When It Comes to Jobs Numbers, the Market Is Trading on Anything but the Truth
Pop the champagne; it’s time to rejoice and toast this month’s jobs numbers, isn’t it? The S&P 500 edged up to another record high above 1,600, while the Dow is seriously eyeing 15,000.
I did think those targets for the two indices were achievable, but not this early in the year.
You can thank the Federal Reserve and the astounding job creation for the high jobs numbers—of course, I’m being sarcastic to a degree.
According to the United States Department of Labor, job creation tallied 165,000 jobs in April, better than the Briefing.com estimate of 135,000. The March reading was also revised upward to 138,000 new jobs from the previous muted reading of 88,000. The 165,000 new jobs is decent, but let’s be realistic: that number is no reason for the S&P 500 to be trading at a record high. The truth of the matter is that we need to see a higher job creation number.
The unemployment rate fell to a four-year low of 7.5%, much better than the Briefing.com estimate of 7.7%. Again, great, but I think the drop has more to do with job seekers leaving the search.
Yes, the job creation numbers are a myth as far as the real strength of the labor market.
The Labor Department estimates there are 11.7 million people unemployed, but in reality, it is probably twice that because many workers have quit looking for work out of frustration.
In fact, a closer examination of the job creation numbers from the Labor Department tells us another story—not what is in the headlines and not what the government wants you to know.
All we see is the unemployment rate declining to 7.5% and everyone, including the market, losing their sanity and driving the S&P 500 up to a new record.
But let me tell you: the job creation, while improving, is still not healthy.
The amount of part-timers came in at 7.9 million in April. Trust me: many of these employees would work more hours if they had the opportunity.
And then there’s that group the Labor Department calls the “marginally attached”—those who are unemployed but have been actively looking for full-time work. There were 2.3 million of these branded workers who were not counted in the unemployment data, because they were not looking for a job in the four weeks prior to the survey.
While I really don’t want to sound cynical, you have to question the real strength of the job creation and realize that the stock market is trading on the headline and not the reality.