It seems that some days all news is good news to the stock market and the next day all news is bad news. And other times it seems as though the stock market extrapolates one single economic indicator as though it alone matters.
No doubt the May 6 “Flash Crash” has spooked many investors, most particularly individual investors who were just getting their sea legs after watching their life savings decimated in 2008 and early 2009.
It is evident that the economy is improving.
But the momentum is too slow.
What the market wants to see is substantive job growth - not public sector jobs but private sector jobs. Over the next several quarters, as the Federal Government’s stimulus program winds down, we will experience a decline in jobs that were funded by that program. I, for one, would be happy to see Congress forfeit all the pork it packed into the back end of the stimulus package (which is not stimulus at all) and spend that money now finishing what was some way overdue spending on roads and bridges across this country. That would be money well spent.
What we need now is new private sector jobs. Since the onset of the recession and so far through the first phase of the recovery, the corporate sector of the U. S. economy has done a masterful job of reducing costs, enhancing productivity, maintaining a pristine balance sheet and fortifying cash flow. But as a country and as an economy, we cannot be prosperous with an unemployment rate of anything close to 9% - 10%.
The US economy differs from economies in Europe in many ways, but most particularly in the fact that the primary driving force in our economy is capitalism, whereas in Europe, the role of Government is far more pervasive on economics and growth. As an example, for decades now the Government has provided the vast majority of the job growth in France.
Despite the increasing encroachment into the private sector of the U.S. economy by Government, through regulation, taxation or outright confiscation of authority, there is still a vast opportunity for private entrepreneurship, job creation and wealth in this country. It is a well known economic fact that in the U.S. job creation is derived from new, small companies. That will and aspiration has not died or even gone dormant. What it needs is some fuel.
Unfortunately, SBA (the Federal Government’s Small Business Administration) has sharply curtailed its spending. So too have private sector banks, as they try to get their overleveraged balance sheets back in shape.
But the corporate sector does indeed have cash and cash to lend. And so do credit unions. And it is encouraging to see that those non-traditional lending sources are opening up their spigots and providing funding for growth.