4 C
New York
Monday, February 6, 2023


Thank Jobs It’s Friday!

US Markets are closed today.

Most markets are closed.  Japan was open and they went up 41 points (0.37%) and the MSCI Asia Pacific Index also went up 0.3% in Tokyo 1trading and Russia fell 0.1% but markets in Australia, Hong Kong, China, New Zealand, Singapore, India, the Philippines, Indonesia, the U.S. and all of western Europe are closed today for holidays.  Strangley though, the Futures Market is open this morning so that can make things very tricky on a big data day like today.

The MSCI Asia Pacific Index has gained 1.7 percent this week as growth in China’s manufacturing and an increase in U.S. consumer spending bolstered optimism the global economic recovery is gaining momentum. The index this week completed its fourth consecutive quarterly advance with a 3.9 percent increase in the three months through March 31. Shares in the gauge trade at 16.4 times estimated earnings, compared with 14.8 times for the MSCI World Index of 23 developed nations.  “The global macroeconomic recovery is behind the current uptrend in equities,” said Tomomi Yamashita, of $3.8Bn Shinkin Asset Management. “That trend is unlikely to change though the market is getting overheated.”

Underemployment in U.S. Workforce, December 2009-March 2010 Monthly TrendWe get Non-Farm Payrolls at 8:30 and, obviously, investors are expecting a report that shows the US firmly on the road to recovery but I have already been reading a Gallup poll on Underemployment that suggests otherwise.  According to the March tracking poll, 20.3% of the US workforce was UNDERemployed and that is UP 0.5% from February.  . Gallup classifies respondents as underemployed if they are unemployed or working part-time but wanting full-time work. Gallup employment data are not seasonally adjusted.  

Those underemployed people are mainly counted as employed in the NFP report and are a major distortion of the numbers, especially as the main delta component was a huge rise in part-time workers, from 9.2% to 9.9% and, like temps, they tend to be counted by the government as happy, happy workers.  Unemployment (no job at all) measured by Gallup decreased from 10.6% to 10.4% and you can see from the following chart how those two are related:

Underemployment Components, December 2009-March 2010 Monthly Trend

According to Gallup, as unemployed Americans find part-time, temporary, and seasonal work, the official unemployment rate could decline. However, this does not necessarily mean more Americans are working at their desired capacity. It will continue to be important to track underemployment — to shed light on the true state of the U.S. workforce, and the millions of Americans who are searching for full-time employment.

Since it's a holiday, I will present to you this gigantic chart that Barry Ritholtz found on Mint.com, which gives us a really good look at the US work force:

Notice the key component here is the total decline in Employed people, millions less than were employed in 2005, which indicates we have flushed a half a decade of growth down the tubes and lost ground.  We know wages haven't been going up and, in fact, the average family makes far less than they did in 2005 and, of course, Trillions of dollars worth of household wealth has been destroyed since 2005 and people are far more in debt than they were in 2005.  Why then, is are the Dow and S&P 10% higher than they were in 2005?

If you haven't done so alread, this is a very good day to read my "2010 Outlook – A Tale of Two Economies," which is pretty much the situation we see unfolding so far in Q1 as the US consumer is still on the ropes but companies that service the top 10% like TIF, COH and SKS are having fantastic years as the top 10% are raking it in with 2009's huge stock market gains, the return of Wall Street bonuses and, of course, all those benefits we get from mass layoffs that allow us to pay our workers lower wages and less benefits in return for the expectation of higher productivity.  That can make up a 10% decrease in consumer buying power since 2005 but what about next quarter?  Where is the growth going to come from?

Well it better come from jobs and now I've rambled long enough that it's 8:30 and we have added 162,000 jobs, which is much lower than expected (GS lowered their forecast from 275,000 to 200,000 just yesterday) but that isn't stopping the futures from acting like something great just happened and their immediate reaction is to push higher.  48,000 of those jobs were census workers – a 6-month temp job at best with 121,000 jobs added in the low paying Service Industry and just 17,000 Manufacturing jobs.  Unemployment, as tabulated by the government, is just 9.7%, which is flat to last Month and well below Gallup's not-so-fluffy 10.4% number. 

