The More You Dig Into the Numbers, the Worse They Get

Barron’s Alan Abelson calls the September employment report “An absolute horror.”

He notes that as bad as things look on the surface, “the more you dig into the numbers, the worse they get.” He references my pal Doug Kass, who explains why those expecting a “V-recovery” and a robust consumer snap back are kidding themselves.

While Doug and I diverged about how far the market momentum might carry — I said further, he said not-so-much — we are in agreement as to the economic effects of labor under-utilization and years of credit card over-utilization: An anemic US consumer:

“As Doug Kass, our hedge-fund-manager friend, who was a whiz at arithmetic when he was 10 years old and still can do his sums, totes it up, there are 2.2 million of these marginally attached souls, who would like to work but haven’t been able to land a job and aren’t receiving benefits. Add in some 9.2 million involuntary part-timers and the aforementioned 15.1 million formally unemployed, and the jobless total swells to over 26 million.

A compassionate portfolio manager (if there is such an animal), Doug tries to fathom in flesh-and-blood terms what those dry-as-dust dry statistics mean. And what he envisions are 26 million people not going to malls for extras, or taking the kids to the movies, hunting the cheapest victuals they can find at the supermarket and who are denying themselves the pleasures of travel, eating out, upgrading to Windows 7 or buying iPhone apps.

Now conceivably, they may not miss the Windows 7 or buying iPhone apps. (Apple and Microsoft might not agree.) Still, 26 million, even give or take a million, is an awesome number of unemployed men and women. The ironic conclusion Doug draws from this dismal picture as an investment pro is that corporate revenues are destined to continue to drag, and companies straining to realize those absurdly inflated Street expectations for 2010-11 earnings will continue to focus on cutting costs, which translates into cutting jobs.”

That sounds just about right . . .


Downright Scary
Barron’s October 5, 2009

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