Mediocre Is The New Perfect
Three things happened this morning: The Labor Department reported a big jump employment; the financial markets responded like kids on Christmas morning; and -- with a few hours lag -- level-headed analysts deconstructed the jobs report and found it to be mediocre at best.
To take just a few of the high (or low) points:
- Americans are still leaving the labor force
- Most of the new jobs created are part-time
- The vast majority of those are in services, which is to say waiters and bartenders and such
- Most new hires are over 55
For readers who want the whole depressing story, consider the following from Mish's Global Economic Trend Analysis and Zero Hedge, which can generally be relied upon for this kind of quick-turnaround debunking of government pronouncements:
- Employment Report Much Worse Than It Looks
- Americans Not In The Labor Force Rise to Record 93,194,000
- In April There Were 26 Waiters And Bartenders For Every Manufacturing Job Added
- Payrolls Pump Deja Vu All Over Again
- Old Workers Hit New All-Time High As All April Jobs Go To The "55 And Older"
Money managers can of course do this analysis and reach the same conclusion, which is that the US labor market remains a mess, with a predominance of old and/or low-paid service drones where well-paid factory workers and bankers used to be. So why did the financial markets pop on this news?
Because mediocre is the now the new perfect. The best-case environment for stocks and bonds is an economy that is growing just enough to stave off a collapse in corporate profits but not fast enough to goad the Fed into tightening. This report fit the bill. The bad statistics cited above are all the ammunition monetary doves need to justify taking the dreaded interest rate increase off the table in June and maybe even September. So low interest rates, rising corporate buybacks and pension funds with nowhere to go but equities and junk bonds are here for as far as the eye can see.