Posts Tagged ‘job creation’
There’s a lot of talk about economic recovery these days. Mainstream economists are saying the U.S. economy will continue to grow, and the stock advisors are telling investors to buy on dips because everything is headed upward. Their arguments are: housing is hot, the unemployment rate is declining, and consumers are spending.
But I have to disagree with those claims. I believe this isn’t a real economic recovery. What we have seen since 2009 has been nothing more than a result of artificially low interest rates, money printing, and increased government spending. Real economic recovery only occurs when conditions improve across the board and return to their historical averages.
The jobs market, which should improve during an economic recovery, is actually stalled and tormented. The official unemployment rate has come down from 10% to 7.6% in May. But the official unemployment rate is not an accurate indicator of the jobs market, as it does not take into account the soaring rate of involuntary underemployment.
There is a spur of job creation in retail and other low-wage sectors, but the 4.4 million long-term unemployed in the U.S.—those who have been out of work for more than six months—aren’t seeing robust improvements. Each month, just 10% of them find jobs, and that number hasn’t changed in the last two years. (Source: Wall Street Journal, June 24, 2013.)
According to estimates from the Brooking Institution’s Hamilton Project, after adjusting for population growth, it could take up to three years for the unemployment rate in the U.S. economy to get back to its prerecession level.
The fact: American consumers are the ones that … Read More
Core retail sales declined 0.1% in April—and that’s after they already fell 0.4% in the previous month! (Source: U.S. Census Bureau, May 13, 2013.)
When compared to the first four months of 2012, consumer spending in the U.S. economy declined in the first four months of 2013 at electronics and appliance stores, health and personal care stores, gasoline stations, and general merchandise stores.
And looking forward, consumer spending in the U.S. economy doesn’t appear to look very promising either.
If companies don’t spend or create better-quality/better-paying jobs, can consumer spending really pick up? It’s well documented in these pages: the job creation we have seen since the financial crisis started has been in low-wage-paying sectors.
Keeping all this in mind, with consumer spending still bleak and core retail sales constantly declining, the retailer must be suffering.
But that’s not so!
When you look at the stock market and, more specifically, at the retailers, it appears that consumer spending in the U.S. economy is booming! Consider the chart below of the S&P Retail Index. This index tracks the performance of some of the most well-known retailers in the U.S. economy.
Chart courtesy of www.StockCharts.com
Dear reader, the stock market isn’t portraying the real picture of the U.S. economy. The retail sales number actually shows how consumer spending—the biggest contributor to our gross domestic product (GDP)—is fairing, and those numbers look terrible.
Even with the printing of trillions of dollars of new money via quantitative easing, the Federal … Read More
According to the International Monetary Fund (IMF), in February, the central bank of Mongolia increased its gold bullion reserves to its highest level since August of 2008. The country has been purchasing gold bullion for three consecutive months—its reserves have increased from 1.5 metric tons to 5.8 tons, or about 287%. (Source: Bloomberg, March 26, 2013.)
Similarly, the central bank of Russia has been purchasing gold bullion. It bought seven tons of the yellow metal in February to bring its total gold bullion holdings to 796.9 tons.
Turkey, the country which has started to use gold bullion as collateral, increased its reserves by 5.7 tons in February, bringing its total holdings to 375.7 tons.
According to the World Gold Council, central banks around the world purchased 534.6 tons of gold bullion in 2012, which was the highest amount since 1964.
How long can this buying spree by central banks continue in the gold bullion market? Consider China, for example. The country’s central bank holds only 1.7% of its reserves in gold bullion. (Source: “World Official Gold Holdings,” World Gold Council, March 2013.) And China has the biggest reserve in the world—worth more than $3.0 trillion.
But compared to the gold bullion holdings of other major central banks, China is still far behind. The U.S., Germany, and Italy hold more than 70% of their reserves in gold bullion. Imagine what would happen to gold bullion prices if China even just tried to double its gold reserves.
In the backdrop of the gold bullion buying spree, central banks around the world are printing paper money, working to depreciate their currencies to jumpstart … Read More
The so-called “recovery” in the jobs market isn’t sustainable. I don’t disagree that there has been job creation in the past few months, but when I look at the spectrum of the jobs created in the U.S. economy, I become skeptical. Jobs growth in the U.S. economy has been in the low-paying retail sector.
