Great news, right! Only 247,000 job losses when it was really supposed to be 325,000 losses. That's all I've been hearing about from Wall Street contacts ever since Friday when the July employment numbers showed the lowest number of job eliminations in 11 months. Convinced that the economy had now turned the corner, investors took off on another one of their emotional tears by chasing after stocks and driving up the Dow Industrials that day nearly 114 points as the unemployment rate unexpectedly dipped to 9.4%, the first such drop in 15 months.
Even President Obama got into the act, telling the nation after the news of the reduced job losses that "we've built a new foundation and that the worst of the recession may be behind us."
He may be right, of course, but everyone seems to be ignoring the accompanying anguish. In brief, the latest layoffs raised the jobless rolls to nearly 15 million, which means more foreclosed and abandoned homes (now in excess of one million), more mortgage delinquencies (currently a whopping 11.3% of the 41 million mortgages outstanding) and a growing number of worriers who will further pinch pennies, putting additional pressure on the economy.
Mark Haber, 56, who e-mails me he has a number of unemployed middle-aged friends who can't get jobs and whose $475,000 upstate New York home is surrounded by 7 others that have been seeking buyers for many months, doesn't share the President's cheery outlook.
"What's going on in the White House is not what's happening in mainstream America," he writes.
About 7 years ago, Haber, a New York men's clothing salesman, was sitting in a Paris café when he struck up a conversation with a friendly stranger who told him the Mona Lisa hanging in the Louvre Museum was really a phony, that he actually owned the real Da Vinci painting which he would sell to him for just $1,200.
"I think Obama is also trying to peddle another phony Mona Lisa," Haber wrote.
Los Angeles money manager Tom Postin of P&W Partners, agrees. "I really can't believe the President is honestly convinced the worst is over," he says. "W.C Fields," he recalls, "once told Mae West there's a sucker born ever minute, and those stock-buying suckers were out in full force last Friday. Practically every day some one says the recession is over and done with, but the facts tell you otherwise," he says.
"Every one I know, and that includes people who own mansions and Rolls-Royces, is trying to save a buck. Talk to companies that have laid off employees, and I talk to them every day, and they'll tell you they ain't ever hiring back all the people they've laid off. What it says is get used to a permanently shrunken work force."
Postin figures of the roughly 15 million unemployed, perhaps as many as 8% of them should forget about ever working again full time.
Still, there's no denying that the economy has been flashing growing signs of improvement, which is even leading some of the more notorious economic bears to ease up temporarily on their dire forecasts. One, surprisingly enough, is Florida investment adviser Martin Weiss, Wall Street's current Prince of Darkness, who views the latest jobs report as positive. In particular, he points to the modest increases in both average hourly earnings and weekly working hours and a drop in the number of industries shedding jobs.
Still, he thinks Obama's "new foundation" is a very shaky. We're in a calm before the storm, which can be prolonged for another few quarters," he says. Why a calm period? Because, he explains, the government temporarily has been successful in tamping down fear; likewise, there has been some stabilization in the housing market due to declining prices.
Accordingly, Weiss, the head of Weiss Research in Jupiter, Fla, sees a feeble recovery for the balance of the year, with GDP growth coming in at a puny 1% to 2% over the next few quarters. "But I wouldn't jump for joy because we're still in a severe economic contraction," he says. Pointing to the severity of the peak to trough declines in recent years of two of the country's major industries -- 78% in housing starts and 45% in auto sales -- Weiss notes that any recovery is highly likely to be much smaller than the declines. He also thinks the unemployment rate will ultimately rise to between 12% and 16% before the current economic downturn runs its course.
Weiss figures the next crisis -- which he notes always comes in waves -- will be higher interest rates across the board. "Were already seeing it in long term notes and bonds and he reckons upward pressure on short-term rates could soon follow.
He also contends our fundamental problems are not being resolved, but rather papered over. In particular, he points to excess debt of low quality, excess speculation in the financial markets and mushrooming debt and deficits. Our deficit is approaching $2 trillion, which Weiss observes, must lead to higher interest rates.
His view of the investment scene: If you're a long-term investor, any rally in the U.S. stock market should be viewed as a selling opportunity and any decline in key overseas markets, notably China and Brazil, should be looked upon as a buying opportunity.
In a highly provocative forecast that most of his peers would certainly view as outlandish, Weiss remains convinced that the Dow, currently trading at around 9,330, will plummet to 5,000 some time in 2,010. At some point, he says, the market will once again trade on reality and not simply at levels based on hope and a prayer.
Speaking of reality, online investment adviser Mark Leibovit of VRTrader.com of Sedona, Ariz., also offers a thought. "It is hard to imagine that all is well with the economy," he says, "when supposedly our entire financial system was on the brink of Armagedden just a few months ago."