Hungry For Jobs?

It was another crazy day in the stock market. US payrolls rose by a a larger-than-expected 117,000 workers after a 46,000 increase in June, but fears of a lingering European debt crisis kept the selling pressure on stocks. Add to that fears of a double-dip recession and the fact that S&P just announced it is downgrading US debt, and you have the ingredients for more selling pressure on stocks next week.

The Canadian economy added jobs for the fourth straight month in July as gains in construction and transportation offset losses in government employment and education, while the unemployment rate fell to the lowest since 2008 on a shrinking labor force. Nonetheless, the Canadian stock market took another beating as the S&P/ TSX fell another 218 points on Friday. Energy and resource stocks have been clobbered on fears of another synchronized global downturn.

I am not going to get into the stock market in this comment (circle back on Sunday). Suffice it to say that hedge funds and bank prop desks are making a killing, feeding off the volatility. Today was a perfect trading day, the jobs report came in better than expected, the market rallied, traders sold the news, rumors abounded on Europe and S&P downgrades and the US market rallied in the afternoon as news that the ECB was buying Spanish and Italian bonds hit the wires.

But regardless of what is happening in the stock market, the US labor market remains weak. There simply are not enough jobs being created to meet the demand. As the ranks of the permanently unemployed swell, policymakers are not doing enough to address the jobs crisis. Worse still, the debt ceiling drama showed the world how the world's most powerful nation has a leadership vacuum.

On Thursday, I spoke with Chris Lawless, Chief Economist at bcIMC, about the structural gap that exists between revenue growth and spending in the US. We were discussing how the US needs to raise taxes (introduce a value added tax), revamp the tax code, get rid of tax credits on ethanol, and cut spending. But cutting spending at a time when the economy remains weak simply doesn't bode well for the labor market. That's why people were not too excited about today's jobs report. The fear is that it's too little, too late, and with confidence plummeting along with the stock market, it could very well be a very long time before we see sustained hiring in the US labor market. The S&P credit downgrade will only make matters worse (even though they are wrong again!).

More troubling is the fact that the share of the eligible population holding a job declined to 58%, the lowest since July 1983. This means more and more people are giving up on finding a job. And what happens to these millions of people? Well, they face the scourge of poverty. The USDA reported that the number of Americans using the government's Supplemental Nutrition Assistance Program (SNAP) -- more commonly referred to as food stamps -- shot to an all-time high of 45.8 million in May. That's up 12% from a year ago, and 34% higher than two years.

I leave you with a video of a man collecting food stamps struggling to get back on his feet. While analysts will focus on the S&P downgrade of US debt and the stock market, there are millions of people like Frederic struggling to get by. This is the reality of today's pitiful labor market and unless this is addressed, the American dream will just become the permanent American nightmare.