Ralph Shell @ 1:30 PM, Friday August 06 2010
This mornings NFP numbers failed to surprise, merely confirming what most observers already suspect. Namely the economic recovery is not of sufficient strength to add jobs, and without jobs, and a lot of them, the consumers will stay home.
NFP jobs dropped because 131K of temporary jobs were lost. The private sector added 71K jobs, not nearly enough to offer jobs to the previously laid off, and the high school and college grads entering the work force. In late May, it was reported that the unemployment rate in the 16-24 year old age group was 19.6%. The unemployment rate remained steady at 9.5% because the Labor Department removed 181K from the roles of job seekers.
There are some experts who think the current employment trend will continue. A Seeking Alpha Article by Michael Shulman entitled " Why Jobless Claims Will Rise All Year" cites some of his reasons.
- Small business is the engine of job growth and small
business confidence hit its lowest level ever in the most recent Wells
Fargo/Gallup poll. They are not hiring.
- The
back to school retail season is just about over with tax holidays in
several states scheduled for this weekend. When this season ends so do
many retail jobs.
- The
tiny push given to build new homes by the federal tax credit ended in
July, more foreclosed homes are entering the market and home residential
construction is going to get even worse. The home building rate is now
less than one fifth of peak new construction – and between 2002 and 2007
more than 40% of all new jobs were tied to residential construction.
- States
are $84 billion in the red; the Feds will probably vote, in September,
for $26 billion in relief; a good deal of the shortfall is going to be
in layoffs and eliminated positions.
- States
are accelerating early parole for many inmates, soon to hit the
unemployment rolls. Perhaps as many as 100,000 people in the next three
months. No kidding.
There are calls for a new stimulus plan. At a Bloomberg Television interview in Sydney yesterday, "Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. economic recovery is “anemic” and called for a second round of “better-designed” stimulus.
“The recovery is so weak that it is not strong enough to generate new jobs for the new entrants in the labor force, let alone to find jobs for the 15 million Americans who would like a job and can’t get one......"
Yesterday David Axelrod, senior policy adviser in the Obama administration attributed the lack of private hiring in the US to the "problems of Greece and Europe..." With this kind of incite it is doubtful a better designed stimulus plan will be forthcoming from the current administration.
This means we are going to leave it up to Fed Chairman Bernanke to perform some monetary feats of magic to stir up some economic activity. Forex markets responding to this mornings numbers and fearing future changes all firmed against the USD. It seems hard to believe that all the economic problems are now more severe on this side of the Atlantic. These problems have worked their way into the markets with strong weekly performances by the euro, pound, franc and yen since the end of May.
Then again Fannie Mae reports a quarterly loss of $3.1B, hitting the Treasury for a billion or so, the US Postal Service loses $3.5B, is on the brink of a liquidity crises, and Social Security takes in less than it pays out for the first time. No wonder the top White House economic adviser, Christina Romer has chosen to bail.
No trades or charts today. We will see what the weekend brings. Have a great weekend.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.