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Saturday, February 2, 2008

Jobs number is "the nail in the coffin"

Or so says the Daily Telegraph which trumpeted that the US is in a recession. Ya think? The question is: When do we come out? The negative job numbers Friday finally alerted the press what the worker, and the market already knew.

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=SSWRMIUQIPEKLQFIQMGSFGGAVCBQWIV0?xml=/money/2008/02/02/cnusecon102.xml

But it's not the 4.9% unemployment rate that the pundits should be looking it. It's the 9.9% total unemployed, (U-6) and the (U-3) 5.4% unemployment rate for January 2008, that are the numbers that aren't seasonally adjusted or massaged by the BLS. Read their explanation on the bottom of the link (NOTE:). It's a beauty! The same information is on the chart above, from Sitka Pacific. (Click on it to see it clearly).
http://stats.bls.gov/news.release/empsit.t12.htm

NOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.

That's the BLS' equivalent of "food and energy" in the CPI! Marginally attached and discouraged workers. When will they join the financial lexicon?

My point is, the market has already discounted the recession, that the pundits only now are beginning to see. The difference now is that the rate cuts by the Fed allow equity investors (the mutual and pension funds-the Pollyanna's) who use other people's money, to be emboldened enough to give the economy the benefit of the doubt and buy.

But those investors, of the bearish persuasion (the hedge funds-the cynics), the 20% owner of the profits crowd, are bearish and short. And the unwinding of their short positions is going to get nasty. Just look at the move the financials made in the last week! Yesterday you had the SOX index and the SMH move almost 7%! But most missed the move in those because traders trade the QQQQ's, which was held down by the heaviest weighted stocks in that index, Apple, Microsoft and Google.

And if the market correctly priced in the recession, isn't it now going to price in the recovery?

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