Some Common Cents for March 8th 2013

Employment Friday is a time for reflection: just where are we, and just how far do we need to go? The answers are seldom what you want to hear.

This morning, the Bureau of Labor Statistics (BLS) announced the US economy added 236K new jobs last month. This was more than expected, and should have been very good news. Even more, the Unemployment Rate fell to 7.7%, the lowest level in some 4 years!

Still, as robust as this data appears, the markets aren’t up as much as you would think they would be. As I type the Dow Industrials is about 50 points higher on the day, after gapping down on the release. This is nice, tidy sum, but certainly not a blowout. So, why has the reaction been so tepid, if that is the right word?

The talking heads might lead you to believe the reason is investors fear the Fed, now, won’t dump more liquidity into the financial system. Even worse, they might take some of the, um, accommodation off the table. If you think this is sort of backwards logic, I am inclined to agree with you, particularly since the Fed has a long way to go before anyone could sensibly argue monetary policy is tight.

Still, with $1 trillion budget deficits, and no end in sight, shouldn’t such a positive labor number bring at least a glimmer of hope? After all, we have to grow our way out of this fiscal mess, right? Well, yes. However, I am not sure we can grow fast enough to take care of the deficit in the short-run, particularly without significant inflation. Let me explain…Read On…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.