Data Continues To Back Late Spring/Summer Employment Surge

Data Continues To Back Late Spring/Summer Employment Surge

“Davidson”: submits:

The Conference Board released its Help Wanted Online report for March 2012 with a 246,300 increase from February. The surge in this index the past 4mos has been particularly strong. The past 4mos is very positive for employment trends the next 6mos+ and positive increases in employment translates historically to higher equity prices and lower bond prices. The link for the press release is: The historical chart of the HWOL vs. the Establishment Survey is excerpted below. The lead time of the HWOL trend vs. the Establishment Survey is in the 6mos-9mos range with HWOL being particularly robust since May 2009.

Data Continues To Back Late Spring/Summer Employment Surge

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As the economy demands that a greater number of individuals be employed to meet the demand for goods, the new employment in turn creates additional demand until we reach full employment. One cannot predict when employment will find it’s “Top” with any precision ahead of the event, but with our current situation of 11mil individuals yet unemployed using historical trends one can assume that an employment peak is still several years away. As we should all know by now, it is the economy which is the underlying driver of the investment markets even though market psychology may dominate for short periods.

This is the time to be optimistic and expecting higher equity prices long term in my experience.

Let’s put this together with what I said last week regarding Temp Employment:

BUT, if we look at what is happening now (chart below), we see a different story. We are seeing the index begin to strengthen through March (like it did in Dec ’11 & why this year’s strength was no surprise). If that continues, we should see NFP begin to strengthen in late spring/early summer

Let’s put the two together:

HWOL lead NFP by about ~6 months and Temp leads by ~3 months. The action in both of of these is backing the view I have that employment gains will moderate this spring before accelerating, perhaps significantly by summer. Note: A decrease in the HWOL index does NOT necessarily mean employment will worsen, it means a slowing of the underlying trend, which we have seen. If it craters, then we would expect to see NFP fall also.

Look close. The HWOL index weakened/flatlined through summer/fall and bottomed in November’11. That does correlate with what we are seeing and expect to see this spring (slowing progress in NFP). Temp employment has remained above last year YTD but hasn’t really improved. That also backs the “flat” jobs improvement outlook I currently have.

Now, if we go to November ’11, we see a “V” bottom and then a hard acceleration from then to now. This matches timing of the recent sharp increase in temp employment. BOTH point to employment data improving, significantly come late spring/summer (note: both indexes operate in a range, which is why I give a range for results)

Well see if this holds but it may be the reason, despite hearing EVERY SINGLE DAY “a correction is coming” we  watch the market march higher.  I can’t be the only one who follows and sees this, maybe other people are expecting strength going forward?

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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 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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