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Stovall: Looking at a Half-Speed Economic Recovery

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    Sam Stovall of S&P Capital IQ weighs in on the unemployment rate.

  • Duration 4:18
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Interpretations of this are -- continue on -- seeing here.

Through the hours of the jobs report it another month of disappointing night job growth that really the headliner with the stock market selling off joining me now for more analysis -- -- Still while the chief equity strategist at S&P capital I keep -- great to see you again anything.

With anything positive about the G numbers.

Well I guess they weren't as bad as they could've been you when you think about the surprise that we experienced last month when the expectation was.

A relatively good number 10000125.

We ended up.

-- what 65 or less so.

Basically this time around it wasn't as bad as it could have been.

But I how I agree that that everyone is is now thinking we'll -- it's not really strong enough to say that it's improving but it's not weak enough.

To cause the Fed to step in and do and that QE.

Three now before today's report you or predict seeing.

That unemployment would drop below 8% by the fourth quarter of this -- are you sticking by that prediction.

Yes that's that comes from RS and for the fourth quarter we're gonna average seven point 97 -- I think that's pretty close to being slightly below 8% but.

Obviously we've been in this situation since the middle of 2009.

So an incredibly slow period in which we see.

The unemployment rate -- its way down among -- For the state of our -- -- -- I'm sorry internal and -- -- doing well but what I wanna get from you is whether that improvement in the unemployment rate will come -- people dropping out the participation rate.

Dropping or a meaningful.

Improvement in the unemployment rate keep you new jobs created improving the overall unemployment percentage.

Well so far.

Really been people coming that had been leaving the workforce.

Whether it's because they have decided to retire whether to go back to school.

The one thing that we.

That the numbers being weaker than expected was that we saw you six.

Which is the broadest measure of unemployment because it also includes underemployment that I disgruntled.

We saw that indicator rise implying that.

We have more people who are really not working up to their full potential in the past it had been coming down along with.

The unemployment rate as well as the -- slight improvement in the payroll picture.

But this time around you know we saw pick up in -- in that number as well so I think what that is is implying is that we're not seeing as many people leave the workforce.

-- -- of the overall picture for the US economy seems to be weakening.

If you look at all of the influences coming overseas including China which is slowing down as well so does all of this add up to a recession for the US.

By our estimate not yet S&P economics gives about a 20% possibility of recession.

That they're forecasting right now reason being that while economy the economy in China is slowing it's going from a nine point 2% rate last year to.

Anywhere from seven point 7UP to eight point 2% a number that any of the developed nations would just covet.

Here in the US growth is expected to be at about 2%.

Or half speed of what we typically see.

In the fourth year of an economic expansion and -- Europe's second quarter were likely to see ten of the seventeen euros own nation's post.

Year over year declines in GDP so it's certainly the likelihood of recession already in place in Europe.

Does it.

Tell you anything -- what's the take away from the fact that gas prices are down some sixty cents a gallon on nationwide average since.

You know the peak in early spring and it's not having a meaningful improvement.

Well I think you could say that maybe people are reading in the newspapers and the old saying that if the if it bleeds it leads so constantly -- being reminded about how bad things are so the feeling is.

If they had any money left and their wallet let's hold onto it.

And I think also when you look at these less than encouraging.

Payroll numbers -- -- the possibility is you start worrying about how secure your own job is and as a result.

You again want to hold on to whatever money you have because too many people know too many people who have been out of work for a year or longer.

It's the confidence problem standstill -- of S&P capital IQ thank you so much -- --

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