Putting the jobs number in context

Fibonacci Forecaster

The jobs number was very interesting. At 192,000, it wasn’t a bad number. But the Nasdaq got crushed. Then, for the first time, the bears came out of hibernation on the Dow as well. So what is going on? Recently, I told you that Clinton was credited with 22 million jobs in eight years. That’s 2.75 million a year, which converts to 229,000 a month. Obviously, some months will be better, some not so much. But remember, he was in office at the right place and the right time. He was the beneficiary of a historic Internet breakthrough. He was the beneficiary of the back end of all the good work created by Ronald Reagan. So they are only 40,000 jobs off that pace. What’s a measly 40,000 among friends? Apparently, somebody thinks we should do better.

We continue to see the complacency and arrogance as represented by the VIX. This is an economy only five years removed from the worst economic crisis since the Great Depression. They expect this economy to measure up to that one? Who’s kidding whom? I see this very low VIX starting to manifest itself in many kinds of weird ways. But now this market is making new highs again, and when markets make new highs it means it’s priced to perfection. I remember back in the summer of 2000 when stocks were priced to perfection and in fact some of the earnings reports were good. It didn’t matter.

Those were the heady days of the “whisper number,” and if it didn’t hit that number they took the stock out to the woodshed. Stock meets expectation? Not good enough, the whisper number was higher. In this case some of the experts felt the number should have been north of 200,000. Why? They had no idea why? These people are just pulling numbers out of the sky. Here we were coming off the coldest winter in years, and just 30 days ago they were praying the numbers were skewed by the weather. So in essence, 192,000 should have been more than good enough. If you saw some the reactions by Democrats, they weren’t happy at all. You’d think they already lost the election. Now it’s too late. Maybe some of them shouldn’t have been so full of ideology and more pragmatic about the economy.

Part of the problem is the sticker shock many are experiencing as they look for houses this season. According to a CNBC article, home prices are up 12.2 percent from this time a year ago and the source is CoreLogic, while wages are only up 2.1 percent. That could be why the stock market got crushed last session. Now lenders actually require buyers to come up with a healthy down payment, something that didn’t happen during the housing boom last decade. The only people who have it are the hedge funds and other investors, which are suddenly backing off. To give you an idea, 65% of mortgage originations were at a fixed rate, while we are above 95% right now. Additionally, buyers could get in with 1% teaser variable rates. Rising rates, higher down payments and a less-accommodating economy add up to shrinking affordability. According to Zillow, by historical standards there is a 62.4% unaffordability rating for Miami. Los Angeles is 57.2%. San Diego is 55.3%. Denver, San Francisco and San Jose are all above 50%.

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