from recent Comstock.Partners

This is particularly true at the current time when the economic recovery has been sub-par and has been so dependent on bubbling asset values rather than rising employment and income from wages and salaries. In this environment we believe that the economy is likely to be even more sensitive than usual to rising rates. In this context we also think that too much has been made of the outwardly strong employment number that, upon examination, has a number of underlying weaknesses. This is the first strong report after four straight months in which expectations were not met even with the recent upward revisions. It is also only the third month of 35 in the present recovery to record more than 300,000 new jobs when, going by past recoveries, we should have averaged more than 300,000 additional jobs per month. In addition, of the 337,000 new jobs in October, 47,000 were temps, 41,000 were government and 71,000 construction, probably mostly hurricane-related. Without these, the jobs increase wouldn’t have even reached 200,000. Furthermore, in the household survey, 85 percent of the increase was in part-time jobs while the so-called augmented unemployment rate that adds back those not looking for work but would take it if offered, jumped from 8.4 percent to 8.8 percent, the highest in 12 months.

In sum, we still think this is an unsustainable economic recovery, and the Fed’s continued tightening along with the winding down of fiscal stimulation and the far lower level of mortgage refinancing are likely to create strong headwinds against growth.