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Now that we all know that the European Central Bank and the Bank of England have made no changes to their economic policies that might significantly evoke dramatic investor and consumer responses, all eyes are fixed on the U.S. jobs report that is due to be published tomorrow.
The tension and apprehension are so thick that you could cut them with a knife. Frankly, it causes me a certain amount of anxiety to know that the world economies are holding their collective breath, hoping that the U.S. will not sneeze.
The major economic news out of the U.S. this morning was that the 346,000 people filing unemployment claims last week was down by 11,000 from the week before. This is one of the reports to which I give very little credence. Here’s one reason why. USA Today cited the number as “A level consistent with steady job growth,” whilst the Washington Post called it “A step backwards.” So, which is it?
Another reason I don’t like it is that it is a weekly number, which also makes it a weak number. It is too small of a picture to understand what how the situation is trending. A better, but still not complete, picture is the four-week average, which – now get this – happens to show an increase in unemployment claims.
The biggest reason that I do not have confidence in the jobless benefit claims report is that it does not reflect the true number of unemployed people, which, as of April 2013 was approximately 11.7 million. That’s the true number of people who are without income. That’s the true number of people who are probably in financial trouble. And that number is 34 times higher than the number of reported claims. If you add the 346,000 to the 2.95 million who are already receiving claims, the total number of employable U.S. workers receiving unemployment benefits is 3.3 million. That means that there are 8.4 million Americans who have no job and no source of income.
When the jobs report comes out tomorrow, listen closely to the very subtle spin when the U.S. Department of Labor is expected to announce that some 158,000 jobs were created in May. Even if the number were only 1,000, someone will call it good. But the truth of the matter is that 158,000 is less than the 173,000 average per month over the previous year. So, now we know that companies are not hiring.
On another front, U.S. home prices took their biggest single-month jump in seven years for the month of April. Again, I ask, “Is this a good thing or a bad?” Well, it’s good for the home owner’s net worth. And it can be a stimulus for contractors to build houses. Yet, on the other hand, their are millions who can barely make their mortgage payments – the ones who have barely escaped foreclosure – plus the millions more who would like to take advantage of the advertised low interest rates to buy a home, but whom the underwriters deny. Which explains why so many U.S. mortgage lenders on the front lines who have stopped wearing neckties and started wearing ropes around their necks. They have people begging for a loan, but no one is willing to take the risk at the aforementioned advertised low rates.
In case you missed it, here’s my point. When the world either breathes a collective sigh of relief or runs for the hills tomorrow, take the report with a grain of salt. Then sit back and relax and wait to see what the Federal Reserve is going to do next.