Consider this: in February, there were 1,422 mass layoffs in the U.S. economy, involving 135,468 workers. Looking closely at the layoffs, 295 of them occurred in the manufacturing sector, sending 39,407 individuals back to look for jobs and seek unemployment insurance benefits. (Source: Bureau of Labor Statistics, March 22, 2013.)
There are more than five million Americans working part-time, not because they want to, but because they can’t find a full-time job. (Source: Federal Reserve Bank of St. Louis web site, last accessed March 26, 2013.)
What’s ahead for the U.S. jobs market? As curt as it sounds, more misery is in store for the U.S. jobs market. Hewlett-Packard Company (NYSE/HPQ) says it will cut 15,000 more jobs—part of a three-year layoff plan that will decrease its workforce by 29,000. (Source: Business Insider, February 27, 2013.) And Hewlett-Packard (HP) is not the only company that’s downsizing and sending its employees back to the jobs market; some of the other major companies are doing the same.
Why is corporate America laying off workers? The answer is simple: its corporate earnings are suffering, and the only way companies can drastically make a difference when revenue is soft is to cut expenses; this will lead to more pressure on the U.S. jobs market. In the first quarter of … Read More
By looking at the stock market’s recent performance, one might think the U.S. economy has turned the corner and the worst is behind us. This is far from reality! The U.S. economy is fundamentally damaged, and since the financial crisis of 2008–2009, there really hasn’t been any real economic growth.
Even a novice economist will tell you: economic growth happens when general living conditions of citizens in a country improve; they are able to find jobs, they are able to maintain their standard of living, and they are able to spend and save.
Unfortunately, I see the opposite of this when I look at the state of the U.S. economy. Instead of economic growth, I actually see misery!
While politicians may rejoice over the recovery in the jobs market in the U.S. economy, it is still tormented. The job creation is unequal. During the financial crisis, 60% of the jobs lost were among the mid-wage earners. In the so-called “recovery,” 58% of all jobs created were in lower-wage sectors—retail and restaurant workers, mostly.
The year 2012 was the third year in a row that 40% of unemployed Americans were out of work for more than six months. (Source: National Employment Law Project, February 1, 2013.) In economic growth, there is equal job creation.
The middle class in the U.S. economy is suffering severely—its cost of living is going up, while income levels stay the same. Just look at the price of gasoline. The U.S. Energy Information Administration (EIA) reported that Americans paid $3.71 per gallon of gasoline during the second week of March 2013. (Source: U.S. Energy Information Administration, March … Read More
There was some rejoicing last Friday after the U.S. Bureau of Labor Statistics reported 236,000 new jobs and a lower unemployment rate of 7.7% for February. (Source: Bureau of Labor Statistics, March 8, 2013.)
While the job creation number was good, it wasn’t earth-rattling and by no means did it suggest the jobs market is set for a superlative upward move.
You know we still have about 12.3 million Americans looking for work, and that’s only the official count. The real number is somewhere around 22.3 million, and this number doesn’t include those working at jobs below their experience level.
I’m not here to spoil the party, but based on Wall Street’s reactions to the numbers, I doubt there was that much excitement on the trading floors. It was maybe more like a sigh of relief that the job creation number wasn’t weaker than expected.
I still believe in the “show me” belief and feel there is still some convincing on my part before I can claim a victory for the bulls.
The Federal Reserve has said unemployment will continue to be a problem in this country and could take a few years to resolve.
The market needs to see the job creation numbers steadily improve. While we are likely far away from the 500,000 or so new jobs needed each month that indicates a healthy economy, we still need to see job creation continue near the current level and for the unemployment rate to hold below eight percent in order to offer any hope of sustained job creation.
The thing is that as long as there’s high unemployment, people … Read More
Thanks to the Federal Reserve, borrowing costs are down. But the last time I took my vehicle in for service, it cost me well over $1,000 because a few parts had to be replaced. I have a trustworthy mechanic, but it seemed like a lot for what got done.
My insurance bill was up quite a bit from the previous year and what really bugged me was that it was with less coverage. My optometrist, dentist and veterinarian are all charging more for their services. And my plumber, God bless him, swims in his heated outdoor pool in winter with snow on the ground. Point being—I don’t care what any statistic says, there is price inflation in the marketplace right now. More than is being admitted to by the Federal Reserve or comprised in the Consumer Price Index (CPI). And we haven’t even gotten to fuel costs yet.
