Header With Logo
Your No BS Weekly Update - September 5, 2011

Understanding the August Jobs Report

In This Issue
Performance
Headlines
Recipe
Golf Tip

Dear  , 

 

The big news last week centered on the August jobs report, which was disappointing to say the least. Non-farm payrolls were unchanged in August but down 58,000 including revisions to June/July. The consensus expected a gain of 68,000. The unemployment rate remained unchanged at 9.1%. [1]   Can anyone tell me when is the last time the consensus was even close to being correct?

 

U.S. stocks tumbled 2% on Friday [2] in reaction to the news, as headlines showing zero jobs growth in August fueled investor concerns.  And while the August numbers are certainly not attractive, there are a few underlying factors we would like to draw your attention to that should cause even more concern. But first let's look at this chart which is provided courtesy of Shadowstats.com.

  

SGS Employment Chart

(Please click chart to go to Shadowstats.com. You'll be amazed at what you find there.)

  

The great thing about Shadowstats.com is that they show U3, U6, and the way unemployment was calculated in the old days; all on the same chart. The line I want to call you attention to is the middle one, U6. This is the unemployed, plus all marginally attached workers, plus total employed part time for economic reasons as a percentage of US labor force. It stands at over 16% now.

 

Many of you may remember that this is an issue that we have written and talked about in the past. One of the biggest obstacles that the unemployed face is not the other unemployed but the 8.8 million part time workers who would take full time work if they could find it.

 

Think about it. If you are an employer and you have two equally qualified people sitting in front of you, one who hasn't worked in two years and one who has at least been working part time the last two years, who are you going to hire? When I ask that question to people, the answer I get most often is, "the guy that is working part time."

 

It's not that the employer wants to punish the guy that hasn't worked in two years but you just don't know how much of his skills he has lost in the last two years. At least you know that the guy that has been working part time probably has a current and sharp skill set.

 

For a more in depth look at this issue you might want to check out this article.

 

AP Logo 

Unemployed Vie with Underemployed for Job 

 

The second big issue for the unemployed is another issue that most people don't even realize is out there. We need to create around 150,000 jobs a month just to absorb the new workers that are graduating from high school and college and entering the workforce! As a reminder, these people have never had a job yet so they aren't counted in the unemployed numbers.

 

That's 1,800,000 jobs needed just for new people entering the work force. Add on top of that the 8,800,000 that are working part time that would rather work full time, and then you finally get to the totally unemployed which is at around 14,000,000. That gives you a total of almost 25,000,000 people looking for full time work!

 

And that folks is the true depth of the problem. Why is this an issue? Because 70% of the US economy is driven by consumer spending. It's awfully hard to spend money that you don't have and it's awfully hard to have spending money without a job. Don't look for a solid recovery until that starts to change.

 

ECONOMIC CALENDAR:

Monday - U.S. Holiday: Labor Day

Tuesday - ISM Non-Mfg Index  
Wednesday - Beige Book
Thursday - BOE Announcement, ECB Announcement, International Trade, Jobless Claims, EIA Petroleum Status Report   

 

 

 

Performance


Resized Chart 9_6

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.


HEADLINES:

Bank of America Corp. and 16 other big banks have been hit with multiple accusations of securities-law violations and negligence in a series of lawsuits tied to more than $50 billion in mortgage securities. The lawsuits, filed late Friday by the Federal Housing Finance Agency, accuses lenders of selling bad mortgage securities to government-sponsored housing companies Fannie Mae and Freddie Mac.[6]
   
The euro came under significant pressure in European trading Tuesday, pulling down other sentiment-sensitive currencies, such as the pound and Australian dollar, with it. A steady flow of negative newsflow out of the euro zone pushed it down about 0.6% - a big move for a major currency - against the dollar.[7]
 
Though oil prices fell to near $88 a barrel Friday, crude has jumped about 16% since August 9th, bolstered by signs industrial production in the U.S. continues to expand. The Institute for Supply Management said Thursday that U.S. manufacturing grew for the 25th straight month while analysts had expected a contraction.[8]

About 70,000 households and businesses along the Eastern Seaboard who lost power during Irene remain without it a week after the storm.[9]

 

 

Quote of the Week

"Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon." -Winston Churchill

Recipe of the Week

Hot Artichoke Dip


9_6_Recipe

From: Vegetarian Times

Ingredients:
1 12-ounce package light silken tofu  
2 tablespoons reduced-fat mayonnaise  
1 tablespoon Dijon mustard  
1 tablespoon lemon juice  
2 cloves garlic, minced (about 2 teaspoons)  
1/2 teaspoon onion powder  
1 15.5-ounce can artichoke quarters in water, drained, rinsed, chopped  
1 cup frozen chopped spinach, thawed and squeezed dry  
1/2 cup grated Parmesan cheese  
Paprika for dusting

Directions:
1) Preheat oven to 400 degrees F. Puree tofu, mayonnaise, mustard, lemon juice, garlic, and onion powder in blender or food processor until smooth. Transfer to bowl.
2) Stir artichokes, spinach, and Parmesan cheese into tofu mixture. Spoon into 8-inch glass pie dish or casserole. Bake 20 minutes. Dust with paprika; serve.

 

 

 
Golf Tip
Achieve Better Contact

 


 To build a more precise swing, practice the "Gateway Drill." Stick two tees in the ground just outside the heel and the toe of your driver (About 1 half inch on either side). Tee up a ball directly between the tees, and then swing the clubhead through the "gateway". If the clubhead is clipping the tees, you aren't making contact in the center of the clubface. Keep practicing until you can hit all of your shots so the clubhead goes through the gate without touching the tees. 

Share the Wealth of Knowledge!

Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

 



Securities offered through Foothill Securities, Inc.  Member FINRA/SIPC.
Reames Financial is not an affiliate of Foothill Securities, Inc.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

 The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.

 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

 

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

Google Finance is the source for any reference to the performance of an index between two specific periods.

 

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

Past performance does not guarantee future results.

 

You cannot invest directly in an index.

 

Consult your financial professional before making any investment decision.

 

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

 

These are the views of Reames Financial and not necessarily those of Foothill Securities, Inc., and should not be construed as investment advice. Neither Phil Reames, Reames Financial, nor Foothill Securities, Inc. gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

 

 [1] http://www.bls.gov/news.release/empsit.nr0.htm 

 [2] http://www.google.com/finance  

 [3] http://www.businessweek.com/ap/financialnews/D9PGDJMG0.htm  

 [4] http://www.bls.gov/news.release/empsit.nr0.htm  

 [5] http://www.businessweek.com/ap/financialnews/D9PGDJMG0.htm  

 [6] http://www.bizjournals.com/dayton/news/2011/09/03/government-sues-17-big-banks-for-mortgag.html  

 [7] http://online.wsj.com/article/BT-CO-20110830-705373.html  

 [8] http://www.businessweek.com/ap/financialnews/D9PGCNIG0.htm  

 [9] http://www.ctpost.com/news/article/70-000-remain-without-power-a-week-after-Irene-2155383.php  

 

Phil Reames
Reames Financial
1856 Skyler Dr.
Kalamazoo, MI 49008
269-349-3966
877-349-3966

[email protected]
http://www.reamesfinancial.com