June Jobs: Five Things You Need to Know

Another summer, another jobs bummer. Payrolls rose by only 80,000 in June, the U.S. Labor Department reported Friday morning. The national unemployment rate held at 8.2 percent. It was the second straight disappointing month for employment growth (economistssurveyed by Bloomberg had been expecting a gain of 100,000). More worrying is that it’s the second year in a row that a spring spurt has jumped the rails.

Many of the key June numbers were basically unchanged from May: The unemployment rate; the total number of unemployed people, 12.7 million; the long-term unemployed (more than 27 weeks), 5.4 million (41.9 percent of all jobless). But that’s the problem. Last month’s report, it was widely agreed, was a disaster: Only 69,000 jobs were added (since revised to 77,000), the lowest gain in a year. The implications for President Barack Obama are obviously not good; voters may or may not be watching the numbers closely on a holiday week, but with only four more jobs reports before the election, the chances to convince them the economy is on the upswing are dwindling.

It probably also increases the odds that the Federal Reserve will move to stimulate the economy further. Pimco’s Bill Gross and others already have speculated that further stimulus could be forthcoming in August. (Update: Mark Thoma, economics professor at the University of Oregon, says the Fed will stay in “wait and see mode” unless data point to further weakening ahead of the next Federal Open Market Committee meeting on July 31-Aug. 1.)

Here are five key takeaways from today’s report:

The all-in jobs misery number. This category, known as U-6 among economists, includes the unemployed and the underemployed, such as those working part-time jobs even though they’d like full-time work, and those who have given up looking for work. The U-6 number has held steady at just under 15 percent for the past five months; it rose slightly, to 14.9 percent, in June. That’s not good; consumers need to feel confident in their full-time employment before they loosen the purse strings. The U-6 number is down from a year earlier, when it was 16.2 percent.

Government jobs. The story recently has been decent growth by businesses (remember Obama’s ill-advised comment that the private sector was “doing fine”?) and contraction in government employment. That trend continues. Total government jobs shrank by less than 1 percent in June from May, to 21.9 million. The biggest hit was taken by teachers; local education jobs fell by a seasonally adjusted 14,200. The private sector hardly picked up the slack, though; it added only 84,000 jobs.

Construction. The housing market has been throwing off signs of improvement, which gave some folks hope that the construction-jobs engine was sputtering back to life. It is in some places, but not nationally. Homebuilders employed 5,900 fewer workers in June, or 556,000 total. A year ago, the number was 561,200.

Length of unemployment   http://www.businessweek.com/articles/2012-07-06/june-jobs-five-things-you-need-to-know

Get ready for the end of record corporate profits

By MATTHEW CRAFT, AP Business Writer – 1 day ago  

NEW YORK (AP) — For almost three years, no matter what has rattled the financial markets — a debt crisis in Europe, high gasoline prices, a slower economy — investors have been soothed by rising corporate profits.

The storyline became as predictable as a soap opera's. But when the latest round of corporate earnings starts rolling in next week, look for a twist: Profits are expected to fall.

"China is still slowing. Manufacturing numbers in the U.S. are weak," says Christine Short, senior manager at Standard & Poor's Global Markets Intelligence. "You can only have so many things working against you."

Stock analysts expect earnings for companies in the Standard & Poor's 500 index to decline 1 percent for April through June compared with the year before, according to S&P Capital IQ, the research arm of S&P.

That would break a streak of 10 quarters of gains that started in the final quarter of 2009.

Over recent weeks, a motley collection of chain stores, steel producers and technology titans have warned of slowing profits. They all point to similar culprits — flagging sales to Europe and slower economic growth in China.

Procter & Gamble, the world's biggest consumer products company, cut its profit outlook for the year, blaming sluggish economic growth in China and Europe along with a stronger dollar, which makes U.S.-made goods more expensive abroad.

Ford said it expects to take a hit from European sales and may have to shut an assembly plant. Nike reported a drop in profits and warned of tough conditions in Europe and China. And that's just within the past month.

"You've seen the evidence," says Adam Parker, chief U.S. equity strategist at Morgan Stanley, the investment bank. "A ton of companies have already told you the economy is slowing."

The list of companies that have warned of trouble is long and varied, and includes well-known names such as McDonald's, Cisco, Starbucks and Tiffany & Co.

http://www.google.com/hostednews/ap/article/ALeqM5gdgskIh44A_EvgN3x3mprYDwdyjg?docId=6061038ba9ba4eb89a801f2d8a62c51f

BRICs Priced For Economic Meltdown

The biggest emerging markets are contributing more than ever to the global economy as their proportion of the world stock market shrinks, leaving investors with the widest valuation gap in seven years.

 

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June 28 (Bloomberg) -- Jim Ross, senior portfolio manager at AllianceBernstein LP, talks about European investment strategy and the inflation outlook. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Brazil, Russia (INDEXCF), India and China, known as the BRICs, will comprise 20 percent of the world economy this year after growing more than four-fold in the past decade, International Monetary Fund data show. At the same time, their combined stock-market value has dropped to a three-year low of 16 percent of the total invested in equities, according to data compiled by Bloomberg.

To Jim O’Neill, the chairman of Goldman Sachs Asset Management who coined the term BRIC in a 2001 research report, the 4 percentage point difference makes stocks in these markets irresistible. The last time the gap was this wide, in 2005, the MSCI BRIC Index (MXBRIC) jumped 53 percent in 12 months, more than double the gain in the MSCI All-Country World Index. (MXWD)

“Unless we are seeing a major collapse of those economies, it’s a huge opportunity for investors,” O’Neill, who helps oversee $824 billion, said in a June 28 phone interview. The BRIC stock markets may double by 2020 as their share of world gross domestic product increases to about 27 percent, he said.

Combined GDP in the BRICs will rise to more than $14 trillion this year from $2.8 trillion in 2002, according to the IMF. Their equity value, which includes locally-traded shares and companies based in the BRIC nations with primary listings abroad, has dropped to $7.6 trillion from $9.5 trillion a year ago, when they made up 18 percent of the global total, according to data compiled by Bloomberg.

Fund Outflows

http://www.bloomberg.com/news/2012-07-02/brics-priced-for-economic-meltdown.html