Dow Jones Industrial is now Collapsing in 2012
The unemployment numbers are in, and it’s looking ugly out there. Payrolls grew by 69,000 last month, which remains a gain, but is the weakest showing in a year. Not only that, but April was revised down. In response, markets are plummeting.
As of Friday, June 1 2012 — the Dow had fallen into negative territory in 2012 in spite of having its best first quarter since 1998. The NASDAQ is still up 6.1%, but almost all of its gains are now associated with Apple’s (Ticker Symbol: AAPL) 40% gain on the year. As a comparison, the S&P 500, which has far less weighting to Apple than the NASDAQ, is only up 2% on the year.
While the U.S. still added jobs, the unemployment rate actually ticked up to 8.2% from 8.1%. That’s because of workers re-entering the job force. This continues a disturbing trend of worsening job growth after robust January numbers.
As has long been a fear around the jobs market, past reductions to unemployment were partially driven by discouraged workers leaving the workforce. Those workers aren’t counted under the unemployment figure you normally see splashed all over the news.
However, the U6 measure of unemployment does count these discouraged workers. That measure hasn’t budged down in recent months, which was concerning in that it looked like employment growth was driven by disaffected workers rather than job creation. Unfortunately, this broader — and very useful — measure of unemployment saw an uptick this month, returning to levels not seen since February of this year.
Also not a surprise is the fact the VIX, or fear index, is once again up today, although its 7.5% jump lags spikes seen earlier in the week. Despite all the fear around Europe, the VIX well off its $48 high over the past 52 weeks.
There’s more volatility to come as Greece is unresolved and China weighs what to do about its slowing growth. If you’re an investor who can’t handle the swings, your best bet is to buy high-quality blue chips like McDonald’s (Ticker Symbol: MCD) for these trying times. They’ll likely hold in better during a severe downturn, and have proven to be long-term winners.