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The jobs report today was good, observes Pimco's Mohamed El-Erian, but markets won’t be...
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Friday, October 5, 2012, 7:49 PM ETThe jobs report today was good, observes Pimco's Mohamed El-Erian, but markets won’t be able to push much higher until the economic fundamentals strengthen. “So far, we’ve had a rally based on chopping off the tails of catastrophe," he says. "But in order to keep going, we need the hand-off to fundamentals. And today’s employment report, while better, is not strong enough for that hand-off.” If fundamentals don't catch up to valuations soon, the equity markets will start coming down.
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And when you realize that this result is after the largest ever infusion of cash (unsustainable trillions of dollars) into the system, then you begin to even further question the veracity of this performance.
Both Goldman (which is usually trading their own book, so you have to discount their research and market calls) and Morgan Stanley (which has much less proprietary skin in the game) today reiterated their calls for a sharply lower equity market by the end of the year. In Morgans case i believe the number was 1170 or so, which, if they are correct (and the fundamentals to which El Erian refers don't kick in quickly), means that the equity market is going to sell off 20% in the space of less than 90 days.
That, my friends, will take your breath away for sure. Job, or no job.
Not sure who is more shallow, Terry or Obama.
What about the 21 million people added to the foodstamps count while your savior has been in office?
I guess you don't care about them.
Reason I ask is I did some quick math on # people reaching 65 on a weekly basis, it's about 385k. So I was wondering if that was the big driver.
But sounds like that's already factored out. Fair enough.
Cheers.
Both guys above me don't know how and what it is in reality jobless claims. Do the homework, or you would sound ignorant.....
(where's that "embarrassed" icon when you need one? LOL)
I'll let you get back to your recovery. Google it yourself.
Don't try to backpedal now with that inane thing of "google yourself".
THAT guy nailed it months ago.
Excuse the cut and paste, but it's says it better than I can.
ZH
The Strangest Number In Today's Jobs Number
T Durden 10/05/2012
Cutting to the chase: the September surge in Seasonally Adjusted jobs give to 20-24 year old is the biggest in decades. This is on top of the only positive NSA increase in 20-24 year old jobs in history.
How does one explain this stunning discovery? RBS's Richard Tang, who noted it first, proved one explanation:
“While we cannot be certain, the back-to-back gains in September 2011 and September 2012 could reflect a decision by younger workers to remain in the workforce rather than pursue a higher education. Given how difficult it is to get a job in the current environment, more young workers may be choosing to hold on to the jobs they already have. In fact, this does seem to be the case during periods of weakness/recessions. The last time we had back-to-back September gains in employment in the 20-24 year old cohort even approaching what we have seen in September 2011 and 2012 was in the 2000-2001 period...”
A valiant effort but one thing remains outstanding: the record amount of student loans outstanding, and defaults, which as we explained last Friday, is indicative of one thing: everyone is doing their best to avoid the labor market in this worst possible time for jobs and is hiding instead in the "safety" of a Federally funded college education. This explains not only the record amount of student loans outstanding, well over $1 trillion in total, and over $900 billion just Federally funded.
So somehow in September, in addition to all the other discrepancies in the labor report, we have one more to add: that of the Schrodinger Student: one who is both in college and piling up student loans on one hand, yet on the other hand entering the work force in the month of September, a time when historically every single month in recorded history has seen an exit from the labor force for the 20-24 year old cohort."
The workforce is shrinking as people give up and although it makes the UE rate look better it means less tax revenues and a smaller and slower economy. If we right size the workforce to pre recession numbers then the UE rate is over 11%. There is reason to think it is even much higher like 14-18% due the fact that people are taking part time work because they cannot find full time work. Just another reason the middle class is getting crushed as income per family keeps dropping.
UE needs to come down to 5% which is around a 3% growth rate in GDP while at the same time we get the people back in the workforce that are just not playing any more. Our increase right now in GDP is likely just price increases so the economy is really bad. Without price increases that boost business profits and tax revenues we would be in extremely bad shape but price increases don't help consumers and citizens. But who cares about them right?
If we grow the economy not only will UE come down we should also see labor rates rise as companies have to fight for employees.
Anyone bragging over this UE rate is an incompetent fool or believes the listeners are incompetent fools and don't understand what is going on.