The Truth Behind Today’s Dismal U.S. Jobs Report
Now, this is very important and I want all my readers to know about it…
The Bureau reported that the underemployment rate (which includes people who have given up looking for work and people who want full-time jobs but who can only get part-time jobs) was at 14.4% in January—the same rate it was way back in November 2012 (seasonally adjusted). To me, this shows absolutely no improvement in the unemployment situation in this country!
And jobs created in the U.S. economy continue to be in the low-paying retail and service industries. Job growth in the low-paying sectors! In February of 2010, the unemployment rate for the wholesale and retail trade sector was 10%. By December of 2012, it declined to seven percent—that’s where the jobs are being created. (Source: Federal Reserve Bank of St. Louis, last accessed February 1, 2013.)
The jobs market in the U.S. economy is tormented. For the year of 2012, the average monthly jobs growth was 181,000. But, as most economists will tell you, the U.S. economy needs jobs growth of 250,000 per month for the economy to see any improvement. (Source: Reuters, February 1, 2013.)
It’s obvious there are still many troubled spots in the jobs market of the U.S. economy. If they are not fixed soon, they will drive the U.S. economy into further deterioration. It is startling to know that 38.1% of all those unemployed in the U.S. economy have been without work for 27 weeks or more.
If this goes on for much longer, the U.S. economy will go through another set of troubles. A couple of days ago we learned that the U.S. economy actually contracted in the fourth quarter of 2012 for the first time in three and half years. As I write below, consumer confidence is breaking down to 2011 levels! But let’s not fear; the stock market is rising (I’m being sarcastic, of course).
Consumer confidence should be followed closely, as it gives investors an idea about consumer spending and where the U.S. economy might be heading. When consumer confidence rises, it means U.S. citizens feel good about spending. Consumer spending accounts for about 70% of U.S. gross domestic product (GDP).
Unfortunately, consumer confidence in the U.S. economy is plummeting—the last thing you want to see when you are looking for economic growth.
U.S. consumer confidence fell drastically in January. The Conference Board, which tracks the Consumer Confidence Index by conducting a monthly survey, reported that the index declined to a level of 58.6 in January from 66.7 in December of 2012—a drop of 12% over a one-month period. (Source: The Conference Board, January 29, 2013). The Consumer Confidence Index is at its lowest level since November of 2011!
Examining the report even further, it shows that 22.9% of the respondents to the survey expect their incomes to decline. That number was 19.1% in December. In addition, the number of people claiming that it’s difficult to get a job has increased to 37.7% from 36.1% in December.
This shouldn’t be a surprise to my Profit Confidential readers. Consumer confidence fell for the very reasons and concerns I have been writing about in these pages for months.
Since the financial crisis began, so-called economic growth in the U.S. economy has been insignificant at best. While some politicians (and even analysts) might continue to speak about jobs creation in the U.S. economy, the fact of the matter is that jobs growth is hardly keeping up with new people entering the workforce.
On top of the bleak employment picture, consumers are worried about their finances, as they simply don’t have a lot to spend. For example, from 2011 to 2012, weekly inflation-adjusted earnings for full-time wage and salary workers in the U.S. economy actually declined $1.00—from $336.00 in 2011 to $335.00 in 2012. (Source: Bureau of Labor Statistics, last accessed January 29, 2013.) One year later, things cost more, but are you making the same amount of money?
For economic growth to really happen in the U.S. economy, consumer confidence has to increase so consumer spending can rise. This just isn’t happening right now.
Where the Market Stands; Where it’s Headed:
It’s up, up and away for the stock market. This morning Exxon Mobile Corporation (NYSE/XOM) reported earnings above expectations and the U.S. jobs number report for January is being taken positively by investors. I have been waiting for the final speculative blow-off for the stock market rally that started in March of 2009—we’re living through it right now.
What He Said:
The year “2000 was a turning point of consumer confidence in high tech stocks. 2006 will be remembered as the turning point of consumer confidence in the housing market. That means more for-sale signs going up, longer time periods to sell homes, bloated for-sale inventory and eventually lower prices for homes. But this time, the turnaround in consumer confidence will have a bigger impact on the economy. Hold onto your seats, this is going to be a nail biter.” Michael Lombardi in Profit Confidential, August 24, 2006. Michael started talking about and predicting the financial catastrophe we began experiencing in 2008 long before anyone else.
About the Author | Browse Michael Lombardi's Articles
Michael Lombardi founded investor research firm Lombardi Publishing Corporation in 1986. Michael is also the founder of the popular daily e-letter, Profit Confidential, where readers get the benefit of Michael’s years of experience with the stock market, real estate, economic forecasting, precious metals, and various businesses. Michael believes in successful stock picking as an important wealth accumulation tool. Michael has authored more than thousands of articles on investment and money management and is the author of several successful investing publications,... Read Full Bio »
Forecasts Aug. 28, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 28, 2015
|Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)||$1014.15|
|Trailing 12-month Price/earnings multiple (Most Recent Quarter)|
|Dow Jones Industrial Average Dividend Yield||2.71%|
|10-year U.S. Treasury Yield||2.14%|