The terrible U.S. Labor Dept’s job report

There are multiple reports from the U.S. Government regarding the labor market. One of these is the unemployment rate and another is the percentage of our population that are workers. Until early 2011, these two lines followed each other very closely (i.e., when you invert one of the two graphs). Here is the graph (from an article by Jeffrey Snider writing in
Clearly, one of these two numbers is wrong! Given that the U.S. economy is barely growing, it is very likely that the unemployment rate is really much much higher. The reason it is so low is because the government subtracts workers from the labor force (i.e., the divisor of the unemployment rate) if they don’t look for jobs fast enough. Is it not obvious that these discouraged workers will take new jobs when they become available?


Tepid economic growth and a cratering job market is not a recipe for a bullish stock market . All three major stock-market indexes (the Dow, S&P and Nasdaq Composite) fell on Friday. Analysis of yesterday’s intra-day market action showed the still-strong presence of demand. The stock market will continue its long-term sideways action until the insiders who control the market have had a chance to sell their holdings.


My graph of cyclicals divided by consumer staples has been dropping since mid March. My Cyclicals Group, containing 15 cyclical sectors, had only one that was significantly positive: the Leisure Sector zoomed up by a huge 8.3% since May 1. However, there were big losses in autos, basic materials, energy, media and transportation. The Technology Group has shown strength in the Semiconductor, Technology Hardware and Computer Software Sectors. But this relatively narrow area of strength is not going to be enough to power the market higher in the face of widespread weakness elsewhere.

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