This transcript is automatically generated
Ten the Dow keep going were one point positive right good news and if we close one point positive we got a new record high.
But to discuss this and what sequestration means and what unemployment numbers met.
On Friday Chris Meyer managing director and head of Analytical Services division.
At -- capital markets joins us from Chicago good morning to you sir thank you for being with us.
-- -- thank you.
So widely doom and -- -- I have a rain cloud over my head and I never understood the rally to begin but I thought we were due for a five to 8% correction I was quoting.
My -- the chief economist at Oppenheimer Funds he said.
That we would see -- sell -- we haven't seen it yet so the big question will we keep going up.
Well you always have some kind of a pullback we know that markets don't go up in a straight line nor do they do go down a straight line.
But I think the market is fundamentally strong and I think that at least in terms of our expectations were expecting the S&P 500 to go up about another six to 8% over the course of the year.
And we think that all the positive factors that drove us to this point are still -- in place and not likely to be interrupted.
Absent some kind of special shock -- -- -- what are those factors because I was under the impression that this rally was really the result of a cheap.
Monetary policy no interest rates.
From the Federal Reserve.
Well that's really big part of -- the Fed is engineer this rally and for good reason the higher of the wealth factors.
The bigger you can inflate the value of the stock market the housing market the more you're gonna get people spending so.
Creation of wealth an improvement of the consumer balance sheet are critical to the Fed's objectives.
So clearly the Fed is behind this in the market needs the Fed in order to go higher our.
-- -- -- get retail sales I think Wednesday.
You -- from its interest thing because people.
Who are being the most impacted by the payroll tax re emplacements.
Obviously they're not spending right now.
But -- spending by higher end consumers is not bad.
And one of the ways you see that as an auto sales auto sales were taken off at a fifteen million.
Four -- annualized rate.
So some people are spending I think is the correct answer I'm glad you brought up on us.
As that I I reported that February's -- -- says one point two million units where fifteen point 38 million year that not the record I -- on the record as what six and a half seventeen million.
But a lot better than the ten -- the bottom of the recession let's show the unemployment rate.
And the numbers from Friday -- seven point 7%.
Rate we also added 236000.
Jobs there was an interesting statistic in the February employment situation report that I.
Thought was -- good want to talk about which was the average.
Number of hours worked per week up to 34.
Point five -- isn't the high 34 point seven it.
Right when the economy peak before their economic collapse does that mean employers are gonna have to hire more people -- that would ultimately be good for the for the stock market -- it.
It would I think they will eventually that -- -- -- that immediately but I think one of the real strong points of the employment release was the fact that aggregate hours or improving.
They've been improving for the last several months they continue to improve we're also seeing that average hourly earnings are improving.
And we're seeing the kinds of growth in jobs in the sectors that you really wanna see -- and you were seeing good construction.
Job growth we're seeing good growth than business services.
In leisure activities.
And almost most importantly -- You're seeing growth in temporarily employees so.
As that companies get a little bit less risk averse one of the first things they're gonna do is hire Temps and we're seeing that now.
And that argues for additional -- employment down the road let me play the doom and gloom where and the naysayers here.
Isn't part of the reason we're seeing an increase in temporary and.
Planet because small businesses being hit by the affordable health care act also known as -- -- -- care.
If they have a full time employee but they're not providing health -- so by cutting back hours for some people.
To part time they avoid that penalty could that be one of the reasons that's going up.
I don't know -- it could be I suppose but I don't know that you would see that happening just yet.
And what about -- -- -- we certainly haven't felt the effects yet is it possible.
I'm gonna play Pollyanna -- -- the doom and gloom where.
Is it possible given the strength that we see an -- being worked in the private sector.
That the layoffs at the government level in the spending cuts could be offset and that the economy will continue to chair and well and we could see job growth.
Adam I think that's precisely the correct point the amount of growth and contribution to GDP receding.
Just from the housing industry alone is enough to -- offset sequestration.
Most people think sequestration is worth about point 6% the terms of cost to GDP.
The housing sector could easily click off half a percent contribution to GDP.
So that by itself could offset the full effect of sequestration.