Jobless Recovery
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The Real Question Facing Tech Investors Is The Jobless Recovery
Now that the election is over, the real question facing tech investors is the same today as it was in January 2009 -- how to play the Jobless Recovery.
Clearly, the stats show a modest rebound -- weak progress on jobs that is just slightly ahead of population growth.
I still see a sluggish economy for the next few quarters. We haven't had any news out of Washington -- from either party -- to give employers the confidence they need to hire in a big way.
Now, with Obamacare kicking in along with new regulations on banks and finance companies, I believe that trend will continue.
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Conspiracy Theories About the Jobs Report Don't Ring True
So listen, can we talk?...
Can we talk about unemployment in the U.S.? And can we talk about conspiracy theories?
I thought you'd say "yes." I can almost hear you saying, "Hell yeah, bring it on!"
So, let's have at it.
Let me say my piece, and then you can chime in.
I'll start by saying I don't think there's any conspiracy to manipulate the unemployment numbers.
You know, the numbers that came out on Friday and freaked everybody out.
Somehow, right before the election and right after President Obama fell flat on his face, after Mitt Romney knocked the champ (don't get mad, he's not my champ, he's the champ because he's the incumbent) down almost for a ten-count, the bloodied champ bounds off the canvas and stands on the ropes proclaiming victory over economic malaise because the unemployment rate fell below 8%.
Well, what's freaky about the unemployment number, the U3 number, the most widely watched and reported measure of unemployment in the country, maybe even the world, is that it fell from 8.1% in August to 7.8% the September.
What's got folks in an uproar (folks that aren't so folksy when it comes to the champ) is that it looks pretty conspiratorial that unemployment hasn't been below 8% in 43 months, not since Obama got into office. And all of a sudden it drops in August to 8.1% from July's 8.3%, and far more freakily, drops to 7.8% (that's below 8% for you non-math types) in September from 8.1% in August.
But before I give you my thoughts on why I don't think there's a conspiracy...
Okay, let's stop right there. The truth is I DO believe in conspiracies.
I believe that John Kennedy was assassinated in a coup'd'tat in Dallas. Who did it and why? Figure it out, the facts are all there.
I believe that the Federal Reserve System is a front for the power, and of course, moneyed elites who run America for the benefit of its Club Fed members. The facts are all there.
Do I believe in other conspiracy theories? You bet I do. I just don't believe in all of them, especially the ones that can't be proved. Theories are fine, but give me some facts.
But I digress.
Does it smell like a conspiracy, some manipulation of the unemployment numbers that look so much better and may now aide Obama's reelection campaign?
You bet it does.
But wait...
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Read This Before You Cheer the September U.S. Jobs Report
U.S. President Barack Obama is undoubtedly breathing a sigh of relief after the September U.S. jobs report showed the unemployment rate in the U.S. surprisingly trickled down to 7.8% from 8.1%.
That's the lowest level in 44 months - since January 2009, the same month President Obama took office.
But, the number of jobs added was shy of estimates, and the unemployment rate remains at an unhealthy and elevated level.
And as usual, there are scary statistics lurk behind that headline number.
"I take these numbers with an enormous grain of salt," economist Joshua Shapiro of consultancy MFR Inc. told The Wall Street Journal. "I think the underlying trend is pretty clear in terms of the labor market-that it's still struggling quite mightily."
The September U.S. Jobs Report: A Closer Look
U.S. Labor Department data released Friday revealed total nonfarm payroll employment increased by 114,000 workers last month, slightly missing economists' estimate of 115,000.
Total employment as measured by the government's household survey rose 873,000 in September.
But the bulk of the jobs added in September were for part-time workers, positions taken because of waning business conditions or because they were the only jobs those seeking work could find. The number of people who are working part time but want to be working full time rose by 582,000.
In addition, a great number of discouraged Americans have simply stopped looking for work or have exhausted unemployment benefits and fallen off the unemployment radar.
Also missing from the count is the out-of-work self-employed group. And a plethora of students are choosing additional education instead of work as a means to avoid a difficult job market.
Even if the "cooked" figure of 114,000 was accurate, it's still well below the minimum 125,000 jobs that need to be added every month just to keep up with population growth.
"When you look at the payroll numbers, they are bumping along where we have been around this 100,000 level, which is not enough to consistently reduce the unemployment rate. The overall message is one of plodding along. It's OK, it's not disastrous, but it's nowhere near where the Fed wants to be," Lee Ferridge, head of macro strategy for North America at State Street Global Markets stressed to CNBC.
