The Jobs report came out and, in the end, was as expected. Consensus was for 190K-200K with 100K census workers. Government only hired 48K census workers and reported 162K total increase in jobs. So, private sector total was 123K, which was better than the 100K expected and had economists pretty much convinced that happy times are coming again. The hollow ring was the decrease in earnings on an hourly basis. Weekly earnings were up due to a .10 hour increase in weekly hours worked. Year-over-year hourly earnings were up 1.7%, not adjusted for inflation. Weekly earnings year-over-year were up .16%, not adjusted for inflation.
The stimulus is arriving into the economy with construction jobs actually up for the first time in a while. This was directly attributable to shovel projects in the stimulus. Manufacturing jobs were up for the first time in a long time, but these were warehousing and other non-production jobs. Production jobs declined. Service jobs were up 82,000 comprised mainly of health care and social workers (up 45K) and temp workers (up 40K). Temps are used when their services will not be required in future (easy firings). Health care workers have been comprising an ever-expanding proportion of the U.S. workforce and the trend is up for at least the next several years. They are not productive, however, because their cost is borne principally by corporations and this cost is counter-productive to the economy as a whole.
Here is the full report: BLS establishment report 4/2
The stim will probably continue to be felt through June, but fall away in second half. I estimate 2nd half GDP at 2.5% nominal. The U.S. has a secular decline in employment manifesting itself in lower-paying jobs and reduced manufacturing. This decline was underway 20 years ago but was masked by the real estate boom, which at it's peak employed directly or indirectly 40% of the American workforce. As the U.S. was shipping manufacturing overseas the workers migrated into furniture stores, mortgage offices, real estate offices, real estate support services, construction, building material supply, architecture, interior design, and government jobs related to their primary revenue stream, property taxes.
Every single one of the job categories above is in decline. Workers have been adjusting to the secular shift in the U.S. economy by accepting ever-lower wages. The lucky ones wound up in government where their wages were not as dramatically affected. However, going forward, government jobs will not be nearly as secure as they have been in the past. Starting in 2 years the federal government will be embarking on a long-term headcount reduction. Congress has alienated the American people with their profligacy and will be in no position to execute more giveaway programs. The Democrats will probably not escape ignominous rejection in mid-term elections as it is. Starting November, if I read the tea leaves correctly, the Republican majority will not spend a dime on bailouts, handouts, digouts, or other fantasies.
The Fed will not increase their balance sheet (increase their risk) to further prop up failing markets (i.e. residential and commercial real estate). The Fed, I believe, will be too late selling their mortgage-backed securities. They are currently in internal debate over the issue, with one camp pushing for immediate risk reduction and the majority wanting to wait for the real estate sector to recover beforing reducing their holdings. In all of their history, the Fed has never held any assets except for U.S. treasuries. Now, they hold no treasuries and the ENTIRETY of their portfolio is mortgage-backed securities. Mr. Bernanke has rolled the dice big-time and may be the fool of the next decade if the Fed portfolio implodes. The ramifications are beyond the imagination.
Stock Market
The wave pattern was conforming early Thursday to an expected 5-wave advance to finish an ABC upward correction from the low the prior Friday. Thursday's price action caused a re-classification to a completed ABC:
The wave pattern was conforming early Thursday to an expected 5-wave advance to finish an ABC upward correction from the low the prior Friday. Thursday's price action caused a re-classification to a completed ABC:
The DJI futures advanced 30 points after the jobs report came out which brought them right to the highs Thursday. There is a strong seasonal tendency for the Monday after Good Friday to open higher and post a morning high. I will be short-selling shortly after the open to 5% exposure.
I posted a DJI chart with a 173-week M/A in the 4/1 11:00 post. The 173-week M/A is currently around 11,050 and, if the market reaches it Monday, offers major resistance. Here is a closeup over the past decade:
U.S. Dollar and commodities
I will not be in silver or oil until the dollar falls to 79.50-80.00. The dollar peaked right in line with it's forward gauge:
Finally, an apparent I1 failure has been rectified.
The latest Elliott Wave Theorist reclassified a portion of the wave 2 primary advance from the March, 2009 low as a skewed triangle, instead of a diagonal. So, what has this got to do with the price of tea, you may ask? Well, one of the very few I1 failures over the last 40 years occurred right in the interval that was reclassified, August 7, 2009 to October 2, 2009. A skewed triangle is a corrective formation which is a sideways triangle overwhelmed by forces causing to skew upward (in this case). A diagonal, on the other hand, is an impulsive formation. The I1 issued a sell signal peak on July 28 and declined to October 3.
While this may seem like a trivial issue it rectifies an apparent I1 failure that has bothered me the last several months. So there, I got it off my chest....
Looking at the above chart one can notice that the I1 peak appeared to occur on Thursday, but actually occurred on Friday, with S&P futures advancing 3.5 points on the jobs report.
Steve, I think you are right on your view point of the past and the out look of the near future. Though timing is every thing. You know that its happening, or going to happen, but its all about when will it happen and what will be its efects. And will something else happen that you never even thought of that changes every thing. Say a new invention or war, a illness a plane hitting the world trade center, who would of ever thought that. And how do any of these things effect the markets if at all. Greed and fear, this is what i think makes up the market moves and the key is to get on the right side of the trade as much as you can and for as long as you can.
ReplyDeleteGreed and fear. I am putting together a "slowed down" I1 for the period since 1965. Just a 60-day moving average, but it accentuates the value by positing rules for only catching the bigger moves. I should have it posted this evening.
ReplyDeleteThanks for the comment.