WASHINGTON, May 9, 2013 – According to the U.S. Department of Labor (DOL), initial claims for state unemployment benefits dropped by 4,000 last month to a seasonally adjusted 323,000. That’s the lowest level since January 2008 when the first rumblings of Great Depression II began to be felt.
Typically, however, DOL unemployment numbers are adjusted upward a few days later, which rarely gets reported.
That said, this is relatively good news on the unemployment front, at least as far as the market is concerned, although the Dow and the S&P have just opened slightly down, perhaps at last ready to take a breather from this week’s relentless melt-up on low volume.
While the job situation is at least slightly improving—something this administration is always quick to brag about—the jobs picture hides problems like stagnant wages and fewer working hours that strike directly at President Barack Obama’s base of support — young people, racial minorities and the less affluent. These groups voted for the president in droves in he most recent election. Yet there’s little evidence that his policies have ever focused much on jobs. Instead, he has continued to hammer on higher taxes and more government programs.
New college graduates face a downbeat labor market. The unemployment rate for workers under age 25 with at least a bachelor’s degree has averaged 8.2 percent, compared to 5.4 percent in 2007. The government’s April jobs report actually showed a decline in average weekly hours worked, and much of the growth was in predominantly low-wage sectors such as food services and drinking places and retail trade. And a new study found that nearly 2 million private-sector employees paid with taxpayer dollars earn wages too low to support a family.
On Thursday, Obama is traveling to Austin, Texas, to draw attention to his administration’s effort to boost jobs and wages and promote his efforts to bring jobs back to the U.S. from overseas. Last week he spent three days in Mexico and Costa Rica, in part to highlight trade relations that he claimed would help increase employment back home.
The economy has created 6.8 million private-sector jobs over the past 38 months, but nearly 12 million remain unemployed, with the unofficial number likely much higher due to the underreporting of those who’ve exhausted their unemployment benefits and thus have dropped off the official rolls. The unemployment rate edged down to 7.5 percent from 7.6 percent in March and has fallen 0.4 percentage point since the start of the year. Once again, however, this number, too, is attributable to the fact that significant numbers of the unemployed and underemployed are not included in official measures.
Though unemployment has hit across demographic groups, the hardest hit have been young workers, workers with low levels of education, and racial and ethnic minorities — the very same Americans who made up much of Obama’s winning political coalition.
The average unemployment rate in the first quarter of this year was 7.7 percent. But for African-American workers that rate was 13.6 percent. For Latinos, it was 9.5 percent. Both groups voted overwhelmingly for Obama in the most recent election.
Today’s market action:
Nothing much to report today aside from those nearly always misleading unemployment figures. It’s clear, though, that bulls are keeping the “sell in May” mantra at bay, at least for now, while they rotate out of “safe” stocks like utilities and into riskier areas including financials, industrials, and even materials. That may be a dicey bet, as there’s no news pretty much anywhere in the world that construction and industry are ramping back up again.
That said, the trend is your friend. We remain heavily in cash, but continue to keep our hand in this market lest we miss what could be this short-term bull’s last gasp at least for a while. Short and intermediate markets are nearly overbought, and at least some pullback is likely. Keep your powder dry. And if you must sample the wares, our old favorites, the master limited partnerships (MLPs) in oil and gas continue to boast excellent yields. A basket of these, the ETF AMLP, is one way to spread the risk. AMLP also carries the added benefit of doing the IRS paperwork for you in the sense that it owns the MLPs, not you directly.
—AP contributed to this story
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