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Jobs Shocker a “Big Negative Surprise”: Economist Behravesh

Jeff Macke

Avuncular economist Nariman Behravesh joined Breakout from Lexington, Mass., to give us insight into the jobs data and what it says about the outlook for the U.S. economy. Behravesh acknowledged up front that the jobs report was a "big, big negative surprise." Then the chief economist of IHS gave us his best guess as to why our economic recovery is taking so long to gain traction.

* High oil prices are a "major headwind" for both consumers and businesses.

* "Uncertainty in Washington over what exactly is going to be done in terms of deficit reduction" is making business managers much more cautious.

Matt Nesto and I pushed back on both points. Pushing back is sort of our thing. Why would a business manager care what Washington is going to do with the deficit? If business is good, a manager will hire. If not, it's time to cut staff. Shouldn't the markets as a whole be looking past the politics in Washington and simply assume the most likely outcome (a last-minute compromise with both parties taking credit for saving the day)?

Behravesh says we're in a period where pessimism reigns, leading to all news being taken as bad news, regardless of what was actually said. It may seem a curious point to make, given the onslaught of miserable economic reports over the thankfully shortened week, but Behravesh makes some sense. The economy, he notes, has a lot going for it, not the least of which is booming exports, vastly improved business and consumer balance sheets, as well as strong corporate cash flow.

The newest Friend of Breakout (FOBO) says the bright side of the data is a "hope that politicians get the message that we're playing with fire" by even putting a default on the table. Such imponderables as that and gas prices are holding back the confidence needed to provide real stimulus to the economy.

As for the data itself, Behravesh sees the 54,000 headline number released Friday morning as "an outlier." It's "very, very hard to predict monthly or even quarterly numbers" given the size of the economy, a point we made earlier in the week. That said, the trend is no longer our friend in either stocks or economic data. There are going to be ebbs and flows along the way, but the best remedy for economic weakness may simply be time.

It's thin gruel after four days of terrible news, but hey, at least we're one week closer to a recovery. Or economic Armageddon, depending on your perspective.

Let us know what you think: Breakoutcrew@yahoo.com.