Welcome to America’s First Jobless Recovery

US UnemploymentThere has been plenty written and spoken in the media about the job situation in American today. With an official U.S. unemployment rate of 9.6%, some say we cannot have a recovery until we experience consecutive months of job growth. (It has been 12 straight months now that the unemployment rate has been above 9.5%.)

Job growth post-recession has been anemic. The Fed has mentioned the high unemployment rate in many of its public comments. President Obama proposed a $50.0-billion infrastructure program on Labor Day to help put a dent in the high unemployment rate.

The fact we have to face is that the Great Recession has exacerbated the structural change in the American employment landscape. To be clear, the structural change in the American employment situation actually started years ago.

After World War II, America became the world’s biggest manufacturer of goods. However, and as we all know, as China’s low-paid work force has been entering the world market over the past 30 years or so, the U.S.’s manufacturing base eroded sharply. As that manufacturing base “went away,” American was transformed from a creditor nation to a debtor nation.

If there is anyone that doubts we have lost our manufacturing base, a Sunday drive in the small towns of states like Michigan or Ohio will put the picture immediately into perspective. The U.S. is following the same route as European countries like Italy, where rising employment costs resulted in factories moving to low-labor-priced East Block and Asian countries.

The recession of 2007 presented itself, the housing market went bust, and, in addition to us losing millions of American jobs as our manufacturing base eroded, construction jobs evaporated as well. Since 2007, over six million Americans have lost their jobs.

With the new housing market in the U.S. not expected to recover for years, American will have to get used to a more permanent high unemployment rate. Back in the 1930s, when the Great Depression was at its peak with unemployment of 25%, the boom in American manufacturing and housing following World War II brought the unemployment rate right down.

This time around, we will not have a recovery in manufacturing because the manufacturing industry is close to permanently disappearing from the grip of America. With millions of homes on the market, new construction in the U.S. will not recover either. Is it any wonder the biggest growth in jobs in the U.S. is in retail? Unfortunately, those are also our worst paid jobs.

Don’t look for the unemployment rate to come down. Until our unemployed workforce is retrained (and that might never happen), we need to get used to a 10% unemployment rate.

Michael’s Personal Notes:

Whenever gold reaches a new price high, the calls come into our office asking if it is too late to get into in the gold action. For years, my answer has been it is never too late to enter or re-enter the gold market. But, like everything else, the right timing is everything.

Gold bullion is up 19% since February of 2010, when the metal traded at $1,050 U.S. an ounce (presently at $1,248.25). After such a run-up in any investment, a correction in the price advance would be both normal and healthy.

If gold prices do not surprise on the upside here, I would see any correction in the price of the metal as a buying opportunity. I see gold as a screaming buy at anything close to $1,150 an ounce.

Please remember: December is usually the best month of the year in respect to strong gold prices.

Where the Market Stands:

Back to breakeven, that’s where we are with the stock market for this year.

A couple of weeks ago, I talked about how the Dow Jones Industrial Average has been trading in a narrow trading range since May of 2010. The market is now moving back to the high end of that trading range.

The Dow Jones Industrial Average opens this morning at 10,415. A breakout by the world’s most popular stock market index above 10,700 would be extremely bullish for stocks.

Unlike my associates in this business, I am more immediate term bullish on the stock market than the majority of market analysts today. I do expect to see some better upside action before this bear market rally is done.

What He Said:

“A Stock Market’s Obituary: It is with great sadness that we announce the passing of the Dow Jones Industrial Average. After a strong and courageous battle, the Dow Jones fell victim to a credit crisis and finally succumbed on Friday, October 3, 2008, when it fell decisively below the mid-point between its 2002 low and its 2007 high.” Michael Lombardi in PROFIT CONFIDENTIAL, October 6, 2008. From October 6, 2008, to November 27, 2008, the Dow Jones Industrial Average experienced one of its biggest two-month losses in history.