Investment Contrarians

Why We Can’t Create Jobs After Three Rounds of Quantitative Easing

By for Investment Contrarians |

We Can’t Create Jobs After Three Rounds of Quantitative EasingThe stock market finally did the right thing last Friday after the disastrous non-farm jobs market reading. Now there are some who suggest the extremely poor jobs market reading forces the Federal Reserve to maintain its controversial bond-buying program and maintain record-low interest rates, driving the flow of easy money—but the jobs market numbers were horrendous. I sure wouldn’t be buying jobs-related stocks at this time.

A mere 88,000 new jobs were created in March, according to the United States Department of Labor. (Source: “Economic News Release: Employment Situation Summary,” Bureau of Labor Statistics web site, April 5, 2013.) Briefing.com had estimated the country would generate 185,000 new jobs in March, so we were short by nearly 100,000 jobs.

This is not something to push aside. In February, an upwardly revised 268,000 jobs were created, some 180,000 more than in March. You don’t have to be an economist to figure out something is wrong with the jobs market picture, but then you would realize this, as I have been bearish towards America’s jobs market despite the optimism that was surfacing.

The 88,000 new jobs were so bad that it was well below the monthly average of 169,000 over the past 12 months, based on data from the Bureau of Labor Statistics.

The unemployment rate edged lower to 7.6%—but you can ignore this, as more workers decided to stop looking for work, which was the reason for the decline.

The Department of Labor says there are 11.7 million unemployed, but readers of Investment Contrarians know that this number is not realistic, but erroneous. In reality, there are likely over 20 million Americans with no jobs, so don’t believe what you are told about the jobs market.

What is also interesting is there is a jobs market statistic called “discouraged workers” used by the Department of Labor, which refers to “persons not currently looking for work because they believe no jobs are available for them.” The official count is 803,000 in March, but the true number is clearly much higher. In my view, the use of “discouraged” should also include those workers who are currently employed in positions that are well below their skill and/or education levels. I mean, how can a college graduate working full-time at McDonalds Corporation (NYSE/MCD) because they need to pay their bills and mounting school debt not be classified as “discouraged?”

As I have said in my previous commentary, economists believe the country needs to see the monthly creation of 400,000 to 500,000 new non-farm jobs for the jobs market to be regarded as healthy. Folks, we are nowhere near this; as I have said, it will take years. Consider the cheap labor costs in the emerging markets and the flow of manufacturing jobs out of the country, especially from the traditional “Rust Belt” states. It’s not a good picture.

So the next time someone tells you they just got a job, consider what kind of job it is and ask yourself about the other 20 million or so Americans still not working. Given all of this, for investing, stick with the discount and dollar store stocks, along with those companies that advance funds and offer prepaid credit cards, as the unemployed and low-income classes will continue to grow.

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  • zlop

    Productivity has increased — Surplus Serfs are Human Liabilities.