Economic rebounds, unicorns and other myths

NEW YORK (CNNMoney.com) -- The latest jobs report spooked investors Friday because it showed that the labor market isn't bouncing back as rapidly as many had hoped it would.

Should people really be surprised by that? Repeat after me. There is no V-shaped recovery. There is no V-shaped recovery. There is no V-shaped recovery.

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Some say the dollar's strength is the reason for the sharp drop in oil and copper prices. But others worry it's a sign of weak global demand.

Before Europe's financial woes started to dominate the headlines, stocks were surging on the hopes that the U.S. economy was in the midst of a sharp rebound from the bottom -- hence the description of it as being V-shaped.

But it looks like the V-shaped recovery -- like the Loch Ness Monster, unicorn and Abominable Snowman -- is a mythical beast. The economy is not on a tear. In fact, some economists are once again starting to worry about a double-dip recession.

That may be a bit of scare mongering though. Let's put some things in perspective. The recovery may take longer than we once thought but that's not the same thing as another downturn.

Yes, the bad news in Friday's job report was that job growth outside of the federal government was anemic. Unless you happened to be one of those clipboard-toting Census takers (and stay away from Hannibal Lecter if you are) then it's unlikely you got a job in May.

Still, there were some positive signs in the jobs report that got lost in the shuffle.

Michael Strauss, chief economist at Commonfund, a money management firm based in Wilton, Conn., noted that the average length of the workweek rose, as did the average hourly wage. Translation: People have more money to spend, which could help keep the economy chugging along.

"When you look at the increase in hours worked and the rise in wages, that should mean more personal income and more economic activity," he said.

Strauss added that another figure in the jobs report, the so-called underemployment figure, fell from 17.1% in April to 16.6% in May. That's still a high level of course, but the drop is notable considering that the underemployment rate had risen in the three months prior to May.

Bill Cheney, chief economist with John Hancock Financial Services in Boston, said that the market may have been making too much over one monthly report and ignoring the general trend.

This was the fifth month of job growth after all and it may make sense for companies to slow down the pace of new hires in light of the recent market volatility and concerns about Europe.

"It's always uncomfortable to have to explain one weak month," he said. "Employment growth should be accelerating but private sector job growth stalled out. A lot of that is a refection of companies still being cautious."

Cheney said he does think companies will eventually start hiring more aggressively again since they will come to the conclusion that they need to replace people that they let go in droves during the worst of the downturn.

Problem is, it's tough to know when companies will feel more comfortable and confident.

"Once we get a real job recovery with moderate growth, it will feed itself and accelerate," Cheney said. "It's unusual to have the economy beaten down so far for this long. But once it gets moving again is the question."

The fiscal crisis in Europe isn't helping matters. Even though it is probably a stretch to suggest that Europe's woes will send the U.S. back into recession, there's no denying that a hit to U.S. exports to Europe will slow the U.S. recovery.

"People are fearing a cancerous effect from Europe. That's been permeating for the past month," said Strauss. "The outcome for Europe is at best incredibly challenging and that will take something out of U.S. GDP."

Other signs hint that the U.S. economy, and global economy for that matter, is still in precarious shape. Commodities prices continue to fall as the dollar gains ground against the euro. That's a worrisome trend.

Oil prices are a touch above $70 (they were above $85 a barrel as recently as early May) and the price of copper has plunged more than 10% in the past month. Copper, a metal that's used in a wide variety of industries, is often looked at as a barometer of global demand.

"How can people claim that there is a V-shaped recovery?" asked Michael Pento, senior market strategist with Delta Global Advisors in Huntington Beach, Calif. "If there was truly a lasting global recovery, these commodities would be rising. The only logical conclusion is that we are having a global slowdown."

Pento is predicting "anemic" growth in the U.S. economy later this year and said that it would be a mistake to dismiss what's going on around the globe as not having a significant impact on the U.S..

"2008 showed us that there's no such thing as decoupling. We are all interconnected," he said.

I'll have what she's having. With Hungary in the news Friday after an official unwittingly rocked the financial markets by suggesting that it may default on its debt, I decided to issue a goofy pop culture quiz over on my Twitter page.

One movie quote about a Hungarian culinary specialty popped to mind and I asked followers to identify the film this is from: "Waiter, there is too much pepper on my paprikash."

For the second time since I've started issuing these occasional quizzes, Kevin Dixon, who goes by TVN_Kevin on Twitter, was the winner. He correctly identified the quote as being from "When Harry Met Sally."

Nice work, Kevin. If you win a third time, I might have to up the stakes and award you a prize worth more than a lowly shout-out in The Buzz.

- The opinions expressed in this commentary are solely those of Paul R. La Monica.