Believe the jobs report or Apple?

Surprising strength in employment seems not to fit with fundamental economic weakness. The iPhone maker may be a clearer sign of what lies ahead for US companies.

By Bill_Fleckenstein Oct 12, 2012 2:00PM

Red arrow (digital) © Riko Pictures, PhotographerThe employment data released on Oct. 5 certainly raised some eyebrows. First off, the number of jobs created in September was almost exactly as expected, at 114,000, while the August number was revised up by better than 40,000 jobs.

 

But the big news was that somehow the unemployment rate dropped from 8.1% to 7.8% (expectations had been that it might tick up to 8.2%).

 

There appears to have been some sort of, shall we say, aberration in the data, as the household survey suggests that 873,000 jobs were added last month, an annualized rate of 10.5 million.

 

(That survey is used to calculate the unemployment rate, while the number of jobs created that gets focused on every month is a function of the establishment survey. So if you're scratching your head at how headline job growth of 114,000 generated a sizable drop in the headline unemployment rate, now you know.)

 

In addition to the squirrelliness of that giant number (the aforementioned 873,000), it seems an enormous amount (581,000) were part-time jobs of some sort.

 

Working backward

Joan McCullough, of East Shore Partners, in a letter to clients, said she thought something smelled fishy. When she talked to the Bureau of Labor Statistics about it, all the contact there could say was that they had received a number of phone calls, and the data were "suspicious," but other than that they couldn't really comment on it.

 

I will leave it to the tinfoil hat crowd (or former General Electric (GE) CEO Jack Welch) to discover the "truth." (Read about Welch's controversial Tweet on the subject here. But there is probably no one who doesn't think that the economic data are massaged. So whether this was pure statistical nonsense or some government employee had an agenda, I don't know.

 

But I will say that I would be willing to bet a serious amount of money that there were not 873,000 jobs created in the month of September, and I would expect that number to be revised away prospectively.

 

Riding the Apple-coaster

Turning from the macro to the micro, after another huge run this year, Apple (AAPL) has been a real drag on the Nasdaq Composite Index ($COMPX) of late. The stock looks sick from a technical standpoint, though I would be the first to admit that I am an amateur technician at best.

 

I have no dog in this hunt, since I have no position in Apple, long or short. The reason I bring it up is because Apple is a very important holding in so many portfolios, and has a huge chunk of mindshare when it comes to investor psychology. For those who aren't involved I think it is an interesting example of what tops often look like. (I am assuming that Apple is making a top, though I don't have any short position, given that I don't have a strong case for suggesting that it may have peaked.)

 

There is no doubt that there is tremendous bullishness (and indeed, near euphoria) about Apple. Analysts have even gone so far this year as to suggest the company would soon get to a $1 trillion market capitalization. (This is something I find rather implausible, given the amount of revenue and continuing margins required to justify such a valuation).

 

However, one thing that the bulls tend to overlook is that the law of large numbers is in operation here, as is consumer fickleness. Tremendous numbers of extraordinarily successful products have been responsible for a large part of Apple's past growth and current revenues. To maintain its trajectory, that past success must not only be replicated, but topped, which is a very tall order.

 

Maybe its hype-er drive malfunctioned

The other thing that strikes me as a bit odd is that after Apple lowered its guidance for this quarter, and given the hype over its new phone, one would have thought people would be piling into it, knowing it would easily beat that guidance number.

 

Thus I find its recent weakness to be a potentially interesting market barometer. October generically causes people angst -- though I am not a big believer in the idea that this month automatically equals lower stock prices -- and the stock market has absorbed a fair amount of bad news, which hasn't mattered. But if bad news does start to matter, then the sledding may get a little rougher quickly.

 

At the time of publication, Bill Fleckenstein did not own or control shares of any company mentioned in this column.

92Comments
Oct 13, 2012 7:13PM
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Don't really know the number of persons that have quit looking for work, and thus never counted in the Govt. statistics.
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Massaged numbers plus a massaged ego (Obama's!) equal re-election! Many said that he seemed uninterested at the first debate! Maybe the fudged numbers will reinvigorate his "Ineptness"!
Oct 13, 2012 5:24PM
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oh didn't see this coming!! jessie jerkson jr. being investigated? for corruption??? well like father like son, two thieving lying racist democraps! you libs just can't stay outta trouble can you?? funny how you libs talk 'bout 'greed' and evil wall st, and corruption and yet your always involved in it, up to your eyeballs in it, democrap after democrap after democrap is either being investigated or arrested for it, all your representatives claiming to be 'for the poor' and who are they stealing from??? their very own constituents!! corruption and greed is the common denominator in being a democrap, and you've got the nerve to call other people greedy and corrupt, fascinating!!!
Oct 13, 2012 2:41PM
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Just a few thoughts for all you conspiracy theorists out there about the accuracy of the BLS employment data including what accounted for the unbelievable increase in jobs added in September (873,000) and the reduction of the unemployment rate to 7.8%.  I remind you that September is the month that sees about 20 million college students return to school.  How many of them do you think started part time jobs????  Concerning the question of how could the rate possibly drop to 7.8% when only 114,000 net jobs were added.  I remind you that the jobs added in July & August were increased by a total 86,000 and the previous months' unemployment rates did not reflect these increases.  So from a statistical perspective, when you add the 86,000 to the September number of 114,000, the total jobs added rises to 200,000 that makes the reduction in the rate to 7.8% seem more plausible.  Unfortunately most of those on the right want to put their mouths in motion before their brains just to score political points rather than having any calm intelligent discussion of the facts!!!!!!  So sad!!!!
Oct 13, 2012 1:55PM
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everybody knows the unemployment numbers were fake, conveniently California who's in financial ruin wasn't included in the jobs report, funny ain't it, had it been included the unemployment numbers would've skyrocketed, so it's over libs, you can lie and cheat, screw around with the facts and figures,  but obama is done and so are you libs in general and you can thank your messiah obama, kick in the head libs ain't it?? heh
Oct 13, 2012 1:29PM
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When the number were above 8% blame obama quote the numbers left and right....

