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The jobs report today was good, observes Pimco's Mohamed El-Erian, but markets won’t be...

The 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.
Comments (29)
  • Ted Bear
    , contributor
    Comments (589) | Send Message
     
    ...and when you dig below the surface you see that the figures are, at best, poor.

     

    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.
    5 Oct 2012, 08:05 PM Reply Like
  • june1234
    , contributor
    Comments (2551) | Send Message
     
    What Morgan Stanley is telling you is they and Goldman will be leading the charge on the way down. Those guys ain't getting caught with their pants down like they did in 08. Let all the seniors and rest of em worry about their losses.You cant solve a debt problem with more debt.
    5 Oct 2012, 08:37 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9928) | Send Message
     
    Will be interesting to see if Goldman and MS are anywhere near correct in their market calls. Since they have the inside track to the Fed and Treasury, they must know something that almost nobody else knows. More specifically that the Fed and Treasury won't intervene to try and prevent any market sell off.
    5 Oct 2012, 10:37 PM Reply Like
  • Terry330
    , contributor
    Comments (866) | Send Message
     
    President Obama has turned the US economy around in only 3 years. Conservatives kept telling us it was impossible, with them voting to keep unemployment high and against working families. Today the S&P 500 is up 17% for another record year.
    5 Oct 2012, 08:12 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    I need to check the votes in congress for keeping UE high. I was not aware that was a bill they passed.

     

    Not sure who is more shallow, Terry or Obama.
    6 Oct 2012, 01:43 AM Reply Like
  • wyostocks
    , contributor
    Comments (7710) | Send Message
     
    I see you are still on the DNC payroll.
    6 Oct 2012, 07:46 AM Reply Like
  • wyostocks
    , contributor
    Comments (7710) | Send Message
     
    terry
    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.
    6 Oct 2012, 07:57 AM Reply Like
  • Drew Robertson
    , contributor
    Comments (313) | Send Message
     
    Help me out on this. I know Pimco has a equity piece going but aren't they still like 85% fixed income? If that fundamental thing gets going and rates spike, isn't Pimco in for a world of hurt? Inquiring minds want to know.
    5 Oct 2012, 08:20 PM Reply Like
  • tradewin
    , contributor
    Comments (658) | Send Message
     
    Well, PIMCO does have what is called TIPS, treasury inflation protected securities. Barclays has one also. I've asked an economist whom I highly regard about these, and was told that they essentially don't always work out the way they are supposed to. In a nutshell, a roll of the dice. And I respect Mr. El-Erians opinion on many things. He is an interesting guy to listen to, even if he wears the wrong choice of jersey, but nobody is perfect.
    5 Oct 2012, 09:44 PM Reply Like
  • JJA1594
    , contributor
    Comments (67) | Send Message
     
    Obama rules!!! 4 more years!!! YAY!!!
    5 Oct 2012, 08:26 PM Reply Like
  • june1234
    , contributor
    Comments (2551) | Send Message
     
    It was an excellent report Mr El-Erian, blew me away. The same labor dept, as it has done for the last 4.5 years, continues to report that 400,000 people are leaving the workforce each and every week in this country, (with republicans or democrats in charge); and that number never includes the self employed. On with the recovery Mr. El or as I like to call it the "not as bad as expected news money printing rally". A bad story remains a bad story no matter how much lipstick you put on it or how many times you repeat it
    5 Oct 2012, 08:30 PM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    400k people leaving workforce each week -- is that adjusted for people reaching retirement age?
    5 Oct 2012, 08:52 PM Reply Like
  • june1234
    , contributor
    Comments (2551) | Send Message
     
    no those would be the number of people who have been filing for unemployment benefits each and every week the last 4.5 years. CNBC and the rest of them always communicate those numbers the labor dept releases each week, You can Google it if you like if you don't believe me.
    5 Oct 2012, 09:45 PM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    Was an open question, not a confrontational one.

     

    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.
    5 Oct 2012, 09:48 PM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    If 400K people were dropping each week for the last 4.5 years that would mean a staggering 93.2M people in a country which have less than 240M people above 18. Are you going to tell me we lost ~40% of that total in just 4.5 years? Really? Use the logic.

     

    Both guys above me don't know how and what it is in reality jobless claims. Do the homework, or you would sound ignorant.....
    5 Oct 2012, 10:25 PM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    I must confess to a huge oops! I was calculating how many people in the 60-65 year old cohort (which is approx 20 mil people) would reach 65 every MONTH.

