Economy “Booming”

288,000 NEW jobs created in April.

Unemployment rate plummets to “only” 6.3%.

The U.S. economy is back!

Does it feel like that to you or your friends?

My thesis since the crisis began has been that post financial crisis recoveries are frustrating. They tease and tantalize on the upside but rarely deliver. GDP growth never hits “escape velocity” and unemployment remains stubbornly high. With the government printing a 6.3% that’s hard to still say “stubbornly high”.

Digging into the details a little more, the labor force participation rate fell to 62.8%, the lowest level since 1978. Almost 1 million people left the labor force. Zero Hedge wrote a good piece about this here.

With wages not growing and people giving up on looking for a job, this is the main reason markets are not celebrating the 288,000 number. Additionally, it seems like at least once over the past few years, we see a monthly print close to 300,000 new jobs created only to have cold water poured on it over subsequent months.

Remember, the actual news isn’t as important as the markets’ reaction to the news. Before you fire off an email to me that the Russia/Ukraine situation led to Friday’s underwhelming performance, stocks looked crummy in the pre-market minutes after the jobs numbers was released. We “should” have seen a huge up day in stocks and really bad day in bonds. That just wasn’t the case and yes, I understand that there were geopolitical events in the air as the day wore on. Monday could be a very telling day for the short-term.

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FOX Business & Employment Report Update

I am going to be on FOX Business’ Markets Now close to 1pm est on Monday, hopefully discussing some of the items below.

After a string of weak but positive employment reports, Friday’s data were “better than expected”, but still not strong enough to keep pace with population growth.  And when you dive into the details of the report, according to John Williams of Shadow Stats, you see the normal “seasonal adjustments” accounted for a significant number of jobs created. 

What continues to amaze me is how many “experts” think this recovery is anything other than normal following a financial crisis.  As I have said for three years, the economy we are living through right now is what typically happens after a systemic meltdown.  It’s lukewarm, tepid and any other adjective you want to throw in.  If history continues to guide us, the real progress on the jobs front will happen on the other side of the next recession, which I happen to believe will be mild given the almost $3T in cash on corporate balance sheets and how lean corporate America has become.

The markets reacted very favorably to the news on Friday, but Europe and our futures were already in rally mode before the employment report was released.  With the disappointing lack of news from our Fed and the ECB and the positive jobs report, the Dow ended last week almost exactly where it began the week.  As I mentioned in the last few Street$marts, there are a few key indicators to watch for clues to the next big market move.

On the positive side, high yield bonds are making new highs and the semiconductors are trying to step up and lead.  But the Dow Jones Transportation index, S&P Mid Cap 400 and Russell 2000 Small Cap need to get into gear for this rally to last much longer.  We also need to see less defensive sectors outperform the market.  For a while now, it’s been consumer staples, utilities, REITs and biotech, not your typical healthy bull market leadership.

Could the Dow reach up to visit its 2012 peak?  Sure.  But unless something changes dramatically, I think it will be your typical summer selling opportunity in a presidential election year more than anything else.

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