A Horrible Jobs Number
Sep 2, 2011
Posted by Jody Eisenman | Filed under Uncategorized
The stock market has been on edge since early yesterday. After a run up on the DJIA to around 11,700 early Thursday, stocks began to fade based on news of a major investigation of mortgage fraud of the major banks, and the anticipation of a weak jobs report number this morning. Unfortunately for the bulls, the economy showed a zero job growth this month, which is the first time we have no new net jobs in eleven months. Here’s an amazing statistic: Over the last seven years, the labor market has increased by roughly 6 million people, yet the total number of jobs created has been 54,000! As I wrote this, the DJIA is down about 200 points to drop below 11,300. This has increased talk of a double dip recession and a possible QE3 action by the Federal Reserve. I do not know if the Fed will try this, but it’s safe to say that QE2 did not have the overall desired effect. A more jaundiced view would call it a failure.
Although the market had made an impressive recovery had made an impressive recovery from August 19 to the end of the month with the DJIA rising about 800 points, the index fell over 500 points overall for the month of August. September has started just as poorly, with stocks down about 300 points already. Meanwhile, the banks continue to get slammed. GS is now down about 25 points (roughly 20%) in the past month, with MS and WFC not far behind. C is doing even worse, now down about 25% in a month. Even BAC, which rallied on the news of Warren Buffet’s investment, has hit the skids, and is currently off almost 50% year to date. I do believe that there is a very high level of apprehension among traders in general and the public in particular. Companies don’t want to hire because of an uncertain future. Consumers don’t want to major purchases because they are concerned about their jobs. In this type of environment, it is difficult to see what the catalyst will be to change this sentiment. Add in the European situation, and you have a rather volatile mix for equity investors. As I have stated for the past few weeks, I expect volatility to stay high. As such, most position traders have had a difficult timing making money. Although anything could happen going forward, I do believe that in this situation, any negative event could be magnified dramatically. In other words, because everyone is so skittish, a negative event (such as a major European bank failure) could have an extremely bearish reaction from the stock market. I’m not saying this will happen; however, it behooves investors to be cautious and use stop loss orders where appropriate. A happy Labor Day to all my US readers.
