On Friday, April 6, the Bureau of Labor Statistics reported that the economy had created 120,000 jobs in the month of March. This was more than 80,000 less than what analysts expected. In response, the financial markets around the world sold off, except the U.S. market. It was closed on Friday. But it caught up with the rest of the markets yesterday.
OK, the jobs report was ugly. But I have a different question: wasn’t the “hope” of 205,000 jobs ugly as well?
To have people excited about an employment report that shows 200,000 new jobs is to have, basically, thrown in the towel.
In late 2008, our economy started shedding jobs. This we all know. It continued to shed jobs for two years. When the bloodshed finally ended, we’d added more than 10 million people to the rolls of the unemployed.
Now, typically after such a horrific economic period we’d get a fast and furious recovery.
But this economy isn’t typical, at least not in the sense most people use the word.
This recovery is not like the ones of the last several decades, which were all within an economic growth period (a period we call the Fall Season). Instead, our latest slide and the ensuing recovery, if you want to call it that, are now firmly within the economic Winter Season. This is a time when we spend less, we pay down debt, we save. This means we need fewer employees.
And it lasts for years.
As We Anticipated and Forecast
And this pattern is playing out just as we anticipated and forecast.
Our economy needs to generate roughly 125,000 to 150,000 jobs per month just to absorb the new additions to the workforce (kids coming out of school). That doesn’t include the millions of people who were thrown to the unemployment line. To include them, we’d need to add 300,000 to 400,000 workers per month to make any meaningful headway in reducing unemployment.
Is that forecast anywhere? Absolutely not!
Instead, we have all sorts of tortured conversations going on about how “great” it is that we’ve seen around 200,000 jobs created per month for a couple of months. Now, as the latest unemployment results attest, reality has set in again.
This is why we have stuck to our guns about preparing and protecting our portfolios.
We get it. People “need” the stock markets to go up, so they try to put lipstick on the pig that is our economy. That doesn’t mean it reflects reality.
As the truth of our economic situation comes back to hit people in the face, expect some very volatile markets and a lot of finger pointing. Also expect, eventually, for the Fed to come back to the pseudo-rescue with some new program.
Between now and then be glad there’s a “bust” section in the Boom & Bust portfolio to protect what you have worked hard to build.
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