Here's a couple of fun facts from the report:  The number of long-term unemployed (those jobless for 27 weeks and over) increased by 414,000 over the month to 6.5 million, reversing the improvement trend in the bar lines on the big chart above. In March, 44.1 percent of unemployed persons were jobless for 27 weeks or more. (See table A-12.)  Isn't that great??   The futures sure seem to think so, as the Dow jumped 50 points on that news.  The number of persons working part time for economic reasons (referred to by the government as "involuntary part-time workers") increased by 263,000 to 9.1 million in March.  These individuals were working part time because their hours had been cut back  or because they were unable to find a full-time job. (See table A-8.)
About 2.3 million persons were marginally attached to the labor force in March, compared with 2.1 million a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)  Among the marginally attached, there were 1.0 million discouraged workers in March, up by 309,000 from a year earlier.  Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.  U6 Unemployment, the broadest measure, rose to 16.9% – that’s off of the December 2009 peak of 17.3, but higher than January (16.5%) and February (16.8%) of 2010.

40,000 of our 162,000 jobs added were temp jobs, temps have added 313,000 jobs since September – far more than our total gains in employment.  Over the month, employment changed little in transportation and warehousing, leisure and hospitality, retail trade, and wholesale trade.  In March, financial activities shed 21,000 jobs, with the largest losses occurring in insurance carriers and related activities (-9,000). Employment in the information industry decreased by 12,000.  I find this very interesting in light of our recent Sector Review where these growthless parts of the market are up about 10% since February.

And, of course, the cherry on top of this report – the item that adds huge insult to the tremendous injuries done to the American workers is that, in March, average hourly earnings for the 137M people who do have jobs fell by 0.1% and 0.1% of 137M is the equivalent of 137,000 jobs lost in the form of less money paid to the existing workers – another huge win for productivity!  Yay top 10%!!!! 

THAT's how the markets go up on a tepid report like this.  Continuing high unemployment and low wages allow the top 10% to squeeze another big quarter of productivity out of the bottom 90% and that should kick right up the line to give us some pretty good Q1 earnings.  Not only that, but the lack of actual jobs will keep the Fed in free money mode – giving more and more loans at ultra-low interest rates – subsidized by the American people -to th companies that arent' hiring them!  Ah capitalism, you beautiful, efficient son of a bitch! 

Have a Happy Easter!  



Notify of
Inline Feedbacks
View all comments

Good Morning!  Somebody give me a Woo Hoo!…..  anybody?…… Have a good weekend.  🙂

NF Payrolls rise 162,000, best gain in three years .. More green shoots 😀

 48,000 of these were Census jobs.

woooo hoooooooooooooooo
DOW will open slightly shy of 11k

 Futures love the number.
Prob. blow by 11000 on Monday

Not sure if Phil or someone else posted this, but very interesting from Teun Draaisma.  Happy Weekend all.

Any thoughts on how to play this change
Expectations Grow That China Will Allow Currency To Strengthen.
The Los Angeles Times (4/2, Pierson) reports as "international pressure mounts, expectations are rising that China will lift its currency peg to the US dollar and allow the yuan to appreciate modestly in the coming weeks or months." Economists say "a change in policy would combat inflation and defuse some of the anger directed at Beijing for protecting its exports with a weak currency." Consensus is "growing among analysts that China will gradually strengthen its currency 3% to 5% against the dollar over the course of the year. That would fall far short of the demands of US labor groups and manufacturers that believe the yuan is undervalued by 25% or more."

Hmmm….Why is this a good number? Below expectations, and slightly more then 100k of private sector jobs, which is likely artificially elevated by the weather last month. And, hasnt the market already priced this in? Oh well. Up we go! I guess.

The NYT and WSJ look gorgeous on the iPad…maybe it’s because I’ve been looking at the Kindle versions of these for too long (and more recently the Adobe AIR version of the NYT), but it’s official: I want one. Stat.

