Things are happening and can get better
January 10, 2004
The bulls are beginning to run out of excuses to explain the stock market's rampant optimism about the economy. The latest unemployment report gave us a drop in the unemployment rate from 5.9 to 5.7%, but payrolls only swelled by 1000 jobs - well under the ebullient expectations for 150,000 and more. The President made the classic excuse of latching onto the drop in unemployment as a sign of good news. As it turns out, the drop in unemployment was from a reduction in the numbers of people looking for work. Bushie even proclaimed that he is optimistic because he "sees things happening" in the economy. Well, what is not happening are the 300,000 new jobs per month that he and his economic geniuses claimed we would be seeing by about now. Perhaps what he sees happening is some sort of stealth economy that is as yet not accurately measured. It is this stealth economy that presented a new excuse that I had not heard the bulls offer before. An economist/analyst interviewed on Nightly Business Report suggested that our jobs numbers may be measuring "a world that no longer exists." He suggested that the real recovery is happening amongst growing numbers of temporary hires and entrepreneurial workers. Maybe so, but let's see some numbers. After all, Bushies re-election chances may be riding on these mystery men and women who will certainly happily thank him for the new opportunities to be gainfully under-employed and/or forced into relying on their own wits and muscles to make it in this post-bubble economy.
Sometimes I wonder whether job growth is a real objective of the President's economic policy. The main thing that seems to be "happening" in the economy is that the rich are getting much richer. As I mentioned in my previous missive, we see this in the great numbers high-end retailers are posting. Again, the primary beneficiaries of slow job and wage growth are employers and owners of capital. Companies have taken advantage of continuing increases in productivity (fewer people doing more work) and have fattened their bottom lines and improved their balance sheets. It is impressive stuff…unless you are out there still looking (or wishing) for a job.
And as stagnant as the job market is, we still must marvel at the fact that things never really got all that bad after the bubble popped. Our forebears who experienced economic crises of old, would LOVE to have our "problems!" So, it strikes me that we are paying a heavy price, in terms of increasing debt and deficits, for so little benefit. It makes you wonder whether job growth is really the goal of the Bushies' economic policies and not the further enrichment of the top few. And when the bills come due for all our debts, these same few will likely claim that the problem is not low taxes and but over-sized government. The result will be a further reduction in the support net for the less fortunate and an ironic contradiction to the big government policies that the Bushies have actually pushed through in the past four odd years.
Anyway, I digress into politics as is my tendency! I will just conclude by saying that the bulls can still hope eternal. Given the poor job numbers yesterday, we know two things: 1) The Fed will have to stick to their promise of low interest rates for the foreseeable future (indeed Treasuries rallied in response to the job numbers) - this helps the bulls continue to justify high stock valuations; and 2) things can still get better - this also helps justify high stock valuations since we can continue to dream about a new boom rather than be faced with the hard numbers of what the "final" recovery will really look like.