After more than 24 straight months of horrific decline, it seems the U.S. private sector actually added 162,000 non-agriculture jobs in March. While that is a mere drop in the bucket in an effort to regain the more than 8 million lost since the recession began in December 2007, the politicos and talking heads have been quick to trumpet America's "turning the corner." I am happy about any gain versus loss, but something tells me the average Joe (or Joe the Plumber) isn't popping the cork on his bottle of Three Buck Chuck just yet.
I am not qualified to state definitively that the job market is displaying signs of real improvement. However, I can report anecdotally that while sending resumes from May - October of 2009, a five month barrage of hundreds of submissions, I netted three interviews altogether. None of them resulted in a formal job offer. Compare this to February-April of 2010, a shorter time frame when I sent out far less applications, but was invited for four formal interviews, which resulted in three offers. I have tentatively accepted one of these positions. In my own experience, change does seem to be afoot. However, there are too many in my immediate circle of friends and family who remain un- or under-employed to warrant anything more than cautious optimism.
I have never been a genius when it comes to financials or the stock market. I get my education from regular reader and commentator Mr. A on that front, but the other "good news" is that the Dow Jones is hovering around 11,000 points for the first time in 18 months. That's great for Wall Street I guess. But again, not sure that impacts the daily lives of those of us who live on Main Street.
If I sound ambivalent about all of this, that's because I definitely am. What do you think? Have we seen the worst? Is it time to get excited about a true economic rebound?
I am not qualified to state definitively that the job market is displaying signs of real improvement. However, I can report anecdotally that while sending resumes from May - October of 2009, a five month barrage of hundreds of submissions, I netted three interviews altogether. None of them resulted in a formal job offer. Compare this to February-April of 2010, a shorter time frame when I sent out far less applications, but was invited for four formal interviews, which resulted in three offers. I have tentatively accepted one of these positions. In my own experience, change does seem to be afoot. However, there are too many in my immediate circle of friends and family who remain un- or under-employed to warrant anything more than cautious optimism.
I have never been a genius when it comes to financials or the stock market. I get my education from regular reader and commentator Mr. A on that front, but the other "good news" is that the Dow Jones is hovering around 11,000 points for the first time in 18 months. That's great for Wall Street I guess. But again, not sure that impacts the daily lives of those of us who live on Main Street.
If I sound ambivalent about all of this, that's because I definitely am. What do you think? Have we seen the worst? Is it time to get excited about a true economic rebound?
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Max has been listening to a WCPT show (can't remember whose show it was) and he sides with the hosts theory that the worst is actually yet to come. He is scared enough to have transferred his retirement account to a new one that charges higher fees but guarantees his deposit at the very least. I followed suit becuase I didn't want to have regrets, but I don't know enough about the whole thing in general. Just trying to be smart.
ReplyDeleteI've heard that we are looking up overall, but the housing prices will still be declining. Who really knows at this point?
ReplyDeleteI have heard that the additional 162,000 jobs consists mostly of temporary employment in the form of census workers. Is that called sand-bagging? It is definitely using statistics in the government's favor.
You used the words genius and Mr A in the same paragraph. You must still be lightheaded from the blood they drew from you. Congrats on the new job! The latest jobs report supposedly included thousands of jobs related to the census. I tend to think that we may have "turned a corner" with regard to jobs but still a long way to go as you say. That is the key to full recovery. Dow 11,000 help anyone on Main Street with a 401K or other such plans as well as those who invest directly in the stock market. I really like how this market has slowly rallied over the last year or so. Anyone still on the sidelines has missed an opportunity to make back some of the losses of late 2008 and early 2009. I personally don't think the worst is yet to come. Sitting on the sidelines because of a market downturn a year or more ago is not sound strategy. The key is to be nimble and pull out at the first signs of trouble and not subject yourself to the losses that a buy and hold strategy subjects you to. Jen, if Max believes those signs are there then you are doing the right thing. I think this market still has some upside in it though. If the jobs picture continues to improve, then it definitely does.
