Unemployment Disappoints

"There's no such thing as shovel ready projects." - Barack Obama (Oct 2010)

After recording their best quarterly gain since 1998, stocks seem to have lost some of their luster.  Today there is a moderate down turn in stock prices mainly due to the poor employment numbers.  Non farm payrolls added 120,000 new jobs in March, down from adding 240,000 jobs in February and well below consensus expectation of 200,000 new jobs. The report was nothing short of disappointing. The unemployment rate fell from 8.3% to 8.2%, but the drop was due to 333,000 leaving the labor force and not from an improvement in employment. Weekly hours fell from 34.6 in February to 34.5. Combined with the paltry increase in payrolls, aggregate wages were flat after increasing 0.7% in February. This does not bode well for March consumption growth.

Definitely we are not in 1998!  Back then the stock market madness that ended in the 2000 market collapse was just beginning.  Economic conditions were good and were about to get a lot better as the government started to pour money into the technology sector spurring wild growth and the tech bubble.  Most of us remember that period well if not fondly.  You could buy any tech company and make money.  Speaking to a friend of mine who was an analyst at the time he mentioned that market multiples were driven by the number of people viewing your website rather than any fundamentals.  A monkey could have made money in the market and many of us did!

Fast forward to today.  The global economy is teetering on the edge of a precipice and government funding has crowded out the market.  This will lead to short term gains and a long term drag.  These types of unemployment shocks will be common.  Economic growth trends will be short lived while recessions will become more frequent and normal.  As the quote above shows, while the government leaders may speak about job creation, the reality is that the trillions of dollars that have been spent to date are gone and have not created much of anything other than saving the financial markets.

While I know that I sound like a broken record and believe me I wish I could change my tune but it is still not time to risk your assets in a market that is based on government stimulus to support it rather than sound global economic activity.  I would point you to the best risk related investment that I know right now and that is www.fixedratedeposits.com where you can earn a good rate of return on your cash while you wait for the storm clouds to pass.