Independent Investment Advice Blog

Jobless Report No Threat to Bears: Independent Financial Advice

   Today’s unemployment report is misleading because the “headline” gain of 200,000 net new jobs is 40,000 less if temporary hiring of couriers is removed according to Dean Baker.“Without the quirk in courier jobs, employment increased by 160,000”. David Rosenberg said adjusting for weather and the skew of online shipping the net gain was 140,000.

   Bears like to joke when the unemployment rate improves it is due to McDonald’s hiring, but in this case it was due to temporary hiring of Christmas online delivery couriers.         

     Most economists believe that the first 125,000 of net job gains are needed to keep up with population growth, so if the true net gain was 140,000 per Rosenberg and then we subtract 125,000 for population growth then we have a true gain of 15,000, in my opinion. If annualized that is 180,000 a year or a 0.14% annual increase. So if unemployment needs to be reduced from 8.5% to 4% then at this rate it will take 33 years to get to 4.0%.

The value of the improvement in the jobless rate

       Today the ten year Treasury interest rate went down 4 basis points to 1.956% and the price of Treasuries using TLT as a proxy were up 0.85%. When the jobless rate improves that is supposed to be inflationary and should result in interest rates going up; instead interest rates went down. Since the bond market is more logical and efficient than the stock market then the invisible hand of the market is trying to tell us that the unemployment report is misleading and that there is essentially a deadlock with no true improvement in unemployment. Add to that the fact that in in 2012 the Eurozone will have more problems and in 2013 there will be a massive U.S. tax increase and less stimulus due to expired programs. This implies good reason for the marketplace to keep interest rates low and for jobless rates to stay high.

     More news stories are being printed that indicate that China’s rapid growth rate may be due to an unsustainable debt bubble which will come to an end. Once investors believe this then they will stop buying commodities and will adjust for a global economic slowdown. So if China and the Eurozone both slow down and the U.S. suffers a tax increase in 2013 then that implies a prolonged global economic cooling for several years which justifies my bearish jobs forecast.

     I wrote an article “Unemployment problem unsolved”.

     Investors should seek independent financial advice.