03|04|2016

Unemployment data decrypted

This past Friday we saw the unemployment rate fall to 6.7%, its lowest level since October of 2008.  That’s reason to celebrate, right?  Wrong!  It’s kind of like when you ask your wife if it’s okay to go to bar with your friends and she says “If that’s what you want to do, than do it.” Very literally, you got permission, but in all actually, you leave the house and you’re a dead man… That being said I love my wife and for the record I’m fortunate enough to never get these kinds of mixed signals… do you think that worked?

 

So why is the unemployment data such bad news?

 

Job creation was far less in December than anticipated; only 74,000 jobs were created as opposed to the 200,000 that were anticipated.  Had the decrease in unemployment come from job creation then we would be celebrating, however, 74,000 signals that the reduction in unemployment came from elsewhere.

 

Labor force participation was the culprit.  We saw the number of people participating in the labor force fall to 62.8%, its lowest level in 35 years.  One contributor to a decreasing labor force is the baby boomer generation coming up on retirement.  This will continue to be a skewing factor for the unemployment rate for years to come.

 

Another factor is one I discussed in last week’s blog. Emergency jobless benefits expired at year end and it’s believed by some that some of those people answered as though they were out of the job market already.  Since they knew their benefits were set to expire why list yourself as a job seeker.  This keeps them out of the labor force statistic even though they would take a job if they could get one.  This will be a much bigger factor in January’s number when 1.3 million people fall off unemployment benefits.

