August Jobs Report – What does it Mean?
Written by: Ryan Bouchey
The August jobs numbers are out and for all intents and purposes it was a big miss. Economist had forecasted 220,000 jobs being added and only 173,000 were created, and the unemployment rate actually fell to 5.1%. This was a very important reading as it’s the last piece of major economic data prior to the Federal Reserve making a decision on interest rates at their September meeting in two weeks. Some things to keep in mind.
• Historically speaking, the jobs reports tend to be revised upward. Even though this was a big miss today, there is potential for this number to be revised upwards next month after September’s reading.
• Don’t fear a rise in interest rates. Many investors and media talking heads would lead you to believe that the markets won’t be able to survive a rise in rates because the low rates are such a crutch to both the markets and economy. The Federal Reserve is raising rates because of the strength in the economy and this should continue to translate into stronger corporate profits and the potential for higher stock prices.
• Be prepared for short term volatility. A rise in rates may cause the markets to go down in the short-term but overall this will be good for the markets. With interest rates as low as they are, a rise in rates at this level has a positive correlation with the equity markets – meaning that stocks should continue to go up as rates rise.
• The rest of the U.S. economy and European economy are growing in a positive manner. The U.S. economy continues to show strength in automobile sales, new housing and existing housing starts. In Europe, they are implementing a dovish monetary policy (similar to what the U.S. did with quantitative easing) and their manufacturing continues to show improvement.
With the negative headlines coming out of China there is still uncertainty of the timing of when the Fed will raise rates and this report doesn’t necessarily provide clarity to the picture. In the sense that it was a big miss, it gives the Fed an excuse to not raise rates in September. However, with the unemployment number going down to 5.1% and the uptick in wage growth, there’s enough reason for the Fed to also potentially raise rates. We’ll know the answer in two weeks and in the meantime continue to stay disciplined and try not to overreact to the big intraday market swings we’re currently seeing.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bouchey Financial Group, Ltd. [“Bouchey Financial”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, no portion of this discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bouchey Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Neither Bouchey Financial’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if Bouchey Financial is engaged, or continues to be engaged, to provide investment advisory services. Bouchey Financial is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bouchey Financial’s current written disclosure Brochure and Form CRS discussing our advisory services and fees is available for review upon request or at www.bouchey.com. Please Note: Bouchey Financial does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bouchey Financial’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a Bouchey Financial client, please contact Bouchey Financial, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.