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Jobs Added... But Not Enough

Thursday, July 2, 2015
Money and Markets
YOUR BEST SOURCE FOR THE UNBIASED MARKET COMMENTARY YOU WON’T GET FROM WALL STREET
You can also access this issue on our website.
Jobs Added ... But Not Enough; Manufacturing, Energy Holding Us Back
Market Roundup 3 p.m.
Dow -53.55 to 17,704.36
S&P -4.50 to 2,073.33
NASDAQ -14.11 to 4,999.07
10-YR Yield -0.04 to 2.384%
Gold -$6.00 to $1,163.30
Oil +$0.23 to $57.24

By Mike Larson

The U.S. added another chunk of jobs last month … just not enough to signal that we’re firing on all cylinders.

First, the numbers …

Arrow America added 223,000 jobs in June, a bit light of forecasts for 233,000. That was also down from a downwardly revised 254,000 in May. In fact, the last two months worth of readings were revised lower by a combined 60,000 jobs.

Arrow While retail jobs rose by 33,000, health care jobs rose by 40,000, and leisure and hospitality employment climbed by 22,000, manufacturing barely budged at +4,000. Mining lost 4,000 and construction flat-lined.

Unemployment fell to 5.3%, the lowest since April 2008.

Arrow Unemployment fell to 5.3% from 5.5%, putting it at the lowest level since April 2008. But some of that improvement was because the labor force participation rate dropped all the way to 62.6% from 62.9%. That means fewer working-age Americans are gainfully employed than at any time since 1977.

Arrow As for wages, average hourly earnings didn’t budge at all. That lowered the year-over-year growth rate to 2% from 2.3% a month earlier.

If I had to characterize the data, I’d call it wishy-washy. Meh. Lacking the kind of fireworks we’re all going to be setting off and watching this weekend. We didn’t add enough jobs, and we didn’t get the kind of wage growth we’ve been actively seeking for so long.

It’s not a recessionary report by any means. But it’s obvious to me that the dollar’s huge rise last year and energy’s major decline are still weighing on the economy.

Our multinational manufacturing firms are competing with one arm tied behind their backs, thanks to the dollar surge. High-paying, skilled jobs in the oil and gas sector have been evaporating thanks to the decline in prices and drilling activity. And don’t even get me started on out-of-control health care costs, increased regulation, and uninspiring tax policy either. All of them are contributing to the lackluster pace of the recovery.”

“The dollar’s huge rise last year and energy’s major decline are still weighing on the economy.”

Markets initially had a fairly muted response to the figures since they were neither atrocious nor awe-inspiring. But attention rapidly shifted to the major developments overseas – in China, Greece, and the rest of Europe.

What happens over the long weekend in those regions will hold the key to the next major market moves. I, for one, will be keeping my eye on overseas developments in between cheeseburger bites and firework lights. And I’ll tell you what happened and what you should do once markets re-open. Stay tuned!

In the meantime, the floor is yours. What do you think of the latest jobs news? Why aren’t wages accelerating? What would help the economy create more jobs? Should we do something in Washington to help manufacturers and energy producers, since they’re the economy’s weakest links? Let me know over at the website.

Our Readers Speak

What will happen next with interest rates? What’s going on in the job market? Those were a couple of issues you were debating over at the website.

Reader Paul F. said: “The job market goes hand in hand with the declining middle class. How can we increase jobs in America when corporations continue to take them overseas and/or automation deprives the middle class of raising their standard of living? American corporations do not care about America. They care about the bottom line.

“CEOs would rather pay a fine for polluting when they get caught instead of solving the problem that would be more then the fine, and hopefully not getting caught. It all comes down to greed — worldwide greed.”

Reader Michee added: “What do I think about jobs? If the government told the truth, the economy would tank. They are creating a minimal amount of low-paying, part-time jobs. The actual unemployment rate is probably closer to 25% and our manufacturing sector will probably never come back. That along with the new trade agreements should drive us into the ground.”

Meanwhile, Reader Jim S. said: “I have been short the 30-year bond for about four months now. Thanks for the warning.”

And Reader Fred151 said: “Several weeks ago you talked about the growing spread in lower quality bonds vs. high quality, short-term Treasuries. Your thinking then was that this was a good sign of recovery.

“My response was the opposite: My thought was that this was an indication of fear. I still believe it is fear. When investors see what is happening to these munis (like Puerto Rico finally calling a spade a spade and going broke), they are bailing fast and thus you are seeing these charts. So many of these entities are de facto broke, but it is like the emperor has no clothes and the press ignores it.”

Well, it’s clear the official jobs report wasn’t as strong as it could’ve been. But it continued the trend of decent readings, and the unemployment rate ticked a bit lower.

With regards to bonds, yes, there are definitely some warning signals being sent out by the market. I’m watching closely to see if the selling spreads to more sub-sectors of fixed-income … and if it does, that’d be a sign to raise even more cash.

Anything else you’d like to add this long holiday weekend? Then don’t hold back. Put down the fireworks for just a minute and add your comments on the website.

Other Developments of the Day

BulletThe clock keeps ticking down to Greece’s weekend referendum on the latest European bailout offer. Greeks will take to the polls on Sunday.

Depending on the vote’s results, Greece could either be headed for a Grexit … or secure a new deal with its European creditors. The controversial finance minister there has already pledged to resign if we get a “Yes” vote, and frankly, the rest of Europe would be very happy to deal with someone other than him and the rest of his Syriza party.

BulletIt’s Merger … er … Thursday. Medicare insurer Centene Corp. (CNC) said it would buy Health Net (HNT) for $6.8 billion to add more exposure to California’s health care market. The price of $78.57 is roughly 21% more than where HNT closed yesterday.

BulletWhile we’re add it, PayPal said it would buy Xoom Corp. (XOOM) for $890 million. The money transfer firm that’s going to be spun off from eBay (EBAY) will boost its international presence by purchasing Xoom, which allows more than 1.3 million customers to transfer money using computers and smartphones.

BulletThere are a lot of ways to lose a soccer match, but one of the most painful is to score on your own team. Unfortunately, that’s exactly what one of England’s players did yesterday right before the end of regular time. The result of the “own goal” play: Japan won 2-1 and will play the U.S. for the women’s World Cup championship.

Share your views over at the website when you can.

Until next time,

Mike Larson

P.S. Did you know Dr. Martin Weiss designed his Ultimate Portfolio to help keep you safer by guiding you to the very highest-quality stocks on the market? Click here to learn more about Dr. Weiss’ investment strategy!

Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
The investment strategy and opinions expressed in this article are those of the author's and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.

For more information and archived issues, visit www.moneyandmarkets.com.

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