There is nothing wrong with a little price inflation. The Federal Reserve, like many other central banks, targets a two-percent annual inflation rate, but the big problem is inflation in the face of stagnant incomes. That’s wealth destruction and the Federal Reserve can’t do a thing about it.
Compared to other economies, the U.S. economy has always been good at righting itself after a shock or recession. But now, it really is different. There is little to no financial flexibility in fiscal and monetary policy. The Federal Reserve created the money and it’s been spent. Corporations and Wall Street benefitted significantly, but the average consumer is stuck—and with the bill too.
If we had economic growth in the U.S. economy, we would be experiencing an increase in the standard of living. But wherever I look in the U.S. economy, I see more people suffering. The pockets of average Americans are being squeezed like never before.
In these pages, it has been very well documented how food stamps usage has increased in the U.S. economy—47.5 million people as of October 2012, or more than 15% of the population. ( Source: United States Department of Agriculture web site, last accessed January 17, 2013.)
But this is not all. The so-called “jobs growth” and “job creation” in the U.S. economy are simply talking points for politicians and nothing more, as job creation in the U.S. economy has mainly been in sectors where wages are low, with bare minimum benefits available to the employees.
So how are Americans surviving when prices are increasing (inflation) and their jobs don’t pay well? According to data compiled by Vanguard, one of the biggest 401(k) managers, the number of people borrowing against their retirement accounts in the U.S. economy has increased 12% since 2008. (Source: The Washington Post, January 15, 2013.)
Another finding by financial advisory firm HelloWallet reports that 25% of all workers use their retirement funds to pay for expenses, such as mortgage payments, credit card debt, and other bill payments.
Sadly, it doesn’t just end there. Those who are poor in the U.S. economy are becoming poorer. As per Urban Institute’s findings, for those households that earn $20,000 per year or less, their debt load has increased more than 100% in the period from … Read More
The fiscal cliff is causing a drag on the economy and, in particular, the desire of consumers to want to spend. The reality is that the budget cuts and tax increases will impact spending regardless of how the deal turns out, as taxes will rise.
The push to extend the Bush-era tax cuts to only those making below $250,000 appears to be a pipe dream of President Obama.
So far, after several failed attempts at a compromise, the Republican-controlled House is looking to push forth what they call “Plan B,” which extends the Bush-era tax cuts to those making less than $1.0 million. President Obama suggested he would veto Plan B, which would likely not get approval in the Democratic-controlled Senate. Obama has moved up the threshold for the tax cuts to $400,000, up from $250,000.
So while this deal-making goes back and forth, consumers are likely to be hesitant to spend in the retail sector. The headline retail sales reading rose 0.3% in November, which was below the Briefing.com 0.6% estimate, but up from -0.3% in October. The ex-auto reading was flat, lower than the Briefing.com 0.2% estimate. While the November retail sector numbers don’t translate into December, I’m sensing the uncertainty of the fiscal cliff will impact consumer spending during this key shopping season for the retail sector.
We are in the heart of the holiday shopping season. I’m sure the retail sector is anxiously praying for consumers to spend. (Want to know which retailers I like? Read “From Discount to Big Box: Some Retailers to Watch.”)
A strong shopping season will also go a … Read More
Last week, when the jobs numbers report was released, a new wave of optimism spurred the U.S. economy. I saw it in the editorials of the major newspapers; I heard it on the popular financial news stations. The unemployment rate in the U.S. economy dropped from 7.9% in October to 7.7% in November. (Source: Bureau of Labor Statistics, December 7, 2012.)
As the mainstream media and the novice reporters that work in it enjoy the fall of the “official” U.S. unemployment rate and the creation of 146,000 jobs in November, the underlying issues in the jobs market haven’t changed much. In fact, I believe they have become worse in some cases. What I often harp on in these pages is that the meager job creation so far in the U.S. jobs market has been in sectors where people earn lower wages.
More than 36% of the 146,000 jobs created in November were in the low-paying retail industry—in places such as clothing and accessories stores, general merchandise stores, and electronic appliances store. But it wasn’t just in November that we saw heavy job creation in the retail sector—retail jobs in the U.S. economy increased by 140,000 in the last three months, which is almost 34% of all the jobs created in the period from September through to November 2012.