Ipad- AAPL- I think it may have been Peter Lynch or some other stock picking guru whose premise was to not invest in the technology itself but in the users who would benefit from it. I never really bought into that and made a lot of money in the likes of Cisco/Oracle over the years. However, this whole segment of portable readers stuck me initially as a game changer – newspapers; magazines; textbooks; etc. could all potentially shed the physical plant expenses and transform into new business models. Not sure at all how this will play out but I am guessing the technology itself will eventually become commoditized just as happened with the desktop PC; as is happening to a degree with cell phones; etc. Although AAPL continues to innovate they are not immune from overall market forces which surely motivates them to keep running fast to stay in place.
Just food for thought and a subject for discussion – not negative on AAPL at all – just musing on possible investment scenarios involving the technology.

Phil –
"The FDA has assigned a Prescription Drug User Fee Act (PDUFA) date of May 1, 2010, by which time it will respond to Dendreon’s amended BLA."
How would you play this ?

Disaster plays –
So – If the market goes over 11,000 do we dump our disaster plays??

First, let me thank you, Phil, for the steady flow of information and ideas this site pumps out on a daily basis, and of course, some great investing approaches and trade ideas.
While I believe your data and agree with the general thrust of your argument, I think you may be missing what the data means and where it will lead: It is undeniable that the numbers of the not-quite-making-it are growing steadily. The entire health "crisis" was fathered by this phenomenon, and the continued growth of government, both as employer and benefactor, is the inevitable byproduct. 
In truth, our economy has finally figured out how to shed (probably permanently) useless functions and functionaries. The people (probably permanently) shed will continue to consume the basics of life, and probably will increase their consumption of beer and cigarettes (an investment idea here?) and overall economic growth will not be diminished perceptibly. It will be paid for by an all-too-willing government, with "free money" to start with, then by taxing the people who are highly productive.
The skill level and degree of comprehension required of our workforce steadily grows, and we all know full well that this leaves behind hundreds of thousands of workers every year. It took a crisis like the one we were handed by bunches of capable but misguided, greedy, and in my opinion criminally-liable people to free our economy of a bunch of workers who were led to believe that the skill package they developed 10, 20 or 30 years ago would always guarantee them a good living. Those are the people most disadvantaged by the current belief that if only we could send everybody to college everything would be much better.
Phil, the economy you consider ideal reached its peak in 1965 and that model has been steadily fading away since. The idea of a highly fluid but steady 4% unemployment rate is dependent on our producing people of the appropriate skill level in the appropriate numbers, and we continue to misread how this should be done. Sending a lame-brain to college does not qualify him for anything except possibly displacing somebody who actually knows what they are doing but did not obtain the degree. It is widely understood that today more people attend college than could possibly find the anticipated work should they graduate (many do not), and we take pride in cramming in even more young people who don’t belong there so they might experience what the movie "Animal House" promises them.
I apologize, for I have drifted from my point:
 I believe it is possible for historically high unemployment to coexist with solid growth in corporate earnings and stock prices, and for this to continue quite a while. We may be about to witness the birth of an entirely new corporate operating model, under which unexpected productivity growth may take root and eventually bust out to the upside. I suppose the proper prescription is for government to substantially raise taxes to pay for those who will never again find full employment, although it tastes foul, but it may lead to sustainability.

I have a Diagonal April 125 / June 145 PUT spread on POT.  Short 125 sold for 6.55 currently 8.48 and long bought 24.20 currently 28.70.  The deltas of the two legs are almost equal.  At this point would you recommend doing:  a)  rolling short down to April 120 or 115 for a debit,   b)  rolling short down to May 120 or 115 for a credit giving up a month on the diagonal,  c) do nothing letting time continue to work and see where it expires, or d)  close the trade with the profit.  Thanks for the guidance.

I just finished transferring my account over to TOS from Etrade so I can actually make the trades suggested on your site.  My only position is VZ Jan 11 $30 call with my entry at 2.15.  My total cash balance is around 4600.  In the next year or so I would really like to use this to help pay down my mortgage, on top of the extra I am paying now, and build up my savings.  I realize that is not that much, but I guess we all start somewhere and every little bit helps 
I agree with you that the market is setting up people for a correction sometime soon, so I like your TBT and EDZ suggestions as a hedge.  TBT especially because I have one of those awful pay-option arms (don’t worry, you can just refinance in a couple years!  Yeah, thanks Countrywide).  Rates are pretty good right now, but I think that will change sooner rather than later.
What do you think the best way to start is?  I am a believer in cash is king, so I don’t feel the need to rush.  Thanks for your patience. 

