With all of this talk about a V shaped recovery and a complete economic rebound it is amazing to see how many firms are still cost cutting. Of course by cost cutting I really mean firing people in order to improve margins or boost profitability. The question is if we are really in a recovery and everyone is talking about business stabilizing, albeit at lower levels, and there is a return to growth how can firms still be downsizing?

Well, simple there is no V shaped recovery because when you take government heroin out of the equation there is no economic growth. I am fairly certain that Friday’s employment report is showing that firms are not hiring and that employment will continue to “lag” the real economy for some time to come. Not only are firms still firing people, but consumer credit is also being paid down and contracting at a pretty healthy rate, $14B vs. the $10B estimate. Again, I do not want the facts to get in the way of a perfectly bogus recovery story.

If we examine the headlines we see some disturbing trends with top tier firms and their plans to cost cut, fire people. For starters Johnson and Johnson is laying off about 6% of its work force, J&J is a defensive name folks who thrives no matter what the real economy is doing so for them to be laying off so many folks is kind of scary in my book. Moving on, Electronic Arts also reported great earnings and the fact that they are cutting some 1,500 jobs, sounds promising to me. Sprint is another firm who has actually improved its business, but they are now laying off some 2,500 people. Not to mention Microsoft, who makes enough in a month to buy most sports franchises or something crazy like that, is laying off 800 people.

Not all of these firms are in top physical condition, but if we were in a recovery there is no way that these firms would be announcing job cuts now, 4 months after the recovery was announced, supposedly. We have very healthy initial claims reports of over 500K a week and so far, excluding the BLS magic formula, which added 86K jobs last month which means the real official jobs report should have been 276K instead of 190K. That data points to continued weakness in the economy and a lack of hiring by firms and as for the great productivity report I suggest you read the NYT’s article showing that the data is flawed, like I always said it was.

Essentially, employers are getting more out of people at a much lower cost so why in the world would they hire? To put it bluntly, they are not hiring and have no incentive to hire anyone until real orders pick up which, at this rate, should be by 2012 giver or take a few years. It is amazing how hard people will work when they fear losing their jobs and that is exactly what is happening now. I am sorry if I do not see the rose colored news like everyone else, that is what happens when you go below the headlines, but we have real problems here. Even though I am not bullish on US stocks, no one is based on the pathetic volume I might add, I am bullish on the Asian economies and see real value there.

As for the US I think we are still heading for that correction and I am sure we will get it, I am not sure when of course, but it will come. It should have come last week, but it did not and anyone who as traded for any period of time will tell you that something is majorly wrong with this market. No one’s model, except for Goldman Sachs, is working and we continually drift higher on literally no volume. Look at today we traded significantly less shares with a 200 point up day on the Dow? Compare that to last Thursday or even Friday and you will see how weak that volume is. I have no idea why it is behaving like it is, but I do know that whatever the reason it is not natural, again any trader will tell you the same thing if they have been around for more than 10 years.

So, with all of these major firms cutting jobs now instead of 6 months ago how can we say there is a recovery? There is no real evidence to point to, even the ISM reports show serious weakness in the economy, except for government sponsored growth which is fake at best. When defensive names are cutting jobs we should take notice as that is a signal that something is wrong. As for the market it is not a forward looking instrument, it never has been, and the next few days should be interesting. We could hit that 1120 mark on the S&P 500, but I doubt it will hold and even if it does hit that level it does not mean the economy is rebounding, the data would indicate that and the data is weak.