economy, contract the government sector back to where it should be. as a result of not getting new kind of significant bump out of the stimulus payments, what we have had to do is maintain them at this current level. as a result we have been adding 8 to 10% to the deficit every

year. now we are talking about having a debt to gdp ratio of around 70%. we are going to look like italy soon. >> i know. that's the problem. we can't afford it. so much of this stuff is making promises we can't afford. anyway, ed lazear, thank you very much for coming on. >> thank you. >> coming up, fed stimulus. that's what the jobs number is supposed to represent. you think markets would have been jumping for joy. why the gloomy stock market action? other than gold which had a great day. we'll ask phil orlando of the distinguished federated investors. later on, not only was the jobs number an economic disaster, it was a political disaster. obama's failed speech and failed jobs creation has now opened the door wide for mitt romney. he's got a big opportunity. our free market friday panel is going to sound off. folks, as always, don't forget. free market capitalism is the best path to prosperity.

if we had more free market capitalism and more economic freedom we would be growing jobs at 4, 5, 600,000 a month. trust me. reagan taught me that. i'm larry kudlow. we'll be right back. jack, you're a little boring.

boring. boring. [ jack ] after lauren broke up with me, i went to the citi private pass page and decided to be...not boring. that's how i met marilyn... giada... really good. yes! [ jack ] ...and alicia. ♪ this girl is on fire [ male announcer ] use any citi card to get the benefits of private pass. more concerts, more events, more experiences. [ jack ] hey, who's boring now? [ male announcer ] get more access with the citi card. [ crowd cheering, mouse clicks ] i bought the car because of its efficiency. i bought the car because i could eliminate gas from my budget. i don't spend money on gasoline. it's been 4,000 miles since my last trip to the gas station. it's pretty great. i get a bunch of kids waving at me... giving me the thumbs up. it's always a gratifying experience. it makes me feel good about my car. i absolutely love my chevy volt.

♪ it makes me feel good about my car.

stocks finished flat on today's lousy job numbers. but weren't professional traders supposed to be cheering? after all it's not that bad. the dow was up 216 points. the nas up, the s&p up 31. excellent numbers. we're going to talk to phil orlando, chief equity strategist at federated investor. one theory was a lousy jobs number would cement a big move for fed stimulus which is supposed to be great for stocks. what happened today? >> to some degree you had a huge move in the market yesterday. up 2% on the back of draghi's action at the ecb. having studied jackson hole a couple of weeks ago, we felt the

fomc decision was going to be close. it would be data dependent. the silver lining on the horrible jobs number is we think the hurdle has been lowered and we'll get something next week. >> hope springs eternal that the fed will pump more money into the economy in what would be a futile effort and waste of taxpayer money. but i want to ask you this. maybe the lousy jobs numbers, revisions the last few months and the whole economy has slowed down to less than 2%. i want to ask you. is it good that the fed is going to stimulate or are the lousy numbers bad because they are telling us a bad economy will produce bad profits? since profits are the mother's milk of stocks bad profits mean bad stocks. >> corporate earnings will be a question, larry. the second quarter we just saw wasn't great. it was okay. third will be much of the same to a significant degree. we need stronger top line growth.

we think third and fourth would be next. consumption is 70% of gdp. we'll have to watch it. >> we had a 0.0 wage rise in today's jobs numbers for the month of numbers. way behind oil prices. way behind the hike in food prices. where is the big consumer spending push going to come? >> wages and hours work were flat. we have started to see the back to school season in july and august. it's been more robust. we had poor retail sales during april, may and june. july and august and september will be a lot more robust. remember, larry, there is a 90% historical correlation between the success or failure of christmas and back to school

sales. if back to school continues to show good numbers, chance as are christmas will be decent as well. >> you are managing a lot of money. let me ask uh you what your strategy is. what advice can you give listeners? >> we set up a target on the s&p at the beginning of the year. we are only 20, 30 points aawwa from that in the asset allocation portfolio. we are 12% over neutral, focused on the areas that are economically sensitive like consumer discretionary. we are de-emphasizing the defensive areas in the market. >> you are buying gold? >> we have commodity exposure. we like gold and oil. we're less excited about agricultural commodities because corn, wheat and soy have had a good move here. we think gold and energy, crude oil, natural gas still got some juice left.

>> all right. phil orlando, federated investors. thanks for your update. up next on kudlow, money over safety. texas has approved the fastest speed limit in the western hemisphere. speed hungry motorists may help revive the state's highway budget. the full story and the latest breaking headlines up next.

okay. making texans pay to do what

many of them do anyway -- drive real fast -- is a texas-sized deal. jackie deangelis has more on that and the latest headlines coming into the cnbc newsroom. good evening. >> good evening to you. texans who live in the austin area will be able to pay to drive 85 miles an hour on a 41-mile stretch of road beginning in november. texas has a contract with a spanish toll road operating company that called for paying more for higher speeds. so the state gets an extra hundred million because out set the limit at 85. just to make that stretch more attractive to drivers the state lowered the speed limit on a parallel stretch of highway from 65 to 55. some peel familiar with texas driving practices may argue a lot of texans drive 85 normally. it's a big state. so will they pay for what many do anyway? we'll see. two weeks after lance armstrong gave up his right to fight doping charges the head of the world cycling federation told the ap he's considering an

amnesty program for cyclists in a move to clean up cycling. the question is if cyclists would fess up. finally tonight a scary version of oreos for halloween. candy corn oreo. most of the moorm is trying to decide if chocolate and candy corn go oegt. the jury is still out. i would say the two taste good separately, but together -- >> what's wrong with normal oreos with the good white stuff in between? >> keep it simple. >> just leave it alone. cnbc's jackie deangelis, we appreciate it. coming up, president obama gave a speech last night that had nothing new in it. i mean nothing new. in fact, it put conventioneers and tv audiences to sleep. the door is wide open for mitt romney's free market policies and our free market friday panel is raring to spar next up.

welcome back to "the kudlow report." i'm larry kudlow. so new tonight tv