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Russ Koesterich
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Russ Koesterich, CFA, Managing Director, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a founding member of the Blackrock Investment Institute, delivering BlackRock's insights on global investment issues. Mr. Koesterich's service with the... More
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The Ten Trillion Dollar Gamble: The Coming Deficit Debacle and How to Invest Now: How Deficit Economics Will Change our Global Financial Climate
  • Behind the Numbers: Friday’s Job Growth Report 0 comments
    Jul 11, 2011 12:38 PM | about stocks: IVV, IWV, OEF, IOO, ACWX
    From the iShares Blog
    On Friday, the US Department of Labor said non-farm payroll employment rose less than expected in June.

    According to the department’s Bureau of Labor Statistics, 18,000 new jobs were created in June, well below consensus estimates of more than 100,000 and essentially unchanged from May.

    In addition, the department said the unemployment rate came in at a higher-than-expected 9.2%, also essentially unchanged from 9.1% in May and the highest level this year. Other details of the report were also disappointing. The fact that the labor force participation rate continues to decline and is now at its lowest level since 1984 was also particularly surprising.

    Like last month’s similar figures, the new non-farm payroll report provides even more data points hammering home the fact that this recovery is unusual. More than two years into the recovery, job creation remains anemic, the unemployment rate high and the number of people engaged in the labor force still dropping.

    Why is this recovery different? Unlike a typical recession, the latest downturn was not caused by an overheating economy and tight monetary policy but instead by the bursting of a credit bubble. And as typically happens after such events, the economy and the labor market are slow to recover.

    Again, while we do not believe that the US economy is heading back into a recession, we do expect that the recovery, particularly in jobs, will be slow and continue to disappoint investors.

    So assuming a slow recovery, what are the investment implications? The weak labor market is just one of many headwinds facing the US consumer. In fact, we don’t expect consumer spending to pick up materially over the next six to 12 months. Such recent weakness in consumption continues to be a negative for companies or ETFs levered to US consumption and particularly for US retailers, which we’ll share more about in a future post.

    In addition, as we pointed out last month, recent non-farm payroll figures are also signs that inflation is likely not going to be a serious threat this year or arguably next year.

    Source: Bloomberg

    Carefully consider the iShares Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737), or by clicking the Prospectuses link. Read the prospectus carefully before investing.

    Investing involves risk, including possible loss of principal.

    The iShares Funds (“Funds”) are distributed by SEI Investments Distribution Co. (“SEI”). BlackRock Fund Advisors (“BFA”) serves as the investment advisor to the Funds. The iShares Blog contributors are affiliated with BlackRock Fund Distribution Company (“BFDC”), which assists in the marketing of the Funds. BFA and BFDC are affiliates of BlackRock Institutional Trust Company, N.A. (“BlackRock”), none of which is affiliated with SEI.

    The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications or other transactions costs, which may significantly affect the economic consequences of a given strategy.

    The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations.

    Neither BlackRock Institutional Trust Company, N.A., and its affiliates nor SEI and its affiliates provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.

    This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.

     

    Themes: economy, jobs, us retail Stocks: IVV, IWV, OEF, IOO, ACWX
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