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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (1366)	3/5/2004 11:03:30 PM
From: excardog	Read Replies (2) \| Respond to of 116555

February Employment Situation KEY DATA: Payrolls: +21,000; Unemployment Rate: 5.6% (unchanged) IN A NUTSHELL: “This ain’t no lean, mean job machine, that’s for sure.” WHAT IT MEANS: What would happen if they threw a recovery party but failed to bring the presents, jobs? Well, we seem to be on the road to find out. The February payroll report was awful, to say the least. Not only were a meager 21,000 new jobs created, but the previous two months gains were revised downward. And if you take out the government, there were no jobs added in the private sector. Over the past three months, a grand total of 126,000 new positions were created. That would be weak for one month. For three, well it is (fill in your own negative descriptor). This occurred in spite of the fact that the carnage in manufacturing has ended. There were only 3,000 positions cut and there was actually an increase in durables. But the rest of the economy was soft. Construction was off, but that may be due to seasonal adjustment issues since activity hasn’t faltered. Retailers barely hired any new people and department stores cut back sharply. There was not much happening in professional and business services, though there was a pick up in temporary hiring. Old dependable health care added workers, but not as much as usual. And the leisure and hospitality sector sliced payrolls as people must have stayed home even though the weather improved. With only half the industries reporting gains, you really cannot expect much job growth. Wages did rise but aggregate hours worked were off slightly. That led to a modest increase in weekly earnings. The unemployment rate was stable, but the labor force did shrink. MARKETS AND FED POLICY IMPLICATIONS: In spite of what looks to be a strong economy, there are few jobs being created. That is a concern not only to the President, but to the Fed as well. The benefits from debt refinancings and tax cuts will wane as we move through the year and the economy needs to start generating income the old fashioned way: People need to earn it. The recovery can only be sustained long-term through job creation. That is not happening and the FOMC will remain quite patient as a consequence. Unless something changes quickly, the chances the Fed will raise rates this year looks to be small and falling. That should give a boost to the bond markets. As for the equity markets, the drifting should continue since the ability to sustain strong earnings growth requires solid job gains and right now, that remains a hope, not a reality. For more information, contact Joel Naroff, Chief Economist, by e-mail or by phone at (215) 497-9050.