Census bureau jobs end = increase in the jobless

In the month of June the U.S. economy shed 125,000 workers.  However, the U.S. government single-handedly represented 225,000 of the lost jobs as the temporary jobs of the U.S. census were shed.  What that means is that net, the U.S. economy added 100,000 jobs.  Expected jobs lost were 110,000.

Analysis: Clearly the economic statistics of late are suggesting that the U.S. economy may experience a double-dip recession.  My intuitive sense is that the lack of job creation, the Gulf of Mexico cluster cuss, the European debt crisis and the declines in the stock market are all spooking the U.S. consumer.  At this point it feels as if our average fellow citizen is back into “hunker down, with one eyeball out of the fox hole” mode.  Unfortunately, there is not much on the horizon that could correct the mood of the consumer.  But there is one thing.

Generally speaking, second quarter corporate profits ought to be higher and more robust.  This is because until June the U.S. economy and the mood of the consumer was fairly upbeat.  As profit reports come in and are likely fairly positive the stock markets ought to recover some of their lost ground.  As silly as it is, most folks still look to the stock market as some sort of indicator of economic health.  A rise in stock market levels may mitigate some of the fears of our fellow U.S. citizens.

I have clearly been bullish on U.S. equities dating back to April and May.  That bullishness was predicated on a lean and mean U.S. corporate machine; a “feeling-better-about-my-life” consumer; and a stabilizing U.S. financial system.  I also felt that if Europe had an economic crisis it would lead to a capital infusion into the U.S. financial system – which it has.  However, the flood of cash has gone into U.S. Treasuries.  So what do I see going forward since my timing has clearly been off, despite seeing the potential risks to the system?

The foundations for economic success are all in place.  Corporations are still lean and mean; the U.S. banking system is still improving; Europe seems to have staved off its crisis; the U.S. economy is still adding new jobs; etc.  What is missing is that ephemeral, yet critical, thing called confidence.  So let me put myself on the line here:

I still feel that if you are a long-term investor (5-7 year time horizon) that buying U.S. equities here will result in excellent long-term returns.

Do I wish I myself had held off buying until this moment?  Yes.  But am I worried that the cream of the crop of U.S. businesses are going to go bankrupt suddenly?  Absolutely not.  Valuations are very cheap right now so it’s an even more excellent time to buy U.S. equities.

Importance grade: 8; the U.S. economy, sans the Census Bureau’s contribution, added 100,000 jobs last month.  This is a good thing.  Not only that, but the loss of the census jobs was anticipated.

Jason