What the Worst Jobs Report of the Year Means to You
Friday, July 5th, 2013
By Michael Lombardi, MBA for Profit Confidential
On the surface, today’s jobs market report looks good…
195,000 jobs were created in the U.S. economy during the month of June, with the “official” unemployment rate for the month sitting at 7.6%, unchanged from May. (Source: Bureau of Labor Statistics, July 5, 2013.)
But look a little closer and this jobs market report is a catastrophe…
Look at the underemployment rate, which includes people who have given up looking for work in the jobs market and those who are working part-time because they can’t get full-time work—based on this number, the picture looks drastically different. In June, the underemployment rate rose from 13.8% to 14.3%—the highest level since February! That means that one out of every seven Americans who want to work can’t get a job. (And the politicians keep telling me the economy is improving?)
And if that wasn’t bad enough…
Most of the jobs created in June were part-time jobs; the number of people working part-time in the U.S. jobs market rose by 322,000 to 8.2 million. These people aren’t working part-time because they want to—it’s because they can’t find full-time work.
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And there’s still more…
Of the jobs created in June, 60% were in low-paying positions: 75,000 jobs were created in the leisure and hospitality sector, and 37,000 jobs were created in the retail sector! Low-paying jobs do not create economic growth.
The numbers don’t lie. The jobs market report today loudly screams, “Not a lot has changed in the U.S. economy.” Let’s get real, politicians; the way the government creates the unemployment rate is misleading. Millions of Americans are resorting to food stamps for one reason—they can’t find a job and have run out of savings.
I remain very skeptical about the so-called “economic recovery.” There is no growth in the U.S. economy. Today’s jobs market report affirms my belief.
A healthy jobs market can give the U.S. economy the economic growth we so desperately need. When Americans have jobs, they buy more goods, they spend on durable goods, first-time home buyers enter the housing market, and consumers generally spend more—but none of this is happening. A worsening jobs market puts the brakes on consumer spending and ultimately causes the U.S. economy to suffer, even contract. (Remember: consumer spending makes up almost 70% of U.S. gross domestic product.)
Dear reader, the question has become: “How can we not avoid a recession in late 2013 or in 2014?” Get ready for it.
I can’t say this often enough: the eurozone debt crisis is here to stay for a long time. The key stock indices might have given investors false hope, but we are still standing at square one of any economic recovery.
Greece, which was at the epicenter of the eurozone debt crisis, may be required to issue Treasury bills to stay solvent. The country has to convince the International Monetary Fund (IMF) and its eurozone peers that it has made the changes required by the bailout conditions it agreed to. If it fails to do so, Greece will not receive any aid from its eurozone partners for the next three months. (Source: MNI Deutche Borse Group, July 3, 2013.)
But Greece has actually failed to follow through on two conditions set by its creditors: cutting 12,500 jobs from the government sector and reducing a small but significant fiscal gap.
And Greece is hardly the only troublesome nation when it comes to the eurozone debt crisis. Look at Portugal—problems are emerging in that eurozone nation as both its finance minister and its foreign minister recently resigned. There are fears that the Portuguese government might collapse and put the 78-billion-euro bailout it received in 2011 in jeopardy. (Source: Reuters, July 3, 2013.) Those fears have caused the key stock index in Portugal to plummet and bond yields to soar.
And it doesn’t end here. The third-biggest economic hub in the eurozone, Italy, is facing troubles of its own. Antonio Guglielmi, an analyst at the second-biggest bank in the country, Mediobanca, in a confidential report to clients wrote, “The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration.” (Source: “Italy could need EU rescue within six months, warns Mediobanca,” Telegraph, June 24, 2013.)
The report also indicated that the eurozone country will “inevitably end up in an EU bailout request” in the next six months unless it is able to lower its borrowing costs and recover from economic chaos. (Source: Ibid.)
Keep in mind that Italy is the country with the most debt in the region and third worldwide, after the U.S. and Japan. The debt crisis that the mainstream media claimed was over or under control could easily shake the global economy again.
All of this shouldn’t come as a surprise to my readers. I have been warning about the debt crisis in the eurozone for some time now. The common currency region still has some major problems that need to be fixed before it can be said that it’s in good economic shape.
What worries me even more is that the nations with stronger economies, such as France, have also fallen prey to the troubles in the eurozone. France is currently in a recession and the country’s unemployment rate remains high. The longer the debt crisis continues in the eurozone, the deeper its impact will be on the stronger economies like that of France.
I can’t stress this enough: the eurozone is critical to our own economy, because a significant number of American-based companies operate and gain revenues from the eurozone. Troubles in that region could hurt the profitability of North American companies, which could eventually cause the key stock indices here at home to slide lower.
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