U.S. job growth cut in half in just one month as reported on Good Friday when stock markets were closed.
The government said 120,000 jobs were produced rather than an estimated 207,000 expected and much worse than last month’s revised number which was 240,000 jobs.
This is the second monthly decline in a row now.
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Unemployment came in at 8.2 percent. But when you consider that unemployment hit its peak of 10.2 percent back in November of 2009, it’s coming down very slowly.
At this rate, we may not see normalized levels of unemployment for another two to three years.
What’s the culprit? Sluggish GDP growth. In essence, the economy isn’t growing fast enough to produce jobs at a quick enough rate.
You see, we need 3 percent to 4 percent GDP growth in order to really move the needle on the employment level. And we had it for a brief period when the Fed was in its quantitative easing programs. Check it out below.
Story continues below chart.
Click on chart to enlarge
But then the QE became ineffective rather quickly and growth began to decline again. In fact, you’ll see from the chart above that the U.S. GDP growth rate literally cut in half within just three quarters.
Since then, all we’ve been able to see is the GDP growth rate flattening out to around the 1.5 percent area.
If that continues, look for it to be two or three years before normalized unemployment levels are reached…and that’s the best case scenario under these GDP readings.
The worst case scenario of course would be that we would see the weak GDP levels to be un-sustained and turn into negative GDP growth which could lead to another recession. So let’s hope the former happens rather than the latter scenario.
One thing is for sure…a sluggish growth rate becomes more of a trader’s market than a “buy and hold” investor’s market.
It’s because it’s hard for stocks to make any “real” headway in that type of low-growth environment.
This could very well cause a lot of micro booms and busts which are conducive to trading than buy-and-hold investing.
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The greatest opportunities for these multi-month trades will be in the commodity and currency market because they tend to have more extreme moves and reactions as stocks have mini rallies and mini busts.
For the average Joe, it will likely produce a lot of frustration because all they know to do is to allocate money in their retirement accounts long-term. Therefore, they’ll just see those go largely sideways for the next two or three years.
But those that are able to follow the multi-month up-and-down trends that are produced in the commodity and currency market will make some huge headway during this tumultuous time in financial history.
About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.
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