David Rosenberg, Gluskin Sheff:

This is no time to mince words. The U.S. labour market is in horrible shape. In fact, considering that policy rates are at zero, the Fed’s balance sheet has tripled in size (with more to come), and a 10% deficit-to-GDP ratio that would have even made FDR blush, the unemployment situation is an unmitigated disaster that deserves the government’s undivided attention. Instead of providing zero-percent mortgage financing to unemployed workers, which is only going to make them more vulnerable to credit conditions in the future, why not instead create conditions that will allow the economy to nurture a sustained pace of job creation. This may mean reducing the cloud of uncertainty overhanging the small business sector, including a second look at how the health care reforms are impeding employment growth, not to mention other supply-side measures such as payroll tax relief for the broad corporate sector.

As far as the September data is concerned, the key was that excluding the Census worker layoffs, payrolls fell 18,000. Full stop. This marks the first time since December 2009 that the underlying level of nonfarm payrolls fell in a month. So perhaps the equity market will rally on hopes that a weak economy will spur on more aggressive Fed intervention. Make no mistake, the economy is on very soft ground, especially benchmarked to all the steroids that have already been injected in terms of monetary, fiscal and bailout stimulus. This economy is still 7.75 million jobs shy of where it was when the Great Recession began in late 2007 — by this stage of the cycle, what is normal is that we are either at a new peak or well on our way.


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