Jobs: the Ugly Truth about the US Economy

For the week, the S&P500 managed to eke out a tiny 0.3% gain, even after suffering from a serious tumble on Friday.  Volume for the week was very light, adding little conviction to the slight price gain. Volatility was unchanged, but still near multi-year lows, suggesting that complacency is reigning.  There’s a lot more “what me, worry?” attitude, than any genuine fear.  From these levels, history suggests that fear and volatility can rise much more than it can fall.

The economic data were much worse than expected, starting with factory orders which rose less than economists had forecast.  The ISM services index fell more than predicted.  Initial jobless claims, at 418,000, were again at levels usually associated with economic slowdowns, not solid growth.  And consumer credit rose, but when Federal government supplied student loans are stripped out, consumer credit actually fell.

Technically, the market’s small rise this week was not unexpected, coming after the previous week’s strong move upward.  But by most technical measures, the S&P500—on the daily charts—is overbought, almost as severely as it was oversold…..only a few short weeks ago.  On the weekly charts, the weak downtrend that began with the Japanese earthquake is still in effect, although this would break if the S&P hits new highs 2011 highs over the next few weeks.

The big news of the week, the shocker, was the June jobs report.  Economist across the world were predicting that over 110,000 new jobs were created.  In fact, there were whispers and rumors that the figure could come in much higher, perhaps even 200,000.

The actual result?

A measly 18,000.

And as bad as this headline number was, the details beneath the surface were just as ugly.  These included:

  • Without the magical Birth/Death jobs (+131K), over 100,000 jobs were actually LOST in June
  • The household survey showed that 445,000 jobs were LOST in June
  • The unemployment rate went UP to 9.2%
  • The broader unemployment measure (U-6) went UP to 16.2%
  • Average hourly earnings stagnated; they were supposed to rise 0.2%
  • The average workweek FELL; it was forecast to remain steady
  • The labor force participation rate FELL to a new 25 year low
  • The employment-population ration also fell to a multi-decade low
  • The average duration of unemployment rose to 39.9 week, an all-time record high

So while the stock markets have been pricing in a “recovery” over the last year or two, this jobs report turns any talk of recovery into a joke.

There has been no true recovery……on Main Street.  Joe Biden, Timothy Geithner, and even President Obama have been touting the “recovery” story for almost two years.

It’s a lie, pure and simple.

It’s a myth designed to placate the public into living their lives with false hope that things will truly get better if they simply “hang in there” for a while.

And for a while this strategy worked, mainly because of the 99 weeks of unemployment checks that citizens have been receiving.  Other “sedatives” include food stamps (now called SNAP) which with about 40 million participants, is at a record high—fully one in seven Americans is on food stamps today.  Other “bones” that the government has thrown the masses is housing support.  Millions of underwater and delinquent homeowners have been living in their homes for almost two years without making a mortgage payment, allowing them to survive despite the loss of employment.

And there’s more.  But the point is that there is NO recovery.

There is instead, a continuation of the recession that began in late 2007.  Simply put, this recession has never ended.

What’s worse, it’s nowhere even close to ending.

Why?

Because NONE of the root problems that led to the original Great Recession, the credit crunch and the global financial crisis has been solved.

Arguably, these festering problems have grown larger, setting the stage for a crisis that could be even worse than the one we witnessed in late 2008 and early 2009.

The stock market has been manipulated upward (the Fed has openly admitted to doing so in the Washington Post in 2010) to fool the public into thinking that things are OK.

Things are not OK.

And one day soon, they’re going to get a hell of a lot worse.  This jobs report is just the tip of the iceberg.

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