|Dow||+67.78 to 17,137.36|
|S&P 500||+10.06 to 2,007.71|
|Nasdaq||+20.61 to 4,582.90|
|10-YR Yield||+.013 to 2.461%|
|Gold||+$2.90 to $1,269.40|
|Crude Oil||-$0.99 to $93.46|
Sometimes in this business, things can come out of nowhere and smack you over the head. That’s certainly the case with this morning’s jobs report from the Labor Department.
Virtually every piece of economic data we’ve gotten lately has been strong. In some cases, we’re talking about the best readings in a decade or more! Even the private ADP jobs report earlier this week came in toasty, if not piping hot.
But according to the gubmint, the economy created just 142,000 jobs in August. That was below the average estimate of 230,000 and the weakest reading in 2014. Retail and manufacturing were two sectors that showed relative weakness.
So does that mean we’re headed back into the drink? Well, not exactly. Look behind the headlines and you see that other parts of the report were fairly encouraging. Average hourly earnings rose another 0.2 percent … the unemployment rate dropped to 6.1 percent from 6.2 percent … and the number of employees out of work for 27 weeks or more fell to the lowest since January 2009.
|Today’s jobs data failed to meet expectations, but the unemployment rate did slip to 6.1 percent.|
Frankly, the muddled numbers reflect the comments I’m reading right at our very own Money and Markets website. One commentator recently said his company is the busiest it’s been in four decades … while another said the economy feels like it never exited recession.
I think one primary reason is that the biggest spoils of the recovery have gone primarily to the “fat cats.” The Federal Reserve’s own research shows that the richest 10 percent of Americans saw their average income rise 10 percent between 2010 and 2013. But those in the bottom 40 percent of America saw their inflation-adjusted income fall 5 percent to $46,700.
As for who holds this nation’s wealth, it’s increasingly concentrated at the top. The upper 3 percent of America hold just over 54 percent of the country’s wealth, up from less than 45 percent in the late 1980s. The bottom 90 percent of American own just under a quarter of the country’s wealth, down from 33 percent.
So does August’s job market stumble equal a stock market tumble? It’s tough to say in this topsy-turvy world. You’d think stock investors would like a stronger economy, because that leads to greater sales and earnings growth.
But in a stimulus-addicted world, “bad news” might be “good news” because it pushes out central bank tightening a bit further. And sure enough, stocks reversed early losses to close higher.
“This nation’s wealth, it’s increasingly concentrated at the top.”
Personally, I will repeat the mantra I’ve been using for months. Things aren’t going gangbusters here in the U.S. of A. But they’re a lot better than they were when the markets and economy were collapsing in 2007-2008. They’re also a lot better than they are in Europe or Japan. And select industries such as domestic energy, aerospace, chemicals, steel, and autos are doing very well.
So I’m going to keep my nose to the grindstone there, seeking out winners and avoiding losers — all with the help of our Weiss Ratings. I suggest you do the same unless and until we see major signs of a trend change in the markets.
Just like I did last month, I’d like to ask for more of your on-the-ground perspectives on the job market in the wake of this latest government report. Are conditions bad and getting worse? Good and getting better? Something in between?
Also, what does it mean for your investing approach? Will these kinds of numbers just keep the easy money taps open forever? Or are they an aberration, and not enough to derail the Fed’s recent drift towards tougher talk?
Hop on over to the Money and Markets website to weigh in!
|OUR READERS SPEAK|
Feisty discussions on the euro currency, the wages of average Americans, and more continue at the website.
Reader Jeff weighed in on the minimum wage issue, saying: “I believe it is here that you may be out of touch with us, everyday Joe Paycheck Americans. Big business has had their way with us for as long as I care to remember.
“The problem with the economy is simple, not enough wage growth to support the expansion that most desire. While I make a good living being a professional engineer, I am forced to perform the duties of several other positions that have been eliminated, all in the name of increased productivity.
“My wife works much harder than I do serving coffee for a national grocery store chain that prides itself on paying minimum wage and basically treating people, their employees (associates), like crap. This is the real America, the profits go to the wealthy, the slave labor goes to the employee.”
Jeff went on to cite everything from rising health costs and taxes to hidden inflation, then implied that many people (myself included) don’t know what it’s like to work for low pay in this economy.
