Employment Reports Indicate Higher Equity Markets

Employment Reports Indicate Higher Equity Markets

“Davidson” submits:

US Employment reports indicate that the economic uptrend continues. While the Household Survey(Emp) fell by ~30,000, other indicators, ADP and Establishment Survey, reported a sharp rise. Media commentary was bullish comments were with this ‘positive surprise’.

“Total nonfarm payroll employment increased by 227,000 in January, and the unemployment rate was little changed at 4.8 percent, the U.S. Bureau of Labor Statistics reported today.”

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In fact, it is not about any single number, it is all about the 4mos-6mo trend about which we care most. The trends in Vehicle Sales vs. Household Survey(Emp) are shown in the chart. The economic expansion continue to be affirmed.

Equity Markets

A comment on employment indicators:

I use multiple employment indicators to assess employment trends. Sometimes one indicator can diverge without support from other indicators. The HWOL, an Internet based indicator, showed weakness beginning mid-2015 which BLS Job Openings did not. The strength continued in multiple indicators such as the Household Survey, Vehicle Sales, Retail Sales, Personal Income and the Chemical Activity Barometer. Job losses had occurred in 2014-2016 specifically in oil/gas, infrastructure and US$ sensitive industries as the US$ strengthened. The HWOL was more sensitive to this. The Gallup Job Creation Index, a sentiment survey, did not capture this nor did other employment indicator. The Gallup Job Creation has shifted to an all time high since the election

Equity Markets

One cannot assume any indicator is the end-all measure of what is actually occurring economically. Economic measurement is very ‘fuzzy’. I stopped presenting the HWOL, because it did not agree with trends in other indicators. It is still a relatively new indicator, tested only 10yrs. Why it differed so much from positive trends elsewhere was initially confusing. In hindsight it appears HWOL in particular captured US$ impact where other indicators did not.

One must continuously test indicators against each other to be intellectually honest.


Economic expansion continues. Equity markets should rise. Interest rates should rise as investors shift capital to capture equity returns.

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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