Quick Take: Job Market Continues to Improve, Bulls Have Work to Do

The first Friday of a new month means that jobs are in focus – so let’s get right to the numbers. The Labor Department reported the economy created 209,000 new jobs in the month of July, which was well above the Reuters consensus expectation for 183,000 new jobs. In addition, the nation’s unemployment rate fell to 4.3%, which tied the lowest level seen since March 2001.

Digging into the details, we find that average hourly earnings climbed 0.3% to $26.36 an hour, which is up 2.5% over the last year and unchanged from the prior month. For reference purposes, MarketWatch reports that wages usually rise 3% to 4% a year when the economy was is running at full throttle. Remember, average hourly earnings is a stat the FOMC is watching very carefully.

The number of employed Americans hit a fresh new high at 153.5 million while the U6 Unemployment Rate (the all encompassing or “real” unemployment rate) was unchanged at 62.9%

As usual, there were revisions to the job gains for the last two months. June’s 222,000 gain was revised up to 231,000 while May was cut from 152,000 to 145,000.

Private sector job gains were 205,000 in July, which was well ahead of the totals seen from the ADP report earlier in the week.

For calendar year 2017, the economy is creating an average of 195,000 jobs per month.

Stock futures and bond yields have both moved higher on the news, with the Dow futures pointing to what could be another all-time high at the open. However, it is important to recognize that the rest of the major stock market indices are not following the Dow’s lead at this point in time and that the Transports are actually in a downtrend. As such, the bulls have some work to do before an all-clear/onward and upward signal can be given.

Publishing Note: My wife and I are closing on and moving into our new home next week. As such, I will publish reports only if time and energy level permits.

Thought For The Day:

Security is not the meaning of my life. Great opportunities are worth the risk. -Shirley Hufstedle

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of the U.S. Economic Growth (Fast enough to justify valuations?)

      2. The State of Earnings Growth

      3. The State of Trump Administration Policies

      4. The State of Fed Policy

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

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