When the numbers drop below 8% the books are cooked...LOL

Shows how much republicans want america too move forward....Instead of being happy with less unemployed they come up with a CRAZY Stupid theory.....Sad if it wasn't so tragic
Oct 13, 2012 1:19PM
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Come on!  The "markets" are a travesty.  Who really gives a hoot!  This will continue and it will make not one iota of a difference who is elected.  Churn and burn those that have pensions and K's.  If you believe other than you are drinking more than koolaid!  Just relaxl and enjoy the BS...it is total fun!

Oct 13, 2012 12:27PM
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Funny thing everyone is talking about the Dems. & Reps. and the Numbers, if they worked together for some reason it would be a better economy. I don't think it has much to do with either side, it doesn't matter what side I favor or you favor because I'm sure not cooking the books or messing with the numbers and I bet you're not either as well, this is above and beyond us, but I am a reality to what is going on in our economy and until you are in the reality looking for a job, you will not see or know the situation till you deal with it at hand, TRUST ME!
Oct 13, 2012 12:23PM
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Figures lie, and liars figure. End of story on this one.

Sorry Kool-aid drinkers.

Backwards.

Oct 13, 2012 12:21PM
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Unemployment - Boomers are retiring at an increasing rate amking up for delayed retirement beginning in 2008. Apple - The PC's not Dead is Mobile and Microsoft's Windows 8 and Windows Phone 8 will prove it.
Oct 13, 2012 12:13PM
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No! How could anyone think that Chicago politics and cooking the books belong in the same sentence?
Oct 13, 2012 12:11PM
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Couple job opening in Chicago Jesse Jackson Jr. is looking for some good lawyers.
Oct 13, 2012 11:54AM
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Another example of cooking the satistics to benefit the current administration. We have one of the lowest participation rates in decades and yet we seem to believe things are getting better? The only reason the appear that way is when people stop looking for work they are not counted anymore.

This in a normal recession that last for a limited tim does not affect the numbers of unemployed or job seakers. But in this lack luster recovery for the last 3 years or so has proven to be a problem for the unemployment numbers being accurate. But I guess if your a Democrat you will believe the headlines and the rest of us will of course look deeper into the numbers.

Oct 13, 2012 11:27AM
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That's right any idiot knows that Temp, Seasonal and Part-Time jobs that only pay $8 to $9 an hour are not real jobs at all and no one can survive off of 20 hrs a week either. The Unemployment Numbers were messed around with. I have been looking for a job for almost a year now and I live in IL., I'm also on Unemployment as well and it's about ready to run out, so again tell me were did they create these so call 873,000 jobs, because once my Unemployment runs out if I don't have a job yet, it will appear that I do because I am no longer collecting Unemployment Benefits and I will no longer be a number in the system. Wow and I thought Wall Street People with degrees are suppose to be smart, no wonder why the Stock Market is tanking in the first place, no dam brains at all.


Oct 13, 2012 11:11AM
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"Trust me,"

You use the ID- King Money- and then start a post off with... "trust me...". Never. You are a grubber who takes from the economy and points fingers elsewhere. Go get a REAL job, loser. 
Oct 13, 2012 11:08AM
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"If the unemployment goes up the GOP is happy if it goes down they are mad. Looks like the GOP wants the country to fail."

The GOP wants a New World Order as long as they make the rules and give the orders. Elect Obama for a second term and that concept is trashed. Many many Americans have had to do the impossible to survive after the mass terminations of career by Republican-leaning hired-in executives at major corporations. You won't see ONE Republican rise from the ashes if faced with the same circumstance. They don't know how to start businesses or run them without Get Out of Jail Free cards.
Oct 13, 2012 11:03AM
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"Apple is more than an iphone or ipad it's a new eco system that is positioned to the icloud. It's more about apps than the hardware."

I generally support your posts, James... but while these advances seem GREAT, they are employed by people who lack a depth of exposure and experience to basic human needs for survival. In two subsequent generations of reliance on devices rather than trial and error to wisdom experience will revert us back to prehistoric levels. If you want to embrace technology such as it is, require a user's license after practical demonstration of competences.

We don't let three year olds drive cars for a very good reason.
Oct 13, 2012 11:02AM
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Trust me, the job numbers will be revised downwards in a Labor Department revision after the last presidential debate.  Then they will say it was a math mistake because there were inadequate people doing the counts because the Republicans cut back the budget..

 

The truth will come out soon about the Libyan embassy security failures.  It was a series of screw-ups starting at the White House and going downwards. 

 

Lets make Obama accountable for his lying and incompetancy by voiting out Obama-Biden ticket

Oct 13, 2012 11:00AM
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If the unemployment goes up the GOP is happy if it goes down they are mad. Looks like the GOP wants the country to fail.
Oct 13, 2012 9:12AM
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Apple is more than an iphone or ipad it's a new eco system that is positioned to the icloud. It's more about apps than the hardware. Android/google will catchup  there is room for two players. Mobile date is only beginning.

The Companies in trouble are Microsoft, Dell, HP etc all from the old eco system. They need to revent their companies yesterday.

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ABOUT BILL FLECKENSTEIN

Image: Bill Fleckenstein, MSN money

This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.

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