     

    (where's that "embarrassed" icon when you need one? LOL)
    6 Oct 2012, 11:26 AM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    Tricky, didn't wanted to offend you. So apologies :).
    6 Oct 2012, 12:00 PM Reply Like
  • Tricky
    , contributor
    Comments (1583) | Send Message
     
    No worries. I'm a big boy. And deserved it. haha
    6 Oct 2012, 02:23 PM Reply Like
  • june1234
    , contributor
    Comments (2551) | Send Message
     
    Either way according to the labor dept almost 400,000 have been filing for unemployment benefits each and every week through their states labor depts for the last 4 + years. The numbers are reported each Thursday of Friday.Unless of course maybe its some huge 4 year running unemployment benefits scam or another conspiracy of some sort? I'll leave that one to more sophisticated minds. I didn't say those people remained unemployed but unlikely they are making more money at their new jobs(for those who could find em). I don't think their employers let them go because they felt those same people would get higher paying jobs somewhere else. Maybe all the millions of people who've been foreclosed on don't really exist either? Losing your job means losing your home for many.

     

    I'll let you get back to your recovery. Google it yourself.
    5 Oct 2012, 10:49 PM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    Again, you don't understand what are jobless claims and how they are calculated.

     

    Don't try to backpedal now with that inane thing of "google yourself".
    5 Oct 2012, 10:57 PM Reply Like
  • surfnspy
    , contributor
    Comments (415) | Send Message
     
    "bbro light without all the fancy bells and whistles."

     

    THAT guy nailed it months ago.
    6 Oct 2012, 02:33 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (998) | Send Message
     
    Whatever the cause, It doesn't really matter at this point. We're in for a massive paradigm shift and capitalism is not going to come out the other end intact. Have fun with this, folks.
    5 Oct 2012, 11:03 PM Reply Like
  • tradewin
    , contributor
    Comments (658) | Send Message
     
    The sum of the whole. Just as GDP, PMI or any other release doesn't determine the direction of the economy alone, it's a wide list and labor numbers are going to bounce around from one week to the next with or without some reckless accusation as to their accuracy from some crackpot former GE wonk who has everything he needs except a straight-jacket. That hand-off to fundamentals is a confirmation of a majority of indicators just as the Dow Theory is. It is completely logical and reasonable to make the assumption that markets should start coming down. Or not move much higher if these numbers do not improve. I just wish El-Erian hadn't made that statement. Markets and people are not rational or reliable.
    6 Oct 2012, 12:00 AM Reply Like
  • SoldHigh
    , contributor
    Comments (1013) | Send Message
     
    Look at the U6 number in the BLS report. The U3 number (headline number) seems better but ONLY because the number of under-employed workers went up. That's not much to cheer about and shows the economy remains weak, as one would expect under an anti-business administration.
    6 Oct 2012, 06:46 AM Reply Like
  • Bret Jensen
    , contributor
    Comments (10078) | Send Message
     
    Let’s see….it takes 125,000 – 150,000 a month just to keep up with labor force growth and we print 114,000 new jobs, there was no change in the U6 unemployment rate, we had the biggest divergence from the household survey and BLS in recent memory, and the govt job part of the household survey has the biggest two month rise since 1948 and unemployment miracously slips under 8% the month before the election after the president’s debate debacle……Nope, nothing going on here….move on, nothing to see…….Any bets these numbers get revised down sometime in first quarter 2013? Welcome to the Chicago way everyone. Wonder if those 20,000 dead voters from chicago that voted for Kennedy in 1960 got jobs…….lol
    6 Oct 2012, 07:10 AM Reply Like
  • tradewin
    , contributor
    Comments (658) | Send Message
     
    Politicians manipulate. Administrations intimidate. That's what they do. I'm not siding with Obama here Mr.Jensen, I respect your observation. But Welch should be locked up for the statement he made. It is similar to accusing a casino of cheating. Almost nothing to gain and absolutely everything to lose.
    6 Oct 2012, 09:46 AM Reply Like
  • Boxed Merlot
    , contributor
    Comments (1583) | Send Message
     
    ZH had an interesting outlier: 20-24 year old increases when, since 48 the number always declines this time of year due to school starting.

     

    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."
    6 Oct 2012, 10:36 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    So yes the Fed has monetized everything and tried to create a wealth effect to spur the economy as the fiscal side of the house is a disaster. The Fed is about tapped so the rally has to be picked up by a better economy. Problem is UE and economic growth which are very tightly aligned right now.

     

    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.
    6 Oct 2012, 01:53 PM Reply Like
  • ASoliman
    , contributor
    Comment (1) | Send Message
     
    I do think getting bad before get better
    7 Oct 2012, 01:52 AM Reply Like
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