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The Ugly Truth About the Promise of the JOBS Act
Last week I wrote about how the Jumpstart Our Business Startups Act (the JOBS Act) can be a pathway to funding brand new businesses as well as small operating companies to further American entrepreneurship and create jobs.
I even called the legislation, signed into law on April 5, 2012, a "light at the end of the tunnel" in terms of its potential to stimulate the economy.
But I also warned you there are elements of the Act that are bad, if not downright ugly.
So, let's take another look at the JOBS Act to see if that light in the tunnel is a freight train headed straight for us.
First, it's instructive to learn that the JOBS Act came into being, not as an original piece of legislation, but as an amalgamation of six House bills, four of which had strong bipartisan support.
What began as a series of bills proposed to facilitate "access to capital" and "capital formation" and incorporated those terms in their former titles, eventually were cobbled together to become the Jumpstart Our Business Startups Act, whose title highlighted this year's election mantra: it's about jobs, jobs, jobs.
Too bad there isn't anything in the JOBS Act that says anything about hiring anybody.
The Masquerade Behind the JOBS Act
Some of you might call me cynical for this, but another way to look at what the JOBS Act amounts to is to see it as a deregulatory push masquerading as a job creation scheme.
And therein lies the problem.
It's all well and good to make raising capital easier for startups and small operating businesses, but altogether disquieting to clear that path by weeding out investor protections that have been on the books for decades.
It's like dj vu all over again.
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How the Fiscal Cliff will Deal a Blow to U.S. Defense Industry
The fiscal cliff is taking down more than U.S. taxpayers - it will tear through the U.S. defense industry.
At the end of this year, current tax policies are set to expire and new ones will go into effect at the start of 2013. What Americans can expect if the policies are not extended is a painful combo of tax increases and spending cuts that will thrust the struggling U.S. economy back into a recession.
If U.S. lawmakers fail to act, scores of economists agree what we'll get is a $600 billion drag on the already sluggish economy. The tax implications have been widely discussed, but there has been little chatter about the impact on the defense sector, which stands to sorely suffer since it is subjected to half of the proposed spending cuts.
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The 10 Most Pressing Questions About the U.S. Economy – And Their Answers
Will the economy lapse into a double-dip recession? What can be done about the soaring U.S. budget deficit? What's next for the stock market?
These are just a few of the tough questions facing investors. And there may be no one better to offer answers, insight, and advice than Money Morning Contributing Editor Shah Gilani.
A retired hedge-fund manger, Gilani has routinely been there to shepherd investors through blinding market uncertainty. He's used his contacts on Wall Street to give Money Morning readers the inside scoop on the collapse of American International Group Inc. (NYSE: AIG), the May 6 "Flash Crash," and most recently the "Mortgagegate" scandal that currently threatens to undermine the fragile U.S. recovery.
Indeed, Gilani has been a tireless advocate for investors and a prescient market maven. That's why Money Morning's editors recently sat down with Gilani to talk about today's most pressing issues and discover what he expects for financial markets in the months and years ahead.
In the partial transcript of that interview below, Gilani discusses why it's a good time to invest in stocks, what steps should be taken to fix the U.S. economy, and whether or not gold prices have peaked.
In short, the U.S. government has failed the public as a matter of course, but there is still a way out of our current economic malaise and ample opportunity for investors to profit.
To find out the answers to the ten most pressing questions facing the economy, read on... -
The Jobs Market May Look Bleak, But Your Investments Don't Have To
There's no getting around the fact that the U.S. jobs market is bleak. Ultimately, though, it's a stark reminder that as investors, we should be looking abroad for maximum profits.
Indeed, investors must turn to countries where the number of people working is rising along with standards of living and consumption.
But that's not all.
There are a few companies that have been performing exceptionally well and are poised to bring investors some joy this holiday season. Before we get to those, though, let's take a quick look at the job market.
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Question of the Week: U.S. Government Spending the Wrong Way to Fix Job Market
The U.S. unemployment rate has hovered around 10% for months - with no real signs of improvement. As American workers grow increasingly impatient, the U.S. government is running out of options to help the job market. But with midterm elections approaching, U.S. President Barack Obama is trying to show voters there's hope in resolving the stubbornly high unemployment rate. Last week he unveiled a six-year infrastructure plan that would invest billions in transportation projects and create a "substantial" number of jobs.
The government would supply $50 billion off the bat to rebuild 150,000 miles of roads, 4,000 miles of rail and 150 miles of runway, plus modernize the air traffic control system. The plan also sets up a government-run infrastructure bank to finance the projects, combining tax dollars with private investment for funding.
