U.S. ECONOMY LOST 85,000 JOBS IN DECEMBER
8 January 2010 by Cullen Roche
11 Comments
The U.S. economy lost 85,000 jobs in December. This was much worse than the 10,000 gain analysts were expecting. The unemployment rate stayed at 10%. Interestingly though, we do mark the first gains in jobs as November was revised higher to +4,000.
Stock futures are down on the news, but this could be an inverse knee jerk reaction from what we saw last month when the futures spiked in the morning on the big beat and then sold off all day. Instead, the implications here are more interesting. The Fed is likely to keep rates low and the government will be pressured to implement more stimulus. In other words, this doesn’t necessarily mean the market is going lower following this report as easy money will continue to flood markets.
TPC, I readily concede that you may be right on your short-term bullish call given low-ball expectations. But there is absolutely no way to construe much positive out of this report, not when we need over 200k jobs just to keep up with a growing labor force. Another way to look at this is, even with all the unprecedented liquidity and how it’s a game changer and all the horsecrap people are tossing around to justify this bubble, we still are nowhere near stemming the tide on job losses. And that 10% number doesn’t mean squat, it’s voodoo math at its finest. But in all seriousness, how will more monetary policy help spur lending or create jobs or do anything for main street? If this is the best that a low interest rate can offer, sorry but can’t say I’m impressed.
Sadly we are Japan. We know how the Nikkei turned out, there’s no reason to suspect that our outcome will be a whole lot different. It’s reports like this out of Main St that still have me convinced that net long is simply too risky right now.
VCC,
I totally agree with your long-term stance. This monetary policy is highly destructive and entirely unlikely to get us back to full health. You can’t spend your way to prosperity. Do not misconstrue my short-term outlook. Things are not as good under the surface as some say they are.
But expectations remain very low heading into this earnings season and that is the overriding factor in my market outlook right now. While this jobs data is terrible, it is not necessarily a negative for the market as it means the government and Fed will continue their merry ways.
Yes, money printing will continue. Regardless of jobs, it’s a fact.
Invest accordingly. I still try to short every other day sometimes, but my mental stops get blow up!
Live and learn.
TPC, one other mental note for you. I think this market has a significant correction, if not before, then very near the 2010 elections.
Only way this ship gets on a different course is a political outcry about all the bs that is going on.
It may happen. At most, I think a lot of people will be locking in profits to see what the election brings.
A September and October more reminiscent of 2008? I wouldn’t be one bit surprised. At that time, the fed is going to be pressure to lift rates, the ECB will be lifting rates, stimulus will be coming out of the market, TARP will be ending and earnings estimates will be very high.
Sounds like a potential market top if you ask me….
Yep. Until then, who knows. Commodities will be strong for a bit I think, even thru 2011.
as usual, i look at the economic news and try not to play economist and fit fact into theory, but simply try to figure out how to make some scratch.
i spy with my little eyes a market in which, for the next 6 months (ie as long term as i want to try to see), financials will outperform on the long side (continued spread between the fed window and holding riskless assets is enough to repair any balance sheet), and long term treasuries will outperform on the short side (rates will go up worldwide, not just in US, but i am not comfortable shorting gilts).
this is where i am placing my bets. comments and criticism appreciated.
Nice thoughts Chris. Playing economist is always a bad idea. Understanding the macro trends at work, however, is where the coin is.
I essentially agree with you. Rates are going higher and banks will outperform as the environment remains accommodative. If you’re going to place a beta trade though, why not just buy small caps or EM? Less balance sheet risk. Just a thought.
i am also long EM, and not so EM, like TUR.
But that conviction owes more to geopolitical, rather than economic, consequences. the US will be in economic decline because of geopolitical overreach, not because of our innate economic capacities (which remain outstanding, although i wouldn’t go so far as to espouse US exceptionalism). EM and frontier countries will take up the slack. frontier countries are very scary, however. i like turkey for mostly geopolitical reasons, as US proxies like the IMF will provide ample support (because the US can no longer).
anyhow, back to your point, it is really the clarity of what i see. i see financials making spread profits almost like the old days of golf @ 3pm, whereas i can’t see whether small caps can get the financing to outperform.
Tech is worth a look as well. With clean balance sheets and the potential for a second coming of the internet boom (I think Facebook, twitter, and several other large tech names file IPO’s) we could see a short-term continuation in the tech rally. Plus, semiconductor market looks robust.
Thanks for the thoughts Chris. Sounds like you know your stuff.
i own a little big cap tech, scared of anything that is a “game changer” but is not yet making money (cf 2001). notice the nasdaq outperforming the dow recently, to your point.
i may or may not know my stuff, all i want is to make a little money to pay NYC prices. i do like to have people comment on my positions because the whole process of taking a position usually is accompanied by tunnel vision as opposed to focus…and making money requires more of the latter than the former.
getting people to comment on your positions helps to distinguish between the two.