Employment Report Disappoints

The overly anticipated employment report showed a disappointing 74,000 jobs being created in December. I have already heard the pundits argue away ad nauseam this report as an outlier that will be revised higher in subsequent months, something I don’t rule out. However, they also reason that all is great and our economy is about to go into warp speed.

I could not disagree more as I have since the economy bottomed in 2009. All was not ok in 2009 or 2010 or 2011 or 2012 or 2013 and not now. We continue to live through a very typical post economic crisis recovery that will a full economic cycle to normalize. As I have said ad nauseam, when we get to the other side of the next recession, all will be back to whatever normal is, but that is a ways away.

Even if Friday’s number wasn’t pathetic at 74,000, the biggest concern is that the participation rate considers to hit multi decade lows. The unemployment rate may have dropped to 6.7%, but it got that way because workers are leaving the pool. They have stopped looking for work and are no longer included. The participation rate is down to the worst levels since 1978, certainly not an enviable time in our history when President Carter and the Fed made disastrous mistakes with our economy.

Moreover, according to the USA Today, we have now seen only the third time since 1948 when the participation rate has shrunk year over year. Of course, many of the perma bullish pundits explain all this away as demographics instead of despondency of the inability to find a job. I am not an economist and not an expert on the issue, but even if it is a combination of both, it is cause for concern.

 

Time for the Fed & ECB to Put Up or Shut Up

Here is the piece I did last Friday after the putrid jobs report.  While the headline number may have indicated an increase of almost 100,000 net new jobs, the underlying data was awful.  Additionally, while the unemployment rate may have fallen to 8.1% from 8.3%, it was primarily due to people leaving the workforce than people being hired.

We already know that Bernanke & Co.  are close to another round of money printing (QE) and this will likely push them into QE3 with a combination of mortgage back security and treasury bond purchases.

http://video.cnbc.com/gallery/?video=3000114319&play=1

Stocks Slide on Tepid Jobs Growth Number

On Friday’s CNBC segment, I spoke about the range bound market with the potential for a fall swoon before the election.  But in any market, there are always opportunities and this time is no different.

http://video.cnbc.com/gallery/?video=3000101361&play=1

So far this week, stocks have not behaved well, but it’s far from a rout and the trading range continues. On Wednesday, we get a peak at the minutes from the Fed meeting and folks will take any scrap of comments that leads to QE3 coming.  As I have said since QE1 was launched, we will see QE2, 3, 4, 5 with the Fed’s balance sheet approaching $5 trillion.

Jobs Report Overreaction

Last week on CNBC I commented on how investors and the media are way too concerned about one less than expected jobs report from Friday, just like they were way too celebratory last month.  While I am glad we raised cash a few weeks, I plan to redeploy that this quarter into weakness.

Give a look…

http://video.cnbc.com/gallery/?video=3000083018&play=1

 

Heritage Capital on CNBC’s Squawk Box

Tune in to CNBC’s Squawk Box on Monday between 6:00am and 6:10am to hear my reaction to crummy jobs numbers that were reported on Friday when the markets were closed.  I have already heard calls that the bull market has peaked and the economy is rolling over. Have they?