Some thoughts as we get to relax for three days before hitting the market again come Tuesday. But before I talk about the market I want to wish everyone a happy and safe July 4th holiday, no matter where you are in the world enjoy the three day break from the US markets.
Lets talk just a bit about this mornings jobs report. The June employment situation report raises some serious concerns regarding the job market situation in the United States. I’ll cover those concerns in a moment but first the headline numbers.
- Employment (persons) dropped 125,000
- Unemployment rate stands at 9.5%, down from 9.7% in May
- The total number of unemployed stands at 14.6 million
On the surface you might find some joy that the unemployment rate dropped. But the sole reason that there was a drop at all was due to the big decline in the labor pool. That is the number of people who are ‘counted’ as being in the labor market and thus the calculations are based has dropped by over 625,000 in the past month. This drop is very significant and I am quite sure that those who have dropped out of the labor market (not looking for work in the past 4 weeks) is not due to them becoming instantly wealthy overnight.
When the number of people who have been unemployed for longer than 27 weeks, which by the way is 45.5% of the total number of unemployed individuals one has to expect there is a point of desperation which is reached when they can’t find work and stop looking until conditions improve. If the 625,000 individuals in June had indicated they looked for work during the past 4 week period then the unemployment rate would actually be back to near 10% once again.
What is more troubling is a trend that I am seeing in the number of people unemployed in the 5 weeks or less category. It is this category that represents newly unemployed individuals and this number has been rising since March and rose once again in today’s report. Why is this important? If the employment situation is to improve we must see a continual decline in the number of newly unemployed people ( <5 weeks), this way the longer time frame ( >27 weeks) will begin to edge downward. With the trend of those falling in the newly unemployed category edging back upwards it says that the unemployment rate will once again begin to rise.
Another bad sign was the average hourly earnings for the month which dropped on a month over month comparison.
Average hourly earnings:
-0.1% V +0.1% expected; AVERAGE WEEKLY HOURS: 34.1 V 34.2 expected- Prior Average Hourly Earnings Month over month revised lower from 0.3% to 0.2%
MAY FACTORY ORDERS: -1.4% V -0.5%E (this is the lowest reading since March 2009)- Prior revised lower from 1.2% to 1.0%
S&P 500 Daily Chart
