Where the Jobs Are

By Duru

March 6, 2004


Where are the jobs?

Apparently, the Bushies are saving up the jobs. Perhaps when they spring bin Laden's capture on us as elections approach, they will sweeten the surprise by presenting all at once the 2.6 million jobs they have been promising. OK - maybe they'll "find" bin Laden first.

In what has become a running joke in Bushie economics, the job numbers failed to come through again. We are not talking about a mere miss, but a huge whiff. The numbers of jobs created was only positive because of government sector hiring. I suppose at the rate the Feds have printing money, the government can quickly soak up ALL the jobs that America has been promised. And let's not all just gang up on the President. After all, he did not create this mess, he just approved it. The real mental giants behind the alleged recovery are various economists in the Bushie camp (Greenie has done his part as well). Even they cannot be alone in their confusion. Economists across the land must be absolutely confounded, flabbergasted, if not outright frustrated! I have been saying here (echoing opinions of other econo-cynicists) that we are in uncharted territory as we deal with the destruction of our most massive financial bubble ever. A lot of economic rules, records, and conventional wisdom have been violated, and we should not be surprised to continue to be surprised. We are officially 27 months or so into some kind of recovery, and job growth is anemic to near non-existent. That simply is NOT supposed to happen. Yet, it is...

But what we do have, as I have said before, is an economy stacked in favor of the owners of capital. Large tax cuts, a resurgent stock market, and a weak dollar are boosting bottom lines, but corporations are not spreading the wealth to workers. In fact, workers are making relatively less (or at least seeing very slow wage gains) and producing relatively more goods and services than ever just to keep increasing the debt loads required to maintain their part of the economic recovery bargain. And what a bargain it is! I am now hearing that productivity gains will slow and companies will be forced to hire more workers. One of the few times you will actually hear economists actually cheer for inefficiency. Or maybe what we need is a nationwide strike…Let's see, if everyone simply refuses to work, we could drive productivity to zero, and companies would have to go on a hiring binge! Full employment for everyone!

OK - DrDuru-sarcasm aside. The sober reality is that the Bushie campaign is in dire straits. The challenger (looks like Senator John Kerry) can talk, and talk, and talk all he wants, but Bush actually has to deliver...NOW. Incumbents are always at a disadvantage because they have to defend what they actually did rather than continue to promise what they will next fail to deliver. It seems now that not even a surprise showing of Bushie's ace-in-the-hole bin Laden will placate the masses that are starting to worry that the economy is not all it has been cracked up to be. I also suspect that louder and louder pronouncements will be made blaming India and China and Mexico for our job woes. Such scapegoating is largely misplaced, especially since we have these countries, and others like them, to thank for helping us to keep inflation low. And China has joined Japan in propping up our current debt bubble by purchasing Treasuries and other American debt. We take out our partners by starving them of jobs, they will certainly starve us of capital and assorted freebies. I hope we can find a way to strike some balance in the rhetoric and the implementation of trade policy. It seems there is not enough appreciation of just how dependent the US is on the rest of the world, perhaps even more so than the world is dependent on us.

And what does all this mean for the markets? It's still mixed! We can count on interest rates maintaining their low course. 2005 is looking more and more likely as the first time we will see a rate hike. This is good for stocks. But at SOME point, jobs do need to grow to keep the spending power robust and the good times rolling (it has been anyone's guess how long consumers can keep running with lower and lower fuel and higher and higher debt). But certainly, the stock market recovery is in peril. The main (last?) saving grace is that the Bushies have made a resurgent stock market part of their election-year platform of bragging rights. They can't afford to see this market drop and will likely use every last spare bullet they have to keep this thing propped up through the elections. What that ammo is, I have no idea. But we should start seeing it after the latest tax cuts get washed through the system.

In previous missives, I have made note of the signs of peril from a technical perspective. Amazingly, very few of these red flags have actually been resolved. The market has no roadmap for what is currently happening in the economy, and its confusion shows. Two more things of note. The bank stock index and the small/mid-cap indices have been making new highs while the rest of the market languishes, chops, and churns. An optimist might assume that the rest of the market must eventually follow. The pessimist might assume these are the last to fall. They might also note that the utility index has also been making new highs - a sure sign the market is getting defensive. I remain an optimist in the short-term, but pessimistic after that. The tech market remains the most suspect. Even more worrisome is the hyper-speculation now running rampant in certain segments of the market. Everyday there are stocks being pushed 20%, 50%, even 200% in one day on little to no news - and the collapses afterwards have been equally dramatic. One only need to look at how MSO moved on Friday as the Martha Stewart verdict was being delivered. The stock zoomed up 20% or so on RUMORS that the verdict was favorable. When she was proclaimed guilty on all counts, the stock proceeded to tumble 35% from the highs. My friends and fellow citizens, THAT is what I call the early signs of a debilitating instability and weakness…


Ó DrDuru, 2004