What a week. On Tuesday the DOW finished the day at 13,279, its highest close since December 2007. In terms of the stock market, we’ve crossed the great divide…December 2007, remember, was pre-financial crisis.
In fact, it was nearly a year before Lehman Brothers vanished from the face of the earth and black swans relentlessly descended upon the LIBOR like common ravens upon fresh Southern California road kill. If you recall, when the sky was falling in late 2008, spread movements that were statistically not possible in a million years, somehow, happened every day.
Money market shares of the Reserve Primary Fund did the impossible…they broke the buck – falling to $0.97 cents a share. Still, while the stock market may be back to where it was over four years ago, the world is dramatically different…
For one thing, back in December of 2007 you could buy a 10-year Treasury Note yielding 4.23 percent. Today the 10-year Note Yields less than half that. Of course, December 2007 was before TARP, CPFF, MMIFF, TAF, ZIRP, QE, QE2, Operation Twist, and all sorts of other harebrained schemes were put into practice to “reflate” financial markets.
But while the stock market may be back to pre-recession levels, one thing all the fiscal and monetary gas didn’t do…it didn’t create jobs. Moreover, it likely inhibited them.
Job’s Market Recline
By the time you read this the Labor Department will have released its jobs report for April. Maybe the 125,000 new jobs needed to keep up with population growth will be added…but we don’t expect many more than that. Obviously, the economy is not adding enough new jobs…
According to the Hamilton Project, “As of February, our nation faces a jobs gap of 11.4 million jobs, 5.2 million from jobs lost since 2007, and another 6.1 million jobs that should have been created in the absence of the recession.
“If the economy adds about 208,000 jobs per month, which was the average monthly rate for the best year of job creation in the 2000s, then it will take until February 2020 – 8 years – to close the jobs gap.”
Unfortunately, at the rate things are going it will take well into the next decade to get to where we’d be if the Great Recession never happened. Who knows, perhaps we’ll never get there at all. Sometimes things don’t progress; they regress. Other times they don’t advance; they decline.
From our vantage point, the U.S. jobs market is neither regressing nor declining. More accurately, it’s doing both of these things in tandem. What we mean is, the job’s market is reclining. Here’s why…
Why There Are No Jobs
At the Economic Prism we know not how the world works. However, we know how we think the world should work. Where money is concerned, “what goes around comes around” is, at least, how we think the world should work…
For instance, if you spend more than you make you’ll eventually go broke. If you buy high and sell low you’ll lose money in the stock market. If you do not generate revenue for your employer they will not be able to afford your paycheck. If you stiff the IRS you’re asking for trouble. Businesses that create products that no one wants at a price no one will pay are doomed to failure.
Yet, regardless of how we think the world should work, from our observations, the world works most differently. Quite frankly, we look around and have more questions than answers…
Why must the American taxpayer subsidize the Chevy Volt? Why do Wall Street bankers get such extravagant bonuses? Why do kids return from college with degrees in American Studies or Art History? Why is Joe Biden the Vice President? What do all those people in the Washington beltway do all day? What gives with Ben Bernanke and his love of quantitative easing?
You see, these are just a small sampling of questions…and each one merits a lengthy answer. But when we crystalize it all down we are left with a brief notion…
We suspect the bailouts may be what are behind the questions. This, too, may have something to do with why there are no jobs.
for Economic Prism