Friday the stock markets staged a late day recovery on the notion that the North American economy is in such poor condition its governments will be under pressure to search for more 'magical' ways to inject tax-payer capital into the financial system. We live in perverse times. The trillions in stimulus spent in the world since 2009 have not stopped the inevitable economic contraction from continuing. Negative economic evidence continues to mount and presents increasingly serious price risk for equity and commodity markets still desperately thrashing around manic levels. Technically stock markets remain in contraction mode at the weekly close. The jobs data in North America was horrific.
US job losses came in at -131,000 versus the consensus estimate of -65,000 (private payrolls rose 71,000 but below the 90,000 increase that was expected). Net revisions for the prior two months were -97,000, so overall the level of employment was 153,000 lower than economists had predicted. Even more alarming, the labour force continues to shrink as discouraged workers drop out an alarming rate— 181,000 in July and down 1.2 million in the past three months. More than 40 million Americans were living on food stamps in May. This is not a jobless recovery. It is not a recovery.
Canadian bulls had a rude awakening too as Canadian job losses surged as well. All the full-time jobs that had been reported with great celebration in Canada the past three months were deleted in this one report. Meanwhile the Globe runs with a good update on the Canadian housing and credit bubble this morning which reminds us Canadians are precariously levered going into this renewed period of economic weakness with debt now at a nose-bleed 141% of disposable income. Good luck.
My suggestion is consider what you have to lose. Pull in, pay down any leverage, shore up cash, wait for it…
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