Home About Archives RSS Feed

@theMarket: Jobless Number Spoils the Party

Bill Schmick

Up until Friday's disappointing unemployment numbers, the stock market appeared ready to regain the year's high all in one week. However, the ugly news that the nation hired a meager 18,000 of our unemployed dashed investor's hopes that the economy might be gaining strength in the second half.

Equities plummeted across the board, as did commodities, while Treasury bonds and gold provided safe havens for worried investors. The Republicans were quick to call a news conference highlighting the Obama administration's failure to create jobs while providing platitudes on how to get America back to work. Unfortunately, neither party has come up with anything close to effective in combating unemployment here at home.

Unfortunately, much of what ails our country's work force has little to do with the here and now. For years, unskilled jobs in environmentally unfriendly industrial and manufacturing industries have been exported overseas. At the same time the construction sector, which had absorbed so much of the unskilled labor pool, is in the doldrums.

Both the government and private sectors have exhorted America's future workers to stay in school, go to college or technical school and obtain skills that would be salable in the new service/technical economy of the country. Instead, the dropout rate has increased while our educational system has continued to decline. Older workers, for the most part, have also refused to either go back to school or acquire new skills.

Now, before we get all jumpy about one month's unemployment numbers remember that the standard deviation (the accuracy) of any one job number is plus/minus 100,000 jobs. That’s right, this week’s number may be off by as much as 86,000 and we won’t know the true figure for months!

But the string of disappointing employment numbers recently has quite a bit to do with layoffs in the public sector. Recall that there was a big spike in the unemployment rate a few months back when U.S. census workers were terminated. Now we are experiencing a new wave of municipal layoffs. Federal aid to states has declined drastically. At the same time, almost every state finds itself in debt with the need to balance their budgets. So unemployment is being fueled by layoffs among state workers with the biggest hit in the health and education areas.

What concerns me most about that is the demand by the Republicans (Tea Party) to cut spending drastically right now. Has anyone given thought to how that is going to impact unemployment and growth in the next six months? For some reason I can't fathom, the GOP believes as long as taxes remain the same everything will be fine. That math doesn't add up.

What I hope comes out of Sunday's negotiations between the leaders of the two parties is a plan to cut the deficit over the long term while continuing to stimulate the economy in the short term. You might argue that I can't have both. But what if we all agreed to cuts in entitlements such as Medicare/Medicaid and higher taxes but wait a year or two, say 2013, before putting that plan into action? At the same time, continue tax breaks this year for both corporations and individuals.

That would give the economy the breathing room to gather strength while giving all of us a heads-up on what's coming around the corner. A deal like that would give the markets confidence that Washington is doing something about the deficit while removing another stress factor (the debt ceiling) from the markets. As for the markets, I remain bullish. After a 6 percent move up in one week, a 1 or 2 percent decline would be a normal reaction.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net . Visit www.afewdollarsmore.com for more of Bill's insights.

Write a comment - 0 Comment       Tags: jobs, debt ceiling, education      

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
McCann Ready to Start New School Year With a Few Changes
Williamstown Fire District Seeks Candidates for Governing Body Spots
Cultural Pittsfield This Week: Aug. 23-29
'Blinded by the Light': Guidance From Asbury Park
North Adams Hosts 9th Annual Motorama
Clarksburg Officials Approve Road Projects From $1M Borrowing
North Adams Airport to Approve RFP Next Month
Cheshire Faces Tough Decision With Trailer Park Roads
Gladys Knight, Roomful of Teeth, Gershwin Highlight Busy Week
'EforAll' Touches Down in Berkshire County

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (299)
Independent Investor (407)
Archives:
August 2019 (3)
August 2018 (4)
July 2019 (5)
June 2019 (8)
May 2019 (10)
April 2019 (7)
March 2019 (7)
February 2019 (6)
January 2019 (6)
December 2018 (4)
November 2018 (9)
October 2018 (5)
September 2018 (4)
Tags:
Housing Wall Street Retirement Commodities Euro Bailout Europe Economy Greece Debt Ceiling Markets Taxes Currency Federal Reserve Crisis Oil Election Metals Stocks Banks Selloff Stimulus Congress Debt Deficit Rally Jobs Fiscal Cliff Pullback Europe Energy Recession Interest Rates Japan Stock Market
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
The Independent Investor: Will We race to the Bottom?
@theMarket: Tariff Threat Unsettles Markets
The Independent Investor: Brexit: The Never-Ending Story
@theMarket: All Eyes on the Fed
The Independent Investor: Make Vietnam Great Again?
The Independent Investor: Paid Family & Medical Leave Overdue
@theMarket: Looking Ahead
The Independent Investor: Home Equity Can Pay for Long-Term Care
@theMarket: G-20 Weighs on Stocks
The Independent Investor: Reverse Mortgages