Is this a big deal, Michael? Yes, it is, my dear reader.
In the U.S., one out of every seven waiters and waitresses and one out of every six bartenders have a bachelor’s degree. (Source: CBS, November 5, 2012). Job creation in the U.S. jobs market is not equal—if it were, … Read More
It’s now officially the holiday shopping season after a relatively decent Good Friday and Cyber Monday. Online spending, according to the Adobe Digital Index, is estimated to reach record sales of around $2.0 billion, up 17% year-over-year. (“Cyber Monday Sales Climb to Record $2 billion,” BGR, last accessed November 27, 2012.) If the numbers are any indication, the retail sector could be in for a strong holiday shopping season over the next four weeks. We know shoppers are the most confident since February 2008, as the Conference Board consumer confidence reading came in at 73.7 in November. Add in the continued uptrend in home prices and, hopefully, job creation into 2013, and you have a good and much-improved climate for the retail sector.
Given what will be higher consumer spending as we head into 2013, the retail sector will definitely be a place to park some investment capital. I recently talked about some of the leading luxury stocks to look at, especially as a play on the strong retail sector market in China. (Read “Luxury Stocks That Are Leading the Pack.”)
The retail stocks that I envision to be successful will be both the manufacturers and the retail outlets.
For the more conservative investors looking for steady growth and dividend income, at the top of my list in the retail sector is Wal-Mart Stores, Inc. (NYSE/WMT) and Target Corporation (NYSE/TGT). Wal-Mart is an excellent global retail sector play, but it will need to get deeper into China to really make a dent and drive the share price higher. Target is intriguing, as the “poor cousin” of Wal-Mart has … Read More
The key holiday shopping season is upon us, and I’m sure the retail sector is anxiously waiting, if not praying, for consumers to go out and spend. A strong shopping season will also go a long way to helping the economic recovery, while giving the stock market some good news.
The recent jobs reports added some optimism to the retail sector; albeit, I doubt it will be enough to drive consumers to the malls and online to spend. We need to see progressive jobs creation going forward to instill some confidence in shoppers. In the best-case scenario, if job creation rises, this would likely translate into higher sales in the retail sector.
The Thanksgiving weekend shopping season, beginning with Black Friday this Friday, is important to the retail sector, as shown in the chart below. Retail sales have increased in three straight years and the hope is that 2012 will continue the uptrend. The National Retail Federation (NRF) is optimistic and estimates this holiday shopping season will generate sales of $586 billion, up from $563 billion in 2011. (Source: “Holiday FAQ,” National Retail Federation, last accessed November 19, 2012.)
Copyright Lombardi Publishing Corporation 2012; data source:
National Retail Federation, last accessed November 19, 2012.
The monthly retail sales numbers in the retail sector are showing some encouraging signs. The Thomson Reuters Same Store Sales Index (comprising of 17 U.S. chains) increased a better-than-expected 4.7% in October, above the 4.3% estimate and up from the 4.1% advance in October 2011. (Source: “Some Retailers See Surge in ‘Sandy’-related Sales in October as Industry Remains Upbeat on Holiday Spending,” Reuters, November 2, 2012.)… Read More
In my view, it really doesn’t matter who won, as the problems are the same. Domestically, we have the national debt burden, job creation, weak revenue and earnings growth, the sluggish economic renewal, and the declining middle class. (Read “Please Save the Middle Class!”) Plus, you have the upcoming recession in the eurozone and the change in leadership in China.
Given all of these uncertainties, there is ample risk in stocks, and you need a good investment strategy.
Now you can buy into new positions and assume the risk, but a much safer investment strategy alternative is to play either upside via call options. In this is way, you can take advantage of any upward move in the equities market and manage the maximum risk you have at the same time via this option investment strategy.
Let’s say you feel the economic renewal will continue to drive automotive sales, but you also are a bit worried about a possible economic downfall if Europe and China tank.
You like what Ford Motor Company (NYSE/F) is doing and feel the stock may be heading higher. But instead of buying the stock outright, you can play Ford via call options that will not only add leverage to your trade but also limit the loss to the premium paid, which is a good investment strategy.
Chart courtesy of www.StockCharts.com
Let’s take a … Read More
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