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The jobs news today seems quite positive to me.

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June 05, 2009 – Comments (9)

Today we saw the job less was hundreds of thousands less than expected 345,000 vs expected 500,000.  Good news.

Unemployment was 9.4%, higher than the expected 9.2%.  This is interesting, why should job losses be less than expected, but unemployment be more?  It could likely be that there were people without jobs that are now actively seeking jobs once again - adding them onto the unemployment numbers.  Lots of people actively seeking jobs indicates an overall rise in expectations about work - and suggests that future months will also see lower job loss numbers as more people find work.  Good news.  

Previous month job losses were revised in a positive direction, rather than in a negative direction.  That's a first - and also good news.

 

I was honestly surprised that the market didn't go up 2-5% today from this news, as it was a shock to me.  This seems to indicate that maybe we've risen too fast, and the rally is out of fuel.  Another possibility is that it was an example of buy the rumor and sell the news.  

I wouldn't be surprised if the market had a slight pullback of 5% or so other the next two weeks.  Long term trend now appears to be up, however.  I placed buy orders last week for several companies- but none were filled as I had limit orders and the market kept going up.  I'm going to stay disciplined on these limit orders.  If they never get filled, that's fine, I didn't lose any money.

 -Rof 

9 Comments – Post Your Own

#1) On June 05, 2009 at 7:33 PM, rofgile (99.01) wrote:

A note on next week:

 GMX has a nice blog post on next week bond auction.

 If you are thinking about going long, I would see what happens during this next week.  If US bond sales do badly - will the market take this as a major negative news?  Possibly - and if so I would use this to buy in. 

 Stay away from banks - unemployment will reach 11% at this rate.  Housing prices will fall.  Banks will need to go to the public markets for additional reserves through dilution of shareholders.  

 Now's a good time to look at companies with no debt, high dividends.  Manufacturing has been quite knocked out - these are where I'm looking. 

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#2) On June 05, 2009 at 9:00 PM, russiangambit (28.77) wrote:

It seems we get 0.5% unemployement increase a month, and that is the official number. At this speed we will be at 11% by the end of summer. I don't know how that is going to improve things. So, the number of jobs loss better slow down, then we might be at  "only" 10.5% by the end of summer.

With  almost 10% of jobs already lost, it is not surprising that the speed is slowing down. But the fact that job losses haven't stopped is not a good sign. It means that the economy is still contracting, i.e. getting worse at slower pace. Even at a slower pace, it is still getting worse, not better, i.e. it has been going in the opposite direction of the stock market for the last 3 months. How long can they diverge?

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#3) On June 05, 2009 at 9:09 PM, Melaschasm (< 20) wrote:

The way I read the unemployment data is a reduction in the number of companies cutting their workforce, but not many companies hiring new workers. 

I expect the auto industry and related jobs to boost the June numbers back over 500,000.  If the current rally hasn't pulled back by then, this could be the news that causes a market pull back.  Also, I think that the higher gas prices could contribute to bad numbers for June, as people reduce travel even more.

I suspect that July could be ugly for stock markets, but I am not yet sure if I should rebalance my CAPS account before the end of June.  I am going to be watching gas use for the next few weeks to try to get a feel for consumer activity.  A fall in demand for gas could signal more bad economic data in July and August.

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#4) On June 05, 2009 at 9:23 PM, russiangambit (28.77) wrote:

And one more thing, people keep talking about how this time is not as bad as Great Depression. It probably would've been as bad if we didn't have food stamps and unemployement benefits. We also have a lot of charities like churches, providing food.

We have several million people who lost  jobs - how would've they supported themselves if we didn't have those programs? Right now they , at least, have money to buy food, this is why we don't see them on street corners selling their valuables. So, if you still have your job and you don't see these people you might think that things are not that bad.

Mish had a good post yesterday about 1 in 9 people currently being on the wealthare in the US. Alstry has a repost of it on CAPS.

