NEW YORK (Reuters) - The U.S. jobs growth that economists have pointed to as the counterbalance to the country’s housing slowdown is not as strong as it has seemed, said Wall Street strategist Barry Ritholtz on Wednesday.
“This is still the worst jobs recovery since World War II,” said Ritholtz, chief market strategist at Ritholtz Research & Analytics, at the Reuters Investment Outlook Summit in New York. “It’s taken the longest to get back where you were before the recession hit. The pace of job addition is very slow.”
Jobs are being added slowly because chief executives, who still have fresh memories of the tech bubble blowout, are reluctant to make investments and have limited their hiring and purchasing, said Ritholtz, who is author of the Big Picture finance weblog.
Wall Street analysts also point to rising income statistics as offsetting the housing downturn, but those indicators should not be taken at face value because they are skewed by the increasingly large bonuses received by high earners, Ritholtz said.
“It’s like the old joke, if you and a friend are in a bar and Bill Gates walks in, you don’t say, Hey, the average net worth of everybody in here just jumped $20 billion,” he said.
Income data is also skewed by figures for rank-and-file workers, because their income figures include company-paid health insurance. As a result, when health insurance premiums rise, so do incomes, even if employees see no increase in their salaries, Ritholtz said.
“You can’t go out and buy more when your health care coverage is identical but it costs 15 percent more than last year and the company is picking up the whole thing,” he said. “But it comes up as a 15 percent gain in income. It’s not. That’s just inflation in health care.”
What is really permitting consumers to keep spending while the housing market cools is the wide availability of low-cost credit, Ritholtz said.
He cited, as an example a no-money-down promotion on plasma televisions at Best Buy Co. BBY.N.
“They were selling a boatload, but once they cut back (on financing) you saw a huge slowdown,” Ritholtz said. “Unless you have the ability to give away the financing side of it, it’s becoming a tougher and tougher sell.”