We did a double-take on the headline and had to read a little bit further. Why would a good jobs report out of Washington be such bad news for Wall Street? The reporting wasn't too helpful but contained within it are our clues to the solution of this mystery.
NEW YORK — Stocks fell Friday after the Labor Department reported surprisingly strong gains in jobs and wages, which in turn could spark inflation and prompt the Federal Reserve to keep raising interest rates.
In late morning trading Friday, the blue-chip Dow Jones industrial average (search) was down 33 points at 10,577 while the technology-packed Nasdaq Composite Index (search) was down 8 points at 2,183. The broader Standard & Poor's 500 Index (search) was down 7 points at 1,228.
"For the stock market, it's a sweet and sour report. On the sweet side, the economy is doing well. It's clearly generating jobs and sustaining growth," said Ed Yardeni, chief investment strategist at Oak Associates in Akron, Ohio. "On the sour side, the Fed will continue raising interest rates."
While Fox is usually better than most it still succumbs to mainstream press thinking that revolves around Alan Greenspan, the Fed, and all things government -- all of these reactive agents
in the economy -- and forgets to plug into the primary, or perhaps we should say "primal" agents of causation, the mindsets of the corporatists who by and large are calling the shots.
Why is job growth and static unemployment
(the rate stayed unchanged at 5.0%) such bad news? It means that companies might actually have to pay more
for labor. A simplistic capitalist analysis would say that that is indeed a bad thing. But let's not be too simplistic. Why did the job growth occur in the first place? Because companies are adding employment because sales (and prospects for future sales) gave them the confidence to do so. Employment is being added because profits over and above a certain trigger point are requiring
Yet for every capitalist who "gets it" and enthusiastically expands his payroll and his output, there are two, three or a dozen pessimistic sit-on-their-rump fund managers who only see the trouble it will cause the markets, who could not care less about the human lives that are affected positively and who probably wish every company in America could suddenly outsource their jobs to Malaysia where workers come cheap.
So instead of the good news that it ought to be, the overall market deems it bad news for the long term and plays around with your retirement investments.
Before someone tosses in the bromide that the market is now the collective action and "wisdom" of millions of Mom and Pop investors, you need to get up to speed on what has happened to Wall Street since the dot com collapse and 9/11. Program trading -- the computerized activity of the big players on the Street -- is way up, and individual investor participation is way down. A fairly good explanation of this can be found in the archives over at Urban Survival.com
where editor George Ure has graphed the difference in investment activity on the New York Stock Exchange, using the NYSE's own numbers. You'll find his analysis under "Friday's Problem."
Bottom line is that regular people are, statistically speaking, no longer confident enough in the markets to do much investing there. That's not hard to understand considering that many investment advocates (once upon a time including the Oklahomilist) were cheerfully urging everyone into the markets by explaining how the markets "never really fail" those stalwarts who invest and stay the course, at least since 1930. Oops! Right now the investing that is being done is that of people using other people's money,
and often it is tied in with much computer baggage that even the guys issuing the orders can't tell you exactly why something is bought, sold or held.
This is not an environment conducive to regarding the impact on ordinary human beings, and it is this absence of the human touch, of humanity, that we have begun to find not just repellant, but fearsome.
We'll admit that it is hard to be overly optimistic in an economic environment where the personal savings rate of Americans has officially dropped to (are you ready for this?) ZERO
and the price of a barrel of oil on the world market is flirting with $63 (when just four months ago there were disaster predictions about $50 per barrel oil).
Conclusions? You might want to think about adopting a more sustainable lifestyle and reducing debt so that you can be more properly prepared for the future, good times or bad. But it's still more-or-less a free country, and you've still got your free will, regardless of what any bureaucrat or federal judge believes. We just want your decisions to be informed ones.