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#5) On June 05, 2009 at 9:54 PM, portefeuille (98.96) wrote:

why do so few ever mention why the jobs are cut (well andy brough from schroders did today on CNBC europe)? they are cut to increase "the bottom line". "job cutting" is very good at that. so the "earnings picture" improves.

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#6) On June 05, 2009 at 10:05 PM, assafer (< 20) wrote:

very true portefeuille.  thanks for pointing that out.   

Another thing that i just can't understand is why we are considering losing 350,000 jobs a good thing.  remember, someone needs to hire all these people, and that can't happen until companies actually start making money, which none seem to be doing right now. 

the market will tumble from here.   

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#7) On June 05, 2009 at 10:26 PM, StopLaughing (< 20) wrote:

Actually many companies cut cost rapidly in Q1 and can make a profit with sales down 10%.

The market can run up and also have the P/E ratios run up while unemployment is high.  Most economists think unemployment will be 10+ for 1 to 3 years but they are predicting GDP recovery during those years.

Alstry and other bears are way to focused on unemployment. It is only one variable of many that determines GDP or the price of stocks. Further, the relationships between unemployment and GDP and the market are quite variable (unstable) so  unemployment is not a great short run predictor.  The relationships also exhibits variable lags. 

In other words Alstry and other Bears have found a good story that seems to have good logic but it just is not a great indicator in the real world except maybe in the very long run.

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#8) On June 06, 2009 at 3:22 AM, rofgile (99.01) wrote:

On the www.calculatedrisk.com blog, 6-5-2009, there is a nice picture of job losses in previous recessions. 

One thing I found quite interesting is that in these job loss graphs, often the losses hit a bottom, then net improve.  This is often followed by more losses creating a second dip.

Many blogs and myself included are trying to extrapolate the second derivative of the losses (the change in the rate of losses) to see that maybe in a couple of more months we'll be gaining jobs net.  Looking at previous recessions - it can be seen that the path may not be a direct line back to net plus jobs.

The overall amount of job losses right now is severe.  It is basically the worst since the WWII in percentage.  This is a severe situation.  I think I've been buying into the positives a lot lately (which do exist) - but I'll be the first to critique my own thoughts.  It is definitely a possibility that the economy is going to have another big increase in job losses before we go towards a recovery.  If this happens - I think we could see the big market dip that GMX and others have predicted.  But this dip isn't guaranteed to happen as these bloggers seem to believe.

On a separate note - one company that I follow is looking like a nice investment right now.  Vodafone has an 8% dividend yield right now, and is still sitting near its 52 week low.  I might start going after companies like this in a defensive mode since I am getting worried about jumping into a market that could have one more downturn. 

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#9) On June 06, 2009 at 3:22 AM, rofgile (99.01) wrote:

On the www.calculatedrisk.com blog, 6-5-2009, there is a nice picture of job losses in previous recessions. 

One thing I found quite interesting is that in these job loss graphs, often the losses hit a bottom, then net improve.  This is often followed by more losses creating a second dip.

Many blogs and myself included are trying to extrapolate the second derivative of the losses (the change in the rate of losses) to see that maybe in a couple of more months we'll be gaining jobs net.  Looking at previous recessions - it can be seen that the path may not be a direct line back to net plus jobs.

The overall amount of job losses right now is severe.  It is basically the worst since the WWII in percentage.  This is a severe situation.  I think I've been buying into the positives a lot lately (which do exist) - but I'll be the first to critique my own thoughts.  It is definitely a possibility that the economy is going to have another big increase in job losses before we go towards a recovery.  If this happens - I think we could see the big market dip that GMX and others have predicted.  But this dip isn't guaranteed to happen as these bloggers seem to believe.

On a separate note - one company that I follow is looking like a nice investment right now.  Vodafone has an 8% dividend yield right now, and is still sitting near its 52 week low.  I might start going after companies like this in a defensive mode since I am getting worried about jumping into a market that could have one more downturn. 

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