*GASP*... I have something positive to say.
Good morning everyone. The Bureau of Labor Statistics published its April Employment Report this morning. As usual, the numbers are bad and in reality they are worse than they appear at first glance. Having said this, there were a few positives that can be taken away from it.
Let's start with the bad stuff. Despite the fact that the number of job losses for the month came in at -539,000, which was less than expected, this number understates the real world number of losses.
First of all, once again the BS er um BLS added 228,000 to the report using the good old birth / death adjustment.
Furthermore, 72,000 of the jobs that were added in April were government jobs. The number of private aka non-government jobs that were lost was actually 611,000.
Also, once again the BLS made a negative revision to the prior month's jobs number. This adds another 66,000 job losses in February and March.
All of the jobs that were added during the month came in government, education, and health. I expect the latter two to come under increasing pressure in the future.
That's the negative.
Here's the positive (am I allowed to mention that here?). Things are clearly bad and getting worse, and I realize that this is no consolation to the millions of people who have unfortunately lost their jobs, BUT...looking at things objectively the rate of deterioration in the economy seems to be slowing. The rate of decline in jobs was the smallest in six months. Even after backing out the new government jobs the 611,000 jobs lost in April was less than the 699,000 revised or 663,000 that were originally reported to have been lost in March and the 681,000 / 651,000 that were reported in February. Furthermore, the weekly jobless claims numbers have been a little better lately.
I have little doubt that the U.S. unemployment rate (I know that U6, which is currently at 15.8% is a better number) will eventually hit 10%, but if we can stop the cliff dive that the economy has been in over the past 8 months or so the stabilization process can begin. Things have to stop getting worse as quickly before they can stabilize. I think that is exactly what will happen. We're in for an "L" shaped recession.
The stabilization process is something to keep an eye on. Over the next year, I personally expect that the pace of job losses will begin to slow and that we will hit a bottom and sit there for a while. This is consistent with my previous statements looking for slow to no growth over the next several years. We're not all doomed, but things aren't going to get better any time soon either. This thought ties in nicely with my new favorite quote:
It is possible it is better to be 200 yards from hell and moving away than 10 miles away and moving toward it.
Having said all of this positive stuff I am not buying stocks right now, nor have I found any opportunities in bonds that were nearly as attractive as I saw several months ago. I have been keeping any new money that I am able to save in cold, hard cash for how.
Not only do I want to be prepared with a large safety net if these job losses hit me or my wife personally, I personally feel as though stocks are actually overvalued at this point after our recent bull run. The price-to-peak earnings multiple for the S&P 500 is now approximately 11 BUT and this is a HUGE butt, er uh I mean but, there's absolutely no way that we are returning to the level of profits that we saw in 2007 any time in the near future. Profit margins then were around 50% higher than their historical average, in part as a result of all of the crazy leverage that was being used.
Looking at more normalized profit margins the current valuation of stocks is probably above its historical average, which means that returns from stocks will likely be below average from this point.
Here's a rant on a somewhat related note:
Once again, a CNBC anchor annoyed me this morning. Not only is she a homewrecker, but Becky Quick is actually stupid as well. When she heard one of the guests on Squawk Box state that the large number of government census jobs that were created last month were only temporary and are lower quality than what most people want she cluelessly said several times something along the lines of “I don’t understand, They’re jobs."
Ahhhh hello Miss Pampered News Anchor. Let's see you get up from your cushy job behind a desk and hit the street with a clipboard doing census work for minimal pay. Then perhaps you'll understand what the guest on your show was talking about.
P.S. Becky...you're not nearly as hot as you think you are.