After one of the worst economic crises the United States has overcome since the Great Depression, the secondary markets can once again breathe a sigh of relief. The Dow Jones Industrial Average just recently broke through a significant 14164.53 milestone postmarked October 9th, 2007, and is now trading on to fresh gains for the composite. As the main stream media begins to fade on the notion that the end of our financial system is near, the unemployment agenda now plays an even bigger benefactor when it comes to a 360 degree recovery within our free market society. What makes a full circle economic recovery even more robust here in the United States, when compared to the rest of the global business world, is the fact that the domestic U.S. unemployment rate as well as the initial jobless claim in the U.S. continues to drop. This major improvement in our labor markets from 2009 to present is a positive sign and is now creating a new case for free market advocates to spur hiring as well as create new jobs in the U.S. Far fewer Americans are getting fired or laid off these days than they were back in 2009. In fact layoffs are back at their pre-recession lows, but new hiring still remains weak.
As more and more Americans today continue to find work and spend more money on consumer products, the biggest part of the U.S. economy will continue to expand. According to an article in Bloomberg posted Thursday April 25th, consumer comfort in the United States is holding close to a five-year high. Economists expect this week the government will also report that employers hired 145,000 people in April. A decline in jobless claims is usually a sign that employers are cutting fewer jobs, although that does not necessarily entail that employers are also training new employees for new jobs created. As sequestration continues to loom over the U.S. economy despite a wide improvement on business profit margins, a furlough of federal workers across all sectors of the U.S. economy is not the wisest decision to make in any crisis. Government as well as private enterprises cutting back on expenditures and cutting back on hiring new employees is not the greatest model for improving productivity during any economic crisis, no matter how conservative the cutbacks may be.
As the economic recovery continues here at home, creating new jobs are "green shoots" that will ultimately solidify the market rally in the Dow Jones Industrial Average and S&P500. As more and more corporations come out with stronger earnings quarter after quarter, resolving the problems that arise within and outside any organization is important to uplift business productivity. If Corporate America intends to improve its overall marketing return on investment, it needs to begin implementing new strategies and update them frequently to meet the expectations of the consumer and market condition. As the secondary market heats up, both the manufacturing and services sector need more experienced and trained labor to handle an increase in consumer demand. Spending cuts, outdated, and inefficient operations investments like stagnant hiring will not move global business ahead but in turn will degrade overall output.
The U.S. Federal Reserve Bank just lowered its GDP forecast slightly downward in the March FOMC meeting. The Fed is forecasting from 2.3% to 2.8% in GDP growth for 2013, taking down the top end of the range from 2.3% to 3.0%. The Committee noted that the private economy was growing a little faster than anticipated, and that would nearly offset the fiscal drag imposed by the Jan 1st tax hikes and the sequester. Higher than expected profit margins quarter on quarter for private business are giving way for new jobs in the U.S. economy. A business strategy conservatively focused on hoarding cash and not reinvesting its proceeds to expand and create an equilibrium in its price to earnings ratio is doomed to fail. The same soup for disaster is beginning to take form in the housing market.
The housing recovery has become a pinnacle force for the economic recovery here in the United States and inventory continues to be the story of the day when it comes to the housing market. Consumer demand is outpacing supply across most asset classes in 2013 from housing to oil & gas, and home buyer traffic is up by 25% from a year ago. Lawrence Yun, chief economist for the National Association of Realtors is quoted in an article in Forbes stating "The inventory improvement last month results from a seasonal gain, but conditions continue to broadly favor sellers.". Yun continued to tell Forbes on Monday that "We need a housing supply of over 6 months to have a generally balanced market between home buyers and sellers, but it's unlikely we'll get there without greater increases in housing construction.". A full rebound in construction work would really help out with the overall job market bounce back, and if construction employment returned to December 2007 levels that would add 1.9 million jobs. The unemployment rate within the U.S. would also drop to 6.5 percent from its current marker at 7.6 percent forecasted in April.
Investors on Wall Street are now concerned about growth in 2013, as well. The mood in Europe was subdued after the IMF cut its global growth forecast on April 16th. China also reported on Monday April 15th that its economy grew at a 7.7% annual rate in the first quarter, much weaker than the 8% most economist were expecting. The negative news from two weeks ago has prompted a slew of sell-offs over equity markets as many traders on Wall Street are now questioning whether stocks are way too overpriced and overbought. If the issue on every investor's mind at the moment is finding "green shoots", why can't global businesses bolster productivity overall within the manufacturing and services sector? The margins are there. What is P/E expansion really, you ask?
Please start hiring…
I feel as though I am repeating myself over and over in this post.