Last Friday’s employment report contained a very happy surprise – 162,000 jobs were created in the merry month of March. This was better than expected. To some the fact that some of these jobs were temporary jobs related to the Census, was enough to take some bloom off the rose, but from my perspective, this is great news. Almost no one was expecting job growth this early in the cycle.
In a conference I attended last month, a famous portfolio manager suggested that the US economy could be posting 200k per month job growth by the second quarter of this year. This bold forecast was met with great skepticism from the audience, which was mostly comprised of professional investors and other industry practitioners. I suspect that everyone may need to brush up (that is, revise upward) their forecasts for job growth in 2010.
Following this employment number, I find myself asking, “What else?” What else do we need to convince those still on the sidelines, hugging to their zero-percent return cash bundles, that the economic recovery is real, that the new equity bull market is entrenched and sustainable, and that the widely-feared “other shoe” isn’t coming? Corporate earnings growth and cash generation is great. Company balance sheets are very strong. Demand from the emerging markets is helping many US companies generate nice profits. Monetary and fiscal policies are still quite simulative. Inflation is benign. The widely-expected collapse of the US dollar hasn’t happened. Even housing is looking at turning around. What else do we need?