Hi Jtiff, I would not advise option trading with money you are counting on to pay your mortgage.  I would advise paper trading for several months.  The great thing about switching to TOS is that they have an EXCELLENT platform, and the paper trading platform is called "papermoney."  You still get to follow along and learn, and given more capital later, it would be really worth it!

Interesting news story on the reaction of today’s NFP jobs increase on the interest rates and bond markets. Go TBT go ..

Happy Easter! Finally we have some good weather in S. Florida, and I’m sitting by the pool with my laptop. Heck, I could pass for a member of the top 10% club!
Phil, for once, I don’t think our disagreement is substantial. I have come to accept the fact that we have crossed some sort of invisible line. On one side is the traditional American belief system and economy, and on the other side is something else that looks more european. Our safety net will continue to grow, and in many cases will turn into a hammock. I don’t believe it can be changed, and I no longer am positive that it is a wrong outcome.
I like your idea about renewable energy, but like all things government, I fear it would turn out differently than you describe. I can’t identify the mechanism for failure, but I’ve learned to expect either failure or much milder success than appears likely beforehand whenever government tries running a program. Government is also nearly incompetent when it comes to preventing or prosecuting beneficiary fraud. I feel you ought to admit this, and adjust expectations downward.
The chain works something like this: Corporations profit through denominator driven productivity gains, the stock market rises, top 10%ers profit from their stock holdings, the government taxes away a big chunk of those profits, and shovels it toward the structurally unemployed, with quite a bit spilling off the sides of the shovel into some vast pit of incompetence and corruption. That is our brave new world, and after a fashion, I embrace it gingerly as probably the best of a bunch of bad outcomes.

Phil i love your ideas, too bad its not about creating efficiency’s instead of more consumption. The corporations that drive this baby just wont let it happen. Our Government’s are too busy fighting for scraps and the people just don’t give a hoot. What we need is a quarterly gathering of the worlds brightest to offset all the stupidity that comes out of Washington. A group that can challenge the status quo. 

Now I will leave you with these words of wisdom..

There’s an old saying in Tennessee – I know it’s in Texas, probably in Tennessee – that says, "fool me once, shame on – shame on you. Fool me – you can’t get fooled again".  … 

As always, you make very good arguments for your positions, and this makes for good debate. I agree with your positions. This is one reason I am very comfortable with my investment in SAM (Boston Beer),  which is showing substantial growth, and will, I believe continue to do so. The government will continue to be supportove to those that are under-employed, or worse, un-employed, and the consumption of beer is increased because of the need to "feel better" in times of stress.
Phil has made some points that have interest regarding England. The united States is well on its way to becoming what England is today, ie a country that is down and out, and is a "has been". Just after the end of the first world war, the UK was the strongest Empire in the world. Their currency, the British Sterling, was the reserve currency of the world. Their status today is a despickable example of how a well meaning but misdirected government can destroy an Empire as strong and successful as was the UK.  It took ONLY 30 years for this to evolve. Liberal Socialism, and the policies it brings with it did the job in the UK,  and is taking hold here in the US. We are well on our way to becoming what England is today – a country that is deeply in debt, unions that have destroyed their key industries, and a welfare state that looks to the government for everything, through the entitlements that have been promissed for political survival purposes. I know this well, as I had a factory outside London, and I became very familiar with the policies and culture that took away incentive to achieve. The United States has some problems that will exacerbate the downward trajectory, that being the pervasive crime problem and the out of control illegal immegration levels that exist in the US, that did not prevail in the UK. Our current administration is hell bent on following the strong Union and Socialist policies that took down the UK.  England had a short reprieve from its demise when Margaret Thatcher was Prime Minister, as she tried to reverse this catestrophic destruction, but that was short lived.  History does repeat itself, and in this case we are following the history of the UK, and we are well on our way. We will eventually lose our reserve currency status, and this will accelerate the downward spiral. Our debt will become ever increasingly more difficult to finance, and this will increase our interest expense. In this environment of governmental Socialist policy which prevails today, I do not see any incentive for current corporate policy to be aggressive in expanding employment, as the cost of new hires exceeds the benefit of potential gain. Corporations are increasing their bottom line by becoming more efficient and that includes containment of employee expenditure. As Kustomz has reiterated so well – Corporate America is far brighter than the inexperienced "string-pullers" in Washington, and as in Texas they sometimes say " Don’t try to BS the Bullshitter"-  He is far smarter!

