I had a feeling that the August jobs report would produce a negative print, and I was one away from being right. It ended up showing that there was zero net job creation in August, which sent the markets lower once again. I’m still scratching my head as to why the market bounced 9% off of its lows. But the real thing that made my jaw drop wasn’t the zero print. It was something else.
Stagnation Nation
The eye-opening piece from the report was the fact that average hourly earnings fell 0.1% last month versus expectations of a 0.1% increase. Even during poor jobs reports, this figure seems to inch up, but not this time. I think consumer spending has held up due to these gradual increases, even though they have been tepid, but increases nonetheless. Not anymore.
So what is the case for a rebound in consumer spending now? I just don’t see it. The market is holding its hand out to the Fed for more quantitative easing, but history tells us that it won’t do a darn thing to help except some speculators here and there. We just got word that 70% of GDP (the consumer) is seeing its earnings drop in absolute terms, not to mention the double whammy of real (inflation-adjusted) terms.
“Another” Recession Coming?
I put “another” in quotes because I don’t think we ever really emerged from the previous one. We got some artificial bounce from all that stimulus, but it has certainly worn off and overall we didn’t make much headway. In fact, on an annualized basis, GDP growth has been negative since 2007. That right there shows the state we are in. Government might think it has the answers, but it doesn’t. Money has to go to the people that can spend it and flooding banks with cash hasn’t worked. I think the double-dip talk will escalate after this report and the bounce is over.
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