Jeff, it’s not that I don’t understand what it’s like to work long hours for low wages. I started mowing lawns and doing other yard work for a few bucks a week as a kid. I bagged groceries at age 14, bussed tables at 15 and 16, and worked all the way through college to help cover my bills.
Heck, I can remember when my restaurant paystub put my hourly wage at $2.12 and a half cents per hour! Yes, we got a share of the tips to get us up to the minimum wage level at the time in the early 1990s. But we’re still talking chump change.
My point these days is that we do need to see higher wages in America. But is printing up trillions of dollars in Fed funny money actually accomplishing that goal? I don’t think so.
As for a higher minimum wage, I don’t necessarily have a problem with it if it’s a reasonable increase. The risk is that if you implement too large of a hike, it just convinces employers to cut the number of workers to offset the higher pay rates they’re doling out to those who are left.
Meanwhile, Reader Howard weighed in on monetary policy in the wake of yesterday’s big move by the European Central Bank. He said:
“What these central bankers may or may not realize is the total lack of confidence most people have in the success of their policies. They are stimulating longer term poverty, not wealth creation. Policies that promote dependence and entitlement to families, while creating confusion in everyone else who relies on sound economic values and growth.
“What an abject failure global money printing has been. These bankers are destroying people’s lives and with the support of elected and unelected officials.”
Howard, I agree with you that all of this money pumping hasn’t done much for the “real” economy — even as it has obviously helped inflate the “asset” economy. That’s great for the 1 percenters, who can afford to build swimming pools shaped like Stradivarius violins and $400 million-plus condos in Monaco … not so much for everyone else!
As for derivatives and banks gambling with the public’s money, Reader Dan S. said: “Why not have reasonable reserve requirements on banks for asset obligations like CMOs, derivatives, and other contracts?
“With $280 trillion outstanding, the sum is definitely significant! Banks do not seem limited in owning these assets by not having reserve requirements. There must be a price to maintain these based upon the risk of holding these. After all, the banks owe an obligation to the insurers of their assets, the U.S. taxpayer. This idea that it is their money with which to do as they please does not reflect proper reality.”
Good points, Dan. The unfettered growth in derivatives over the past decade and a half is a major risk to bank stability, and it still hasn’t been effectively dealt with.
Don’t forget to add any other thoughts you might have at the website here.
|OTHER DEVELOPMENTS OF THE DAY|
Is peace breaking out in Ukraine? Yeah, that’ll be the day! Every previous agreement between pro-Russian rebels and Ukraine President Petro Poroshenko has collapsed in a hail of bullets, so I’m highly skeptical of the latest cease-fire discussions.
The U.S. worked to establish a coalition of allies, including the U.K., France, Australia, and Germany, to help it combat ISIS at NATO’s Wales summit this week. The strategy envisions backing on-the-ground, anti-ISIS fighters in Iraq and Syria, while simultaneously bombing the group from the air.
The euro isn’t the only currency that’s been taking it on the chin lately. The Japanese yen briefly fell to a six-year low against the dollar overnight, before bouncing on the weaker-than-expected jobs data.
BP PLC (BP, Weiss Ratings: C) shares got slammed yesterday after a U.S. district court ruled the oil giant acted with “gross negligence” in 2010. That’s when one of its Gulf of Mexico wells spilled anywhere from 2.4 million to 4.1 million barrels of oil.
The firm could face fines of as much as $17.6 billion, above and beyond the $24 billion it has already spent. That, in turn, could lead it to sell more assets to raise money — though it’s worth pointing out the fines could take years to determine, appeal, and ultimately, pay.
Lastly, the football season kicked off yesterday with a proper beatdown of the Green Bay Packers at the hands of the Seattle Seahawks. The Super Bowl champions won 36-16.
Personally, I’ll be at Sunday’s New England Patriots-Miami Dolphins season opener. Looking forward to cheering my Pats on — even if it’s going to be a thousand degrees in Sun Life Stadium! LOL.
Reminder: You can let me know what you think by putting your comments here.
Until next time,
P.S. Martin presented 2 very urgent video briefings this week, designed to not only insulate your money, but also guard your safety and your family’s wellbeing! If you missed these, please click here now to watch!