Employment Data: What Can You Believe?
Ryan Cole, The Investment U Research Team
In the first installment of this series, making sense of the economic data coming at us daily, we dealt with inflation.
Today, we’re looking at the employment numbers.
Some of you might remember, back in June we took a closer look at the way we calculate unemployment today – and the vagaries of our current system are coming home to roost now.
After all, we started August by losing jobs… but the unemployment rate somehow went down.
How can you increase the number of unemployed people, while reducing the number of unemployed?
Simple. You stop counting them. As noted in our earlier article, the official unemployment numbers don’t count a number of out-of-work people – including those who have been unemployed so long, their benefits have run out.
And that’s exactly what we’re seeing here. When the official unemployment rate dropped to 9.4% – from 9.5% the month before – it didn’t mean America was starting to hire again.
We haven’t – jobs are as scarce as ever. It simply meant we fired less people this month than we fired a year ago – and those folks still don’t have work.
How Bad Is It?
Let’s be clear: the unemployment numbers are giving us some reason to hope. Even with a little uptick in first-time claims last week, the overall trend is slowing. Less and less people are losing their jobs, every month.
Now, there’s debate over whether unemployment is a leading or trailing indicator. In the early part of the last century, unemployment was considered a leading indicator, because it was much more difficult to track economic numbers and businesses usually responded to changing conditions before we knew what was going on.
Today, many argue that unemployment lags, as we spot the general trends more quickly than businesses can adjust their ships and change course.
Which is true? I won’t be able to settle that argument – regardless, losing less jobs is always a good thing, whether it’s a sign of what’s already happened or what’s to come.
But remember: we’re still losing jobs.
And the fact that people have been unemployed a year and still can’t find work is very worrying. That indicates that, while the worst of the crisis has likely ended, we aren’t about to return to normal.
When Will Things Turn Around?
Until the economy starts to actually add jobs – not just lose them less quickly – don’t expect a truly healthy economy.
In other words, what the economic numbers are telling us is we’ve hopefully reached our lowest plateau. Barring another unexpected big run downward, the economy has largely stabilized and we aren’t going to fall further.
But we’re not about to turn things around, either – we’re not going to have a V-shaped recovery. Not while millions remain unemployed, and especially not while many unemployed are losing their benefits, and now will be putting absolutely nothing back into the economy.
For every chronically unemployed worker that’s kicked off the rolls, local restaurants suffer, durable goods suffer even more, and in many cases landlords will lose tenants, as families move back in together (if the unemployed owned a home, it’s probably already been foreclosed).
Until America starts hiring again – until they’re given productive roles, creating value and consuming goods again – the economy will be stuck in a funk. And considering the government still believes we’re going to hit double-digit unemployment before the trend reverses, we’ve probably got a long way to go.
A broad U-shaped recovery is probably the best we can hope for, and an ugly, long L – staggering along at our current clipped rate for a year or more – remains a possibility.
So, how can we grab a silver lining from this?
Well, millions of Americans now have a new web portal when they log on every day. Instead of going straight to CNN, Yahoo! or Google… they’re starting their day with Monster.com.
Job search site Careerbuilder is about as large. Unfortunately, a conglomerate of newspaper publishing companies and Microsoft own it. The publishers are circling the drain, and
Microsoft is too large to notice an uptick in job searches on Careerbuilder.
Monster, however, is a small, lean, publicly traded company that focuses on this one thing: getting jobs for the unemployed (or poorly employed). At no time in its history has Monster had as large a pool of customers to talk to.
Already profitable – with 50-cent earnings-per-share – Monster is up almost 25% so far this year. With the unemployed pool not about to shrink – and likely growing more desperate as benefits run out – Monster’s run isn’t done yet.
We recommend buying Monster Worldwide Inc. (NYSE:MWW) and feeling good about yourself. After all, you’re making money, while contributing to the solution.
Good investing,
Ryan Cole
P.S. If you’re looking for more companies that dominate their industries, consider taking a look at The White Cap Report – It targets the market’s most aggressive growth companies. You can find out more here.
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