Welcome to the Crash: Dow Officially Negative 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. The Dow Jones Industrial Average (INDEX: ^DJI) is down 1.83% while the Nasdaq (INDEX: IXIC) is down even more, at 2.10%.

As of 11:10 a.m. EDT, 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 40% gain on the year. As a comparison, the S&P 500 (INDEX: ^GSPC) , which has far less weighting to Apple than the Nasdaq, is only up 2% on the year.

On the bright side, it could be worse. Germany's DAX is off 3.71%.


More on those jobs numbers
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.

Month

Payroll Growth (jobs added)

January 275,000
February 259,000
March 143,000
April 77,000
May 69,000

Source: Bureau of Labor Statistics.

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.

Month

U6 Unemployment (seasonally adjusted)

January 15.1%
February 14.9%
March 14.5%
April 14.5%
May 14.8%

Source: Bureau of Labor Statistics.

Any way you slice it, this wasn't an inspiring report. As my Foolish colleague Morgan Housel noted yesterday, the jobs report has a margin of error of +/- 100,000. Unfortunately, revisions to April and March led to a subtraction of 49,000 added jobs from those months. People fretted when April's numbers came out, but the situation was actually worse than they expected.

In a way, a gain is still a gain. The problem is how slow the pace is. If the economy were to add just 69,000 jobs a month, it will be past 2030 -- perhaps substantially, depending on some assumptions -- before we return to a 4.5% unemployment rate.

Back to the Dow
Not surprisingly, there are no winners on the Dow today. Wal-Mart (NYS: WMT) comes the closest at just a 0.02% drop as of this writing. A middling economy isn't as harmful to budget-oriented companies. Likewise, Family Dollar (NYS: FDO) is seeing a 0.77% loss, which is better than any broad index you can find.

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.

In the end, the advice doesn't change from what I offered yesterday. 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 for these trying times. They'll likely hold in better during a severe downturn, and have proven to be long-term winners.

Take the long-term view
That's it for this market checkup. While staring at stock screens all day can be bad for your health, the best investors don't pull out of the market. Instead, they find stocks they can live with for the long haul. Check out The Motley Fool's special report on long-term investing, where you'll find three promising stock picks for long-term investors, along with some tips on how to invest for your golden years. It's free, but don't wait -- get your report today while it's still available.

At the time this article was published Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple and a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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