Life Goes On After a Lousy Jobs Number

One month ago, after the better-than-expected jobs number, the Street became enamored of the idea that recovery (and inflation) were at hand; the bond market sold off and commodities rose in price. The thought was that Bernanke had to start implementing an exit strategy for the stimulus program and begin to drain liquidity from the system. The jobs number released last week has absolutely put an end to that thought. There was little good in that report.

In all, 467,000 jobs were lost, when estimates had been for far fewer. While that is a horrendous number, consider the pattern of 2009: January's job loss was 741,000. February followed with a still awful 681,000. March was 652,000; April 519,000; and May 322,000. June's loss of 467,000 is in line with the gradual decline seen this year, and May looks to be the odd number that should have caused more skepticism than it did. You can take some comfort in the yearly trend. While the numbers are still staggering, they do show a gradual improvement.

Hours worked declined to an all-time low of 33, which indicates full-time work became part time. And part-time jobs slumped by 38,000, which is a disappointment since the loss last month was only 9,000. Average hourly earnings were flat for the month and are down 0.3% for the year. The median duration of unemployment rose to 17.9 weeks from 14.9 in May. More than half the unemployed stay unemployed for more than 15 weeks, which is a record. While the jobless rate hit 9.5% (oddly, the eurozone has exactly the same rate of unemployment), a measure of unemployment called U-6 -- measuring part-timers who want full-time work plus discouraged workers who have stopped looking -- rose to a record 16.5%.

The Wall Street Journal points out that one in four teenagers is out of work and a scheduled July 24 increase in the minimum wage is likely to worsen that number. Mandating higher pay in the face of a fiercely troubled economy will throw people out of work. Look for the teenage rate of unemployment to worsen.

On the other hand, the decline in manufacturing is slowing worldwide, as a bunch of ISM surveys improved (the U.S., China, the U.K. and Japan). Housing sales are showing some life and inventories are being depleted, which means industrial production will rebound at some point. Home mortgage rates fell a bit last week to 5.32%, which is a good rate for new homebuyers (but not low enough to rekindle refinancings).

My bottom line on all this is that the jobs number is a jolt of realistic news at a time when many were holding on to "green shoots." While the numbers in total are less bad than they have been, they are not good yet and the stock market is ahead of itself. I believe the correction will continue; oil will decline in price; bonds will be stable, with the still-weak economy vs. the huge supply of new Treasuries causing the market to be more stalemated than not; and the dollar will still be more the currency of choice than not.

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Vincent Farrell Jr. is chief investment officer for Soleil Securities Group and a regular guest on CNBC and other national print and broadcast media.

Prior to joining Soleil in August 2008, Farrell was a principal of Scotsman Capital Management. Before that, he was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.