Date: May 3, 2014

Economy “Booming”

288,000 NEW jobs created in April.

Unemployment rate plummets to “only” 6.3%.

The U.S. economy is back!

Does it feel like that to you or your friends?

My thesis since the crisis began has been that post financial crisis recoveries are frustrating. They tease and tantalize on the upside but rarely deliver. GDP growth never hits “escape velocity” and unemployment remains stubbornly high. With the government printing a 6.3% that’s hard to still say “stubbornly high”.

Digging into the details a little more, the labor force participation rate fell to 62.8%, the lowest level since 1978. Almost 1 million people left the labor force. Zero Hedge wrote a good piece about this here.

With wages not growing and people giving up on looking for a job, this is the main reason markets are not celebrating the 288,000 number. Additionally, it seems like at least once over the past few years, we see a monthly print close to 300,000 new jobs created only to have cold water poured on it over subsequent months.

Remember, the actual news isn’t as important as the markets’ reaction to the news. Before you fire off an email to me that the Russia/Ukraine situation led to Friday’s underwhelming performance, stocks looked crummy in the pre-market minutes after the jobs numbers was released. We “should” have seen a huge up day in stocks and really bad day in bonds. That just wasn’t the case and yes, I understand that there were geopolitical events in the air as the day wore on. Monday could be a very telling day for the short-term.

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Paul Schatz, President, Heritage Capital