Employment Data is Positive: Look at Overall Trends Not Minutiae

Employment Data is Positive: Look at Overall Trends Not Minutiae

Employment Data is Positive: Look at Overall Trends Not Minutiae

There has been a ton of excitement out there over last weeks employment data. Again, we are not going to get caught in whether the # was 135k or 155k. We are watching the overall trends. THAT has stayed consistent and has even begun to accelerate.

“Davidson” submits:

Mohnish Pabrai’s Lessons From Buffett, Munger And Life

Mohnish PabraiEarlier this month, value investor Mohnish Pabrai took part in a Q&A session with William & Mary College students. Q3 2021 hedge fund letters, conferences and more Throughout the discussion, the hedge fund manager covered a range of topics, talking about his thoughts on valuation models, the key lessons every investor should know, and how Read More

As a proxy for future employment trends there are 2 very helpful precursors to which I pay attention, Auto&Lt Truck Sales and the various labor demand indicators of which 3 are shown below in the chart Household Survey(Emp) vs Job Openings, Gallup & HWOL Indices.

Each of these helpful economic series is often interpreted narrowly vs. previous month readings and doing so is for the most part highly misleading. But, taking them together and within in the context of each’s 4mos-6mos trend, one can observe how well they correlate with each other and how well they forecast the employment trend in the months ahead. The recent trends in these various labor demand indicators tell us that employment should continue to expand at our current pace of ~280,000/mo.

Higher Labor Demand Leads To Higher Employment Leads To Continued Economic Expansion Leads To Higher Equity Prices

Some have complemented me on my economic prediction the past 3 ½ years, being very optimistic in the face of what appeared to be enormous global issues. What appears to be exceptional predictive insight is only the process of using the various economic indicators to interpret current business fundamentals. I have no forecasting ability, but can certainly see what is happening in the economy by paying close attention to the details.

These and other indicators forecast significant economic expansion lies in our future and equity prices have always risen in response.

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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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