The jobs market in the U.S. economy has attracted attention, as the employment rate has fallen marginally below eight percent for the first time under the Obama Administration. Some are even going as far as saying the U.S. economy is witnessing economic growth.
I have a different view. I believe the jobs market is fundamentally broken and, hands down, the biggest hurdle to economic growth in the U.S. economy. The truth of the matter is that the jobs are being created in industries where wages are low and there are millions of Americans who are still unemployed.
Now, after roaring into a new year, some U.S. companies are facing hardships as their sales outside the U.S. come under pressure. We have already seen companies like Morgan Stanley (NYSE/MS) and Citigroup, Inc. (NYSE/C) make cuts to their domestic workforces. Companies like American Express Company (NYSE/AXP) are following in their footsteps.
Amex, as it is better known, is planning to cut 8.5% of jobs, or 5,400 jobs, from its workforce. (Source: Reuters, January 10, 2013.)
Sadly, it’s not only the private sector witnessing job cuts and poor jobs market conditions; local governments are doing the same. In December, 11,000 jobs from public schools were slashed in the U.S.—this marked the fourth straight month of local government cutting jobs. (Source: Reuters, January 4, 2013.)
Longer term, since August of 2008, local governments in the U.S. economy have cut about 300,000 teaching and other school jobs.
Could the U.S. jobs market rebound be nothing but a hoax? If you take out all those low-paying jobs being created, the jobs market situation is indeed frightening. You can’t have a real economic recovery when job creation is concentrated in low paying jobs like retail and service industry jobs. U.S. consumer spending accounts for 70% of U.S. gross domestic product (GDP). At the rate we are going, low-paying jobs will soon account for 70% of all U.S. jobs!
The longer the jobs market stays shaky, the longer it will take the U.S. economy to see economic growth. If people don’t have well-paying jobs, or they are earning less than they did before, they will spend less, as savings can only last for so long. Hence, you can see why I’m so suspicious about the so-called economy recovery more and more people are talking about—something I simply don’t believe exists.
Where the Market Stands; Where it’s Headed:
The higher the stock market moves in the next couple of weeks, the harder it will fall. I don’t believe corporate earnings in 2013 will justify rising stock prices. This is why I see 2013 as a turning point for the stock market rally that started in March of 2009.
What He Said:
“As a reader, you’re aware I’m not a Greenspan fan. In the years that lie ahead, I believe we (and our children) may pay dearly for the debt bubble Greenspan created during his tenure as head of the U.S. Federal Reserve.” Michael Lombardi in Profit Confidential, March 20, 2006. Michael started talking about and predicting the financial catastrophe we began experiencing in 2008 long before anyone else.