Where other people see a stagnant, fetid economy emitting more smell than productivity, Jim Paulsen of Wells Capital Management sees the beginnings of a wellspring of growth. Paulsen's unfashionable optimism makes him an easy mark for the cynics but his impressive track record on Breakout has earned the right to be heard.
In the attached video Paulsen makes the case that the negative reaction to last week's uniformly underwhelming economic data didn't jibe with what's been going on in the bigger picture.
"Step back and look at where we are year to date," he insists. "Four months into April we have created from the household about 270,000 jobs a month."
The widely held view that last Friday's jobs report only showed a drop of 0.1% in unemployment, down to 8.1% because discouraged citizens simply stopped trying to find jobs is a particular sore point. Paulsen insists the workforce is simply growing more slowly because of America's aging demographics. There are certainly unemployed Americans dropping of the grid and ceasing to look for work but, in Paulsen's thinking, the organic growth of the U.S. labor force is more along the lines of 120 — 150k jobs a month.
By that math the rule of thumb that the economy needs to add 250k jobs every month just to break even is outdated, making the employment situation look worse than it is.However you justify it, 8.1% is a national disgrace. Paulsen agrees but adds "we got the high unemployment rate not because the recovery is so bad; we a high unemployment rate because the recession was so horrible."
By the end of the year the strategist sees the number at 7 to 7.5%.
As for the depressed housing market, Paulsen says, "the data is showing its best activity since before the crash." He also cites the impressive run rate in auto sales, consumer confidence levels, and corporate profits that "continue to be spectacular."
There's a case to be made against every single one of his points. The jobs recovery is pathetic even with Paulsen's data. A recession of such depth "should" recover explosively, not be used as an explanation for why data remains horrible. The dot-com bubble's impact surrounded Silicon Valley and imprudent traders; a weak housing market (and, no, it's not improving) grips literally every American.
Paulsen addresses and dismisses most of the above, sticking to his more constructive view. Waiting for a full recovery or economic armageddon serves no one. The trick of investing is keeping score while a situation unfolds. It's the difference between "true belief" and "good investing."
So what's Paulsen's "tell" regarding the economy?
Forced to give viewers just "one thing" to keep an eye on in order to best gauge America's economic progress, Paulsen returns to jobs. Create 270,000 jobs a month and we have ourselves a recovery, at least in his eyes. For whatever it may be worth, his eyes have proven to be pretty keen over the last few years.
Are you as optimistic about the U.S. economic recovery? Let us know your thoughts in the comment section below or visit us on Facebook.