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Global Macro: Where's the Real Growth?

NEW YORK (TheStreet) -- A look at labor market explains why investors cannot decide whether the Federal Reserve will begin to reduce its bond-buying program now or later.

Monetary stimulus was put in place to calm markets, but now the future of easing measures has been the root of wild market swings. The month before a major central bank decision, traders go wild trying to guess what will happen next. This market schizophrenia isn't healthy and makes for a difficult trading environment.

Positive economic data can be both bad and great for the market at the same time, which leaves analysts scratching their heads. In an effort to provide some clarity over the true condition of the labor market, I have devised a chart below.

The chart analyzes the price action of the last 10 years of nonfarm payrolls data. The nine-period moving average (orange) and 36-period moving average (gray) overlay the actual monthly reading in blue.

It looks as if we have mostly recovered from the deep trough in the U.S. labor market during the aftermath of the 2008 financial crisis. Jobs numbers have been trending higher since mid-2012. The issue, however, is the slow pace of the recovery as many had hoped to achieve growth superior to that in the early 2000s.

The chart below shows that the job data have moved in a fairly tight range recently. The trend is heading higher, although the data aren't exceeding expectations by a great amount.

Without more improvement, pushing the unemployment rate down has been difficult. While the rate is ticking lower, a decreasing participation rate in the labor market may be the reason.

And while there's an absence of major downside risk, the upside is uninspiring. Central bank stimulus has been the main driver leading assets to record highs, not a big improvement in the economy. Investors are piling into equities merely so that they won't miss out on the next rally.

Stimulus and low interest rates are still needed for the safety of financial markets, but improved fiscal policy is needed for real economic growth. Until then, the economy will improve only tepidly.

At the time of publication, the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. He takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

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