As usual the comments on the employment reports reflect dire outcomes. What I have heard few say with respect to the Establishment Survey is the phrase in the report:
“The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000.”Bedford Park Opportunities Fund Q2 Letter: Long Converge Technology Solutions
The Bedford Park Opportunities Fund returned 13.5% net of all fees and expenses in the second quarter of 2021, bringing its year-to-date return to 27.6%. Q2 2021 hedge fund letters, conferences and more In the fund's second-quarter investor letter, which ValueWalk has been able to review, Jordan Zinberg, the President and CEO of Bedford Read More
These are substantial upward revisions of which few take into account. The link to the pdf of the release is: http://www.bls.gov/news.release/pdf/empsit.pdf
I prefer the Household Survey which I refer to as the Household “Employment” Survey (HES) which captures the trend of all employed individuals including those who are self-employed which is not captured by either the Establishment Survey or the ADP Employment reports. It is the HES which is plotted vs. Auto & Light Truck Sales in the chart below. There is a strong correlation between employment and vehicle sales with vehicle sales forecasting employment by 9mos-12mos. The current pace of HES I have estimated at 283,000 per month. September’s vehicle sales which rose to 14.87mil SAAR (Seasonally Adjusted Annual Rate) which indicates that for the next 9mos-12mos now we should experience economic expansion and higher employment. All economic measures are statistical in nature and can never capture with precision an exact count of the trends which they represent.
Expecting to extrapolate from one month’s report vs. last month’s report to next a precise expectation of month’s report has been a task which for years has been fraught with countless failed predictions by forecasters. Even today’s HES report of an increase over last month’s report of 873,000 carries a monthly error of +/-436,000. Three months of error can add to a significant amount. One always needs to keep in mind that the methods used to count employed individuals in the HES are in fact counting the number employed in roughly 310million Americans. The number of those employed provided in today’s report was 142,897,000 individuals working +/- 436,000 or 0.3%, but the actual trend of change can only be seen if one determines the trend over several months which I do in the chart. The trend comes to 3,678,000 new individuals hired over the past 13mos or a rate of ~283,000 new jobs per month. At this pace we are on track to create ~17mill new jobs over the next 5yrs. This is a good pace and can get the US back to historical employment levels of ~48.5% of the population in that timeframe.
Today’s reports are “GOOD NEWS” as far as has been our historical experience. I continue to recommend higher equity exposure in accounts where it is appropriate. I expect stock prices which have risen strongly as market psychology has turned more positive to continue. Volatility will continue as always with the short-term direction dependent on Momentum Traders, but over the long term even these traders should (as history tells us) give way to improved economic activity and equities prices rise with improvements in market psychology.
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