June 2012 Unemployment Report Shows Dismal 80,000 New Jobs Added:
June 2012 jobs growth was exceptionally low. May 2012 unemployment came in at 69,000 and June followed the lackluster growth with and addition of 80,000 new jobs added. We believe this increases the likelihood the Federal Reserve Bank will add more liquidity in the financial system which would be positive for U.S. equities.
The Fed may begin signaling they are ready to move as soon as next week. We predicted jobs growth for the month of June 2012 would be 75,000 and we were only off by 5,000 jobs while many major investment houses erroneously raised their estimates based on the ADP report. In a low volume market, we believe movements based on today’s jobs report will occur next week. This was the worst case scenario many people predicted yesterday.
The Fed will now have more ammunition for increasing liquidity and follows the moves of several world banks including China, the U.K., Australia and the ECB who eased recently. The Fed is clearly not alone in believing more easing is necessary and we believe they may be a bit behind the curve. Commodities and oil are not inflationary at the current levels which should make it easier for inflation hawks to agree more easing is necessary.
The sectors most likely to benefit from easing in our view are the banks, small caps, and technology. We will watch the euro to monitor global reactions to the jobs report released today and look to buy on dips.