This blog post originally appeared on RealMoney Silver on July 11 at 8:07 a.m. EDT.
"We need to stop being surprised by the continued weakness of job creation and start being prepared for it. We need to confront a changed global system and the place of the United States in it, as well as the challenges of future growth for what is on balance an extremely affluent society compared with the rest of the world. The cycles of the 20th century are not and will not be the cycles of the 21st. This time, it's different." -- Zachary Karabell, Daily Beast ("Jobs Aren't Coming Back")On Friday, I wrote that there was no way to put lipstick on the (employment) pig. The mistake many have made and are continuing to make is that they view the jobs weakness of 2009-2011 as cyclical. It is not -- rather, it is a structural phenomenon. Employment will not resume (relative to bullish expectations and relative to past cycles) as the overall economy recovers. The economy in the 21st century will not resemble the economy of the 20th century. It's different this time. Public policy of throwing money at the jobs problem ( quantitative wheezing) is misplaced. Nor will lowering tax rates for corporations and the wealthy help -- both groups have more than enough liquidity. Corporations, in particular, have never had more liquidity and more solid balance sheets, yet they are still not hiring. So, from my perch, trickle-down economic theory is dumb theory -- it's yesterday's theory. Indeed (with the benefit of hindsight), the policy of quantitative wheezing had adverse consequences in raising the costs of the necessities of life and by penalizing the savings class, placing more pressure on the middle class. ( Screwflation of the middle class remains an important theme to the last decade and to the next 10 years.) The wrong tools are being used to deal with elevated unemployment that is being influenced by new factors that include globalization, austerity, the shedding of municipal jobs (associated with local, state and federal fiscal imbalances), technological innovation and the use of part-time employees as a permanent part of the workplace, reflecting mounting health care costs and the costs of regulatory burdens. Structural unemployment will be a consistent drag on domestic economic growth -- and, in the fullness of time, corporations will be victimized by lower demand for their products -- until authorities recognize the source of the secular problem and deal with it in a more focused and aggressive manner. Investors will soon recognize that correcting our structural issues requires time and patience. When they finally do, share prices and valuations will be lower than they are today.
- The AAII individual investor survey is at five-month high (42% bullish/26% bearish).
- The CBOE 10-day put/call ratio has fallen from 1.15 to 0.92.
- ISI's hedge fund study indicates a swift and sudden rise in net long positions in the past seven days (from 49.4% to 52.6%).