Daily Investment Interpretations

December 5, 2008

2008-12-5:  The markets rose today in the face of the worst unemployment report since 1974: U.S. job losses worst since 1974 as downturn deepens: 533,000 jobs lost, not including 30,000 employees who died during the month or farm employees. (I haven't the first clue why the stock market rose today.) The NASDAQ rose 63.75 (4.41%) to 1.509.31, the Dow gained 259.18 (3.09%) to 8,635.42, and the S&P 500 climbed 30.85 (3.65%) to 876.07. Oil fell to $40.81, dipping below $40 a barrel at one point during the day, and gold declined to $752.20. The VIX fell to about 60.
    Before discussing the possibility that the stock market is sneaking up on a turnaround, a graph is in order. As you can see in the left-hand graph,

 employment has just about fallen off a cliff in the past three months. It's gone from an average rate of 82,000 a month earlier this year to 419,000 a month for the past three months. Also, the September and October layoffs were revised sharply upward, something that could happen to  November's 533,000+ 30,000 when the new numbers are reported early in January. In addition, 621,000 additional employees this month were forced to switch from full-time work to part-time work, and 432,000 were dropped from the rolls because their unemployment

compensation expired. Add it all up and you have 995,000 who were laid off or died this month and another 621,000 who were forced into part-time employment... in one month's time. Meanwhile, most of the layoffs being announced now won't occur until after January 1. Happy New Year! And these layoffs will trigger others.
    Retail sales are also falling rapidly.
    When this collapse began. the average level of consumer debt reached 117% of personal income. Here are two articles of possible interest.
Dr. Doom Foresees Much More Pain: So Why Is Roubini's 401(k) All in Stocks? and The liquidity trap.