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May 04, 2006
Waiting for Non-Farm Payrolls
There are a few items worth noting on this chart. First, notice that employment growth was stronger from 1996 to 1999 than it has been over the last three years. This is not necessarily bearish because the economy is still creating jobs and it implies that companies are growing profits with fewer employees (lower expenses). Second, the 12-month Rate-of-Change has been trending higher since 2002 and there is little reason for concern as long as this indicator holds above 1%. Third, notice the week numbers in September and October (red oval). This may have contributed to the sharp decline in stocks from August to mid October. Non-Farm Payrolls jumped sharply in November and this put the bulls back on track.
I am not about to try and predict this number. Even economists with massive data sets and complicated models have a hard time predicting this number. As long as it stays above +150K (magenta line), I would view job growth as sufficiently strong and this would be generally bullish for stocks.
Posted by Arthur B. Hill at May 4, 2006 10:44 AM