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 will continue to borrow on credit to survive, and this will add to the already high personal debt level. The amount of loans rose to a seasonally adjusted $2.8 trillion in November, according to the Federal Reserve. (Source: Crutsinger, M., “US consumer debt rises on more car, school loans,” Associated Press, January 8, 2013, last accessed March 11, 2013.) All is fine now, but as interest rates ratchet higher—and they will in a few years—I foresee significant problems for many Americans in trying to make their monthly payments. Paying the minimum balance will absorb interest payments each month, but this will not help lower personal debt.
As long as the unemployment and job creation pictures keep grinding along, I cannot see a way out; and this cannot be good for the economic recovery in America, especially given the impact that sequestration will have on the country. All of this will make the situation in America even worse, and it could drive a market correction down the road. (Read “Big Risk? Try This Strategy.”)