Two very bad and extremely dangerous economic developments happened yesterday — and Wall Street appeared to miss both of them.
The Dow Jones industrial average fell 40.86 points to 14565.25 after the Labor Department announced that the seasonally adjusted number of new jobs created in March was just 88,000 — far below the 190,000 or so Wall Street expected.
The March figure was also less than one-third the number of jobs created during February.
This led to the misperception that the job market tanked in March.
It didn’t.
Remember that April is the month when the market often begins major selloffs as professional investors get a jump on the “sell in May and go away” lesson that has served them well in recent years.
And in early April the market isn’t artificially propped up by the end-of-the-month manipulation, led by money managers who want their clients to think they are doing a good job — or by options-expiration week shenanigans.
So why weren’t March’s job figures as bad as Wall Street thought they were?
Well, if you look at the pure, unadjusted data you’ll see that the survey of companies showed that the economy really gained 759,000 jobs in March.
That figure was reduced to the lowly 88,000 because Labor’s computers obviously were expecting a not-seasonally adjusted figure bigger than 759,000.
But if you choose to look at unadjusted numbers in March, you also have to do so over a number of months. And when you do you’ll conclude that the economy certainly isn’t very strong, but it isn’t tanking either — at least not yet.
The unadjusted gain for February was 1.02 million jobs. In January, the economy lost 2.8 million jobs — the result of layoffs after holiday help was let go.
So what were the extremely dangerous developments that Wall Street appears to have missed?
First, it’s that the unemployment rate declined to 7.6 percent in March from 7.7 percent because another 496,000 people left the labor force — and simply gave up looking.
As a result, the labor force participation rate fell to 63.3 percent, the lowest the statistic has been since 1979.
The second extremely bad thing happened in Japan, where that country’s Central Bank on Thursday announced new and aggressive moves to print money. Japan invented Quantitative Easing, which Federal Reserve Chairman Ben Bernanke has embraced in a bear hug.
Overnight interest rates on 30-year Japanese bonds doubled — in a sobering display of how investors will demand to be paid more to lend money to a country that treats its currency with disrespect.
That’s what happens when you lose control of interest rates — something that could happen here.
It was reported before the financial markets opened yesterday that President Obama had suddenly proposed cuts to Social Security and Medicare in an effort to reduce the federal budget deficit.
The president had been adamant against making such moves until Thursday.
Why the change?
I obviously don’t know the reason for the flip-flop, but the president does get the jobs report on Thursday afternoon, and he would certainly have known about the Japanese bond-market debacle before he decided that the world should know that he changed his mind on Social Security and Medicare savings.
It’s all quite perilous.
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