I’m happy to report that Hurricane Matthew has come and gone, and left our region with relatively light damage. But to all of our readers still in its path, or anyone who may have had a more difficult experience, best of luck and we hope for a speedy recovery process.
Now, let’s shift to the big news of the day – the latest reading on the job market. Many investors are wondering whether it shows that America’s job engine is running out of gas or chugging along just fine. So here’s my take …
First, the U.S. economy created only 156,000 jobs in September. That missed forecasts for 172,000. It was also down from 167,000 in August and 252,000 in July. Continued job losses in manufacturing and a decline in government jobs hurt the numbers, as did a slowdown in growth in the leisure and hospitality sector.
Second, average hourly earnings growth came in at 0.2%. That was less than the 0.3% gain economists were expecting.
Third, unemployment rose to 5%, rather than held steady at 4.9% as expected. One reason is that more Americans re-joined the labor force. They would only do so if they thought looking for a job would actually result in finding one, or at least that’s the theory of many Wall Street economists. But the trend definitely bears watching because investors have gotten used to seeing better and better numbers for a long time.
Indeed, I continue to believe we’re very late in the economic and credit cycle. Growth in sectors like real estate and autos is starting to slow due to the tightening of lending standards and other problems I’ve spent the last several months highlighting.
|Markets couldn’t seem to figure out what to do with the jobs data.|
Ongoing weakness in the manufacturing and industrial sectors is a headwind as well. We got more evidence of that from today’s profit warnings out of Honeywell International (HON), a conglomerate with significant aerospace and building systems operations, and PPG Industries (PPG), a maker of paint, chemicals, and products for the auto sector. Both stocks plunged on the day.
Bottom line: Markets can go up and down for a lot of different reasons. Today, they couldn’t seem to figure out what to do with the jobs data, swinging up and down several times during the course of trading.
But ultimately, if we don’t have strong underlying economic growth and a robust labor market, we don’t have the underpinnings for widespread, healthy gains. Throw in the fact we’re at a challenging point in the credit cycle, and you can see why I think caution is still warranted when it comes to investing.
Until next time,