An article today titled ‘Jobs Report: A Blow to Optimism‘ "A dismal June jobs report offers few, if any, 'green shoots.' Will a soft labor market slow a recovery?"

Yesterday’s U.S. June job loss report was – according to many reports – reflected in Wall Street (and hence Bay Street) responding negatively to the higher than expected job losses that were reported by the U.S. Labor Department.  The Dow dropped 224 points (2.6%) and the S&P/TSX Index dropped 130 points (1.2%).  I have the following reactions to this:

•    what is going on?  Are those writers who report on changes in stock market indices simply ‘making it up’ as to the reasons for increases or decreases, or is the efficient market theory simply ‘out the window’?  I think market gurus and analysts would say that the market was pricing in further job losses prior to yesterday’s report but the larger than expected number of June job losses was a ‘negative surprise’ which contributed to a market decline yesterday – hence the efficient market theory is alive and well.  On the surface there seems to be logic to this.  However, the statistics that have been issues over the past several months often have been subsequently restated.  Surely the efficient market theory would dictate that the risk of ‘estimation errors’ on both the upside and downside should have been priced into the market before the Job loss announcements - in which case the markets ought to have dropped yesterday for other reasons;

•    I am not an economist.  I have said that many times on this blog.  I am simply a 67 year old accountant who has spent his adult business life advising people on the value of their businesses.  How is it I have been decrying the likelihood of ‘green shoots’ since the phrase was first used a few months ago when with only a few exceptions the Wall street analysts, commentators, and pundits – as well as the U.S. Fed and other U.S. Government officials – have been promoting the view of a U.S. economic recovery by late 2009.  Yesterday even President Obama in a Press Conference expressed concern with the reported June job losses and what they – if they persist going forward – may mean to U.S. economic recovery; and,

•    Unless things turn around quickly in the U.S. I can’t see how America will not be forced to become more and more ‘trade protectionist’ to the detriment of Canada and other countries.  That said, I see globalization as a juggernaut that – like the Queen Mary – will be hard to turn around in a short time span, and may prove impossible to turn around in a meaningful way in the long term.  Is America in a ‘too little, too late’ position.  I am becoming increasingly concerned that it is.

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