	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 6-Aug-04
Job growth figures worst in 8 months, far below analysts' estimates

Web Log - August, 2004

Job growth figures worst in 8 months, far below analysts' estimates

The economy is not producing new jobs at anywhere near the rate that pundits, high-priced analysts and politicians have been promising.

I've been listening to analysts all week talk about an expected "job surge" to be reported today. Analysts were predicting 215,000 to 300,000 net new jobs to be created in July, and some said that anything as low as 100,000 would be a tremendous shock. The figure came in at only 32,000. Furthermore, the May and June figures were adjusted substantially downward as well.

Word of this morning's jobs report is causing bond prices to jump immediately, indicating that investors are likely to be moving money from stocks into bonds this morning.

The White House projected in February, just six months ago, that the economy would create 2.6 million jobs this year. They made this estimate by assuming that the recent recession is just like other recent recessions, such as the 1991 recession, or other recessions since 1945.

What Generational Dynamics says is that today's economy is like the 1930s-40s depression economy. The reason is that, within the last ten years, the generation of people who lived through the great depression have all disappeared (retired or died), all at the same time, and so our society has been making the same mistakes that gave rise to the 1930s depression.

The major "mistake" was the stock market bubble of the late 1990s which was, in essence, no different than the stock market bubble of the 1920s. The Federal Reserve has postponed, but not prevented, the aftereffects of the 1990s bubble by keeping interest rates at near zero. That's why we've been saying, since 2002, that we're entering a new 1930s style Great Depression.

Historical Price/earnings ratio for S&P 500

Historical Price/earnings ratio for S&P 500

The fact that stocks are due for a big fall has been evident for years to anyone looking at the extremely high price/earnings ratios, well into the 20s. If history is any guide, and it is, then the price/earnings ratios are going to fall below 10, which means that the Dow Jones average will fall to the 4000 range and the S&P 500 index will fall to the 400 range.

There is one thing about the current job report that's very intriguing: The number of people calling themselves "self-employed" grew by 641,000, causing the unemployment rate to tick down to 5.5% from 5.6%. Are these "self-employed" people just saying they're self-employed because they've given up seeking work? Or are these people actually creating new businesses that will eventually grow large enough to replace our aging business infrastructure? Only time will tell. (6-Aug-04) Permanent Link
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Generational Dynamics Web Log for 6-Aug-04 Job growth figures worst in 8 months, far below analysts' estimates

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Generational Dynamics Web Log for 6-Aug-04
Job growth figures worst in 8 months, far below analysts' estimates