Monday, April 9, 2012

It's All About Jobs

It had to happen - the euphoria about the economy improving paled in the face of a less-than-stellar jobs report.

Yes, the numbers say the jobs picture is improving.  But, investors recognize that it takes many, many more than 120,000 new non-farm payrolls to do so, especially when nearly twice that number had been anticipated.  The disappointing news, coupled with the market's being closed on Good Friday, meant we had the weekend to lament the obvious:  until more people are working, the Great Recession is not over.

Coupled with a sluggish outlook for corporate earnings - companies have slashed costs about as much as they can; real "organic" growth in revenue is anemic - and low first quarter GDP, investors are concerned.  They register that concern by fleeing "risk assets" (READ: stocks) and opting for the safety of bonds.  The 10-year Treasury note dropped its interest rate slightly, meaning it doesn't have to pay quite so much to attract buyers.

Obviously, one poor month of employment data does not a trend make, just like robust employment numbers the previous month did not.  But, the next few months may be bumpy, and some analysts are expecting a 3%-5% decline.  That may represent a good buying opportunity, as we now are close to February's closing level on the S&P 500.