Stock Market Collapse Makes No Sense

NEW YORK ( TheStreet) -- Panic is more often than not ill-founded, based on an incorrect assessment of the future. The current malaise causing the S&P 500 to lose more than 9% since the beginning of April is a case in point.

Virtually every indicator suggests the U.S. economy is recovering. Slowly, yes, and hirings are lagging, and the real estate cycle has not turned up. But still, there is progress.

We read daily about the euro crisis and hear talk of contagion. Contagion is a scary word. What does it mean in the context of the eurozone? Ever since questions were raised about euro sovereign debt, I have said things are going to get a lot worse before they get better. I believe that before it is all over, Greece, Italy, Portugal and Spain will not be in a "zone" with Germany, the Netherlands, and Austria.

In what follows, I will look closely at these two areas of concern.

The U.S. Economy

The table below provides data on U.S. economic conditions. The U.S. still has a large inventory of real estate to work off. Nevertheless, housing starts continue to trend upwards. Vehicle sales are up as are other retails sales, albeit slowly. Capacity utilization is about as high as it gets.

For the two ISM indicators, anything over 50% signifies growth, and they are both more than 50%. And finally, both the leading indicators and corporate profits are up.

But employment is only recovering slowly, a common occurrence coming out of a recession. Recognize that since March 2010, the U.S. private sector has added 3.4 million jobs. That sounds pretty good, but we need another 3 million+ jobs to get back to full employment. And while the private sector is generating jobs, "austerity" has resulted in the loss of 459,000 government jobs, with most job losses coming from local governments. Not only is employment coming back slowly, but wages continue under pressure as U.S. labor adjusts to be competitive globally.

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