By Markos N. Kaminis
8.1% spells relief? What were you thinking when you saw that the unemployment rate jumped a half of a percentage point in February, surpassing economistsʼ expectations by two-tenths of a point? Did you wipe your brow and say “whew?” Of course not right… So then, you must be wondering why the stock market actually rose modestly on Friday. Itʼs called a relief rally, and itʼs spelled: “we already sold everything all week long, and so when the world didnʼt end, there was nothing else left to sell on Friday…” Voila… rally, kind of sort of. I mean it was a pretty pathetic rally, but it was better than chalking up another decline on a week that netted a loss of 6.2% on the Dow. The Industrials Index fell incredibly deep below 7000, to close out the week at 6,626.94.
The Employment Situation Report produced a net loss of 651,000 nonfarm payrolls (read jobs) in February. Thatʼs a high number of newly unemployed folks, and it includes a birth/death rate adjustment that the government makes on its estimates of population change and job creation. The pure number of folks who joined the unemployment line in February increased by 851,000, to 12.5 million people, and if you include the 787,000 troubled souls who started working part-time jobs because they have no other choice, the number gets even larger. These “involuntary part-time workers” total 8.6 million now, and including those individuals in the jobless measurement takes the less than full employment rate to 13.7%.
Thatʼs not good news, but the ADP Private Employment Report that preceded the government data by two days had already shown private nonfarm payroll losses at a whopping 697,000. Thus, it cleared an expectations path for the federal data to walk through on Friday. Itʼs not like it was necessary though, given the dramatic weekly pace of new jobless claims throughout February. We had our share of fair warning.
Stocks started worrying about the jobs data on Monday, and actually recovered some ground on Wednesday when it was rumored Chinaʼs Premier might increase his nationʼs stimulus efforts. Then on Thursday, Prime Minister Wen Jiabao promptly sucked the wind out of those sails when he made no mention of such an increase. On Thursday, Weekly Initial Jobless Claims were reported at 639,000, and the market got right back to worrying.
The last few horrid weeks have officially indoctrinated President Obama as a bear market president, since stocks have fallen 20% under his watch already. However, the President said he did not focus on day-to-day stock fluctuations, since that would be a flawed tool to set long-term planning by, according to the Prez. Okay Bad News (thatʼs my new pet name for the President since he keeps reminding the nation of his inheritance of a catastrophic situation that will take so much sacrifice to recover from). Obama needs to learn one thing, a good coach never tells his players theyʼre not going to win this game because theyʼre not good enough. Thatʼs the one sure way of guaranteeing a loss.
So whatʼs in store for next week then? Well, the new spending bill is clogged up in Congress, as divided Democrats need some Republican votes to get it through. Those votes will not come without $8 billion in earmarks, and those earmarks conflict with Obamaʼs stark campaign words against such evil. It seems to me that we have an opportunity for a valuation driven rally at these levels. Still, whether a bear market rally ensues or stocks slide further this week may hinge greatly on whether the bill passes into law or not.