 Gel; the odd thing is that other than socialists ideas, Obama seems to detest England and Europe.  Witness his treatment of England and Gordon Brown so far; as well as the short shrift he has given to other European friends.
There is still hope.  Most of America is not in tune with this adminstration and its socialist intentions.  November will be a big tell, when Pelosi and Reid get their asses handed to them.
Another difference btw US and UK is that the US has always had a more independent, courageous and innovative culture, simply by the nature of the birth and evolution of our society … throwing off monarchy; anti-tax; religious freedom, etc.
The problem here is the unaccountable and professional political class and their media enablers.
Do you see any rallies here in the US clamoring for big government and higher taxes and socialism ?   NEVER !
You’ve seen anti-war demonstrations; a staple since the Vietnam war days and governed by a collection of the far left and fringe groups.
Did you see any ObamaCare rallies ?  Did millions of uninsured take to the streets ?   No.  Other than O’s little made for TV photo ops; where was / is the popular demand for Obama’s "change" and his programs.
It does not exist ….

gel well said and the quote from my post above came from the biggest dumb dumb from Texas…the one and only GWB..he couldn’t even get a simple quote out correctly.

Cap as usual spot on, its all about divide and conquer.

Good points! The problem of those who expouse the benefits of their Socialist manifestos, is they truly believe the end is a panicea of wonderful things to come, primarily a super majority of voters that are reliant on the entitlements that have been given and promissed to them by the very thoughtful and generous  politicos.These very appreciative voters, then will continue to re-elect these same politicians over and over again, as they are more afraid of losing their free services and benefits, than they are of losing any potential opportunity or freedom that might exist in the future. In order to perpetuate this cycle of personal greed over common sense, the engine that has created this wealth in the past, ie the free enterprise system, is destroyed along with incentive to excel. It is difficult to understand who Obama looks up to, as a roll model. I know he gets along well with Sarkozy of France, and was kind to Chavez  when he met him, and seemed to be very cordial to the leaders in Russia, but pissed of Netanyahu of Isreal. Gordon Brown is a failure at running a Socialist state, so maybe he is less than respectful of one that does not execute this economic system properly. Cap, I wish I had your optimism, and that this downward spiral will be reversed soon. I think possibly not, as there are too many folks that are in need of assistance, and Obama and his associates are willing to promise everything, in a desperate attempt to continue with their dream, in perpetuity.

Kustomz… LOL. Yep Bush was a man of words – just got them in the wrong order!

Barfinger and Gel:
well typed!  the only difference between the UK transition to socialism and the US transition is that the US transition will be faster, and it has to be.  Technology worker displacement did not exist for England, but it does here and now.  There was a Discovery channel show on a company which manufactures Bows, the kind which shoots arrows, and its a two person company, cranking out 100+ bows a week through technology.  How many previously skilled laborers did that machine process replace?  at 100 a week, greater than 50 i would guess.  Technology in many ways is eliminated many highly skilled jobs and specialized service jobs, which existed through the 1980s, and some into the 90s.  The question which the government is struggling with and has to answer, is what to do with all the people with a growing population and shrinking employment opportunities at the current standard of living?  The problem is that moving to the chinese standard of living will cause all of us to lose our houses immediately, whereas a slow and gradual with high unemployment, will allow the government time and the US innovation how to adjust to survive, though social unrest will become return, and that will be an issue for everyone. . .  the quickest way to get mfg back is to raise the standard of living in china to the point where chinese materialistic repression becomes a threat to the central government., so that us wages equals chinese wages plus transportation, and tariffs. . .  protectionism may be the only policy left to keep the mfg base employed, and currency from escaping to other countries, and I, being over 50, can only hope I can get my kids through college in the next four years to be able to save and or trade for any type of retirement.
sportsguy not on a full membership with phil

Stay Connected


Latest Articles

Would love your thoughts, please comment.x