A huge down day in the stock market, if it was driven by the jobs data, was a serious overreaction. Some claim that 41,000 new private sector jobs in May is evidence of an anemic or "jobless" recovery; others suggest that it is evidence of an eventual and nearly guaranteed double dip. But stepping back from the abyss, and the emotion of the day, and thinking about the economy with a broader perspective suggests that these reactions to the data are not justified. The May report was inconsistent with other recent economic and the labor market information. The layoff monitor from Challenger, Gray & Christmas, reported monthly, shows that corporate mass layoffs have fallen substantially – reverse, upside down "V". In fact, mass layoffs show absolutely no sign of economic stress, and instead point to a solid job market. Another indicator, pointed out to us by one of our favorite economists, Michael T. Lewis, President and Founder of Free Market Inc., the Rasmussen Employment Index has moved to new highs in recent months. This indicator is calculated from a survey where employee's are asked if their company is hiring or not. This index has risen recently and is back to late-2008 levels. No double dip there. Other indicators, including the employment sub-indexes of the ISM manufacturing and ISM non-manufacturing data also show a recovering labor market. If today's stock market sell-off was indeed because of this morning's employment report, then we think it was way over done. Today's employment report was inconsistent with the underlying trends in the economy.
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Posted on Friday, June 4, 2010 @ 4:43 PM
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