Contrarian View: Glum Job News Won't Last
By: Employment figures are down: the Labor Department reports joblessness rising to 4.6%. The Dow has followed suit, losing 30.92 points in afternoon trading. So--should investors head for the hills? Not according to Mike Darda, chief economist at MKM Partners.
Darda joined "Street Signs" to spread his contrarian message of hope. Even as the rising Nasdaq and S&P 500 both confounded the pessimists, he described the labor figures as "ambivalent" and "ambiguous." The economist said the "slight uptick" of joblessness is "temporary and contradictory" -- and predicted that unemployment will fall below 4% for 2007.
CNBC's Erin Burnett asked the question many might pose: What does Darden base his rose-colored view upon? First, he pointed to the months of upward revisions in job numbers: changes in results for November and December added some 81,000 U.S. jobs, as CNBC's Steve Liesman reported.
And Darden underscored the importance of "trends in profits and productivity, relative to labor compensation." He declared that "every time we have a profit and productivity cycle" like the current one, the jobless rates dips below that golden 4%.
Darden--in true contrarian form--seems to ignore what others say. William Gross, founder and CIO at Pacific Investment Management Company (PIMCO) -- whose prescience earned MoneyMasters' sobriquet "the King of Bonds" -- said he's certain economic conditions will require rate cuts in the second half of the year. But Darda remains undaunted, maintaining that his analyses mean "the economy is going to be much stronger" than the pessimists say.
