This morning the Bureau of Labor Statistics (BLS) reported there were only 88,000 jobs added to the U.S. jobs market last month. This will certainly give the politicians more bragging rights: the unemployment rate in the U.S. economy decreased to 7.6% in March, down from 7.7% in February. (Source: Bureau of Labor Statistics, April 5, 2013.)
As I always say, the devil resides in the details. The anemic jobs numbers report today showed, once again, how tormented the U.S. economy really is. In the month of March, the civilian labor force declined by almost 500,000 people!
Problems in the U.S. jobs market still persist. The number of Americans unemployed for more than six months hasn’t improved. They still make up almost 40% of the unemployed in the U.S. economy. Keep in mind; the longer they stay out of work, the harder it will be for them to get back into the jobs market, as they lose their skills.
The underemployment rate, a measure I consider to be a good indicator of the jobs market, still hasn’t shown any major improvements. In March, it stood just under 14%, compared to 14.3% in February.
March’s jobs market report is worrisome to say the least. Over the past 12-month period, on average, the U.S. economy has seen 169,000 jobs added each month. With only 88,000 jobs added last month, March’s jobs created were 48% below the 12-month average!
If you take out stock buyback programs, companies in key stock indices are struggling with profit growth. And I believe they have no other option than to cut their labor forces to maintain profits.
We had dismal growth in the U.S. economy in the fourth quarter of 2012. With the jobs market staying anemic and consumers losing confidence, I doubt the first quarter of 2013 will be as great as the stock market seems to indicate. At this point, out-of-control government spending and rigorous money printing really isn’t helping the economy—both events will only give us long-term pain, as inflation and currency devaluation are next in this economic cycle.
According to the U.S. Commodity Futures Trading Commission, the amount of bearish bets is inching closer to bullish bets on silver for the first time since 2007. (Source: Wall Street Journal, April 2, 2013.) This means that the number of investors turning bearish on silver prices is increasing. From trading just above $30.00 at the beginning of 2013, silver prices have declined below $27.00, or by 10%.
But what holds true is that just like gold bullion, the fundamentals behind silver prices are strong as well.
In a report issued by GFMS Thomson Reuters and commissioned by the Silver Institute in November of 2012, average industrial demand for silver in 2000 was 383.3 million ounces (Moz). By 2008, this number increased to 492.7 Moz. In spite of the deep downturn in the U.S. economy and global uncertainty, silver industrial demand reached new heights by 2010—499.6 Moz. For the years 2012 to 2014, GFMS Thomson Reuters estimates the average silver industrial demand to be around 483.3 Moz per year. (Source: “The Outlook for Silver Industrial Demand,” GFMS Thomson Reuters, November 2012.)
From the supply side, silver production hasn’t increased as much as the demand. The U.S. Geological Survey reported that, in 2011, worldwide silver mine production was 23,300 tons, or 821.8 Moz. By 2012, silver mine production only increased by little more than three percent. (Source: “Mineral Commodity Summaries,” U.S. Geological Survey, January 2013.)
Now bring in the investment demand (which I believe will drive the silver prices higher), and we see the real picture for silver.
The Istanbul Gold Exchange reported that imports of silver into Turkey increased 31% in March from a month earlier. The country imported 6.19 tons of the grey metal in March alone. (Source: Bloomberg, April 2, 2013.) Similar to gold bullion, silver has been known as the savior of wealth when the fiat currency takes an ugly turn.
The demand for silver is still present (if not increasing), and the long-term rise in silver prices is still intact. As I have stated in these pages before, paper money printing by central banks will eventually result in higher inflation as compared to now. The correction in silver prices that we are currently seeing is very normal and healthy for the long-term bull market in silver.
What He Said:
“The U.S. lowered interest rates in 2004 to their lowest level in 46 years. And what did Americans do with their access to easy money? They borrowed and borrowed some more, investing the borrowed money into real estate. Looking ahead, perhaps the Fed’s actions (of lowering interest rates so low as to entice consumers to borrow more than they can afford) will one day be regarded as one of the most costly errors committed by it or any other banking system in the last 75 years.” Michael Lombardi in Profit Confidential, July 21, 2005. Long before anyone was thinking of a banking crisis, Michael was warning that the coming real estate bust would cause havoc in the banking system.