ReplyDelete-Mr A
I agree with Jen, the worst is most likely yet to come, and it will probably be far more painful than what we have seen so far. Because of the influx of cash into the market through TARP and the stimulus, we will probably be looking at serious inflation, possibly even hyper-inflation, which will further weaken the already low-valued dollar. This will make our massive debt even more expensive, with interest alone eating up an unsustainable portion of the country's budget, not to mention substantially drive up costs for all of us on everything we buy, since the dollar will lose its purchasing power. As income taxes on those making more than $250K increase, we will most likely see a further increase in unemployment, since most small business owners (who account for 70-80% of new job creation in the U.S.) claim business income as personal income (and the lower capital gains tax will not help them at all, unless their business is selling capital of some sort, which the vast majority of small business owners don't), and most are above the $250K mark. They will simply not be able to afford new employees, and in many cases, will be forced to let people go. Then we need to consider that several states have pension liabilities and will have more Medicare/Medicaid liabilities with the passage of the health care bill they will not be able to afford without raising taxes, leaving even less discretionary income for people to spend, which will further depress the economy and continue to drive up unemployment. This increase in unemployment will put an even bigger strain on the states' already over-stressed budgets. Basically, we are going to feel some major hurt, but just how painful and for how long remains to be seen. There are only a handful of ways to solve the economic crisis in this country, and none of them are easy or pleasant. We can either continue to borrow and print money, which will draw things out (economists are predicting up to a decade or more before we are out of this, based on the spending of both the current and previous administrations). Or we can cut taxes to increase investing and job creation AND spending because we are already spending way more than we can afford. But that is not a hugely popular option, especially to those who receive benefits. The options are basically drag out the pain for several years, but it won't hurt quite as bad (but will still be plenty painful) or hurt really bad, but significantly shorten the duration of the pain. It's the difference between ripping off a bandage and slowly pulling out each hair as you remove it. In the meantime, a person's best strategy is to continue to diversify their investments (the last 2 years has been a great time to buy, like getting funds on sale) and honestly, a stockpile of cash in a money market account is wise. If you have debt, push yourself to pay it off as soon as possible. If you're in a 401(k) or IRA, and you have 15 years or more before you need those funds, odds are it's better to leave a good portion of them in more aggressive investments (a good rule of thumb is 100-your age is the percentage you should have in higher risk investments). Also, if you have the funds, it's a better time to make any big-ticket purchases (i.e. cars, appliances, electronics) now rather than later, because when the inflation hits (I believe it will be in the next 12-18 months, if not sooner) prices will soar. And don't use credit cards unless you can pay off the balance in full each month. I hope I'm wrong, but if I'm not, these are the best approaches to safeguarding your lifestyle and future retirement. And if I am wrong, then the benefits of this strategy will be even better.
ReplyDeleteInteresting points Anonymous. Not sure I completely agree but many points sound credible. One question: with interest rates effectively at zero, the Fed is sure to tighten at the first sign of inflation as is always their first line of defense. With the jobs picture worsening as you say it will, what is the driving force behind higher prices? Much of the TARP money has been paid back and that money is not flowing into the system as fast as it would have been in the past. The stimulus is likely a failure but I guess still remains to be seen. It's always a good idea to pay off debt asap. I strongly believe that one of the lessons people should learn from the recent/current economic turmoil is to get a simple yet reasonable plan to shift their invested money when things turn good or bad. Instead, it seems the lesson for many is to avoid investing in equities all together out of fear and sit on their money in mm accounts, etc. I strongly feel that is the wrong lesson to learn.
ReplyDelete-Mr. A
Do we now have two thought provoking, intelligent, Mr. A's? The more, the merrier.
ReplyDeleteHi other new Mr. A! My belief that the inflation rate will increase substantially and drive up the costs of good & services stem from the fact that TARP & the stimulus flooded the nation with capital. There is simply too much liquidity (although those who are looking for loans aren't getting them right now, in part due to banks' uncertainty of people's ability to repay those loans due to the weak job market, potential new law & regulation that may or may not come to pass). This link http://economics.about.com/cs/money/a/print_money.htm does a great job of explaining why printing more money leads to inflation & higher prices. The inflation of tomorrow would start, I believe, from manufacturers, rather than consumers, utilizing the capital they received from the stimulus, some of which will go to higher wages(which is a good thing), but will then encourage consumer spending, leading to increased demand for goods, which would further drive up prices. Also, because of the massive borrowing our government has engaged in with foreign countries (and this is true of every administration for decades, although in the last 10 years it has really skyrocketed), the value of the U.S. dollar is severely weakened. We basically owe so much money to foreign governments that the dollar's value will compound the problem of having too many dollars chasing after too few goods. Even Bernanke admits our current deficit is unsustainable. I agree, many people are not learning the right lessons from all this turmoil. Investing in the market is a good thing...investing is actually crucial to strengthening our economy. I agree with your comment about people getting a simple reasonable plan for investing, although I would add a few points to it; try to be as emotionless as possible when investing...fear over losing money or exhilaration when making money shouldn't really factor in when making decisions as to where to put one's money. The other lesson I believe we need to learn is lo live below our means. It worries me seeing so many people spending money on the newest gadgets and vacations and the like, when I am sure that many of their retirements are under-funded. People need to realize that the dollar amount of your checking account isn't the whole picture that needs to be considered before making a purchase.
ReplyDelete-Newbie Mr. A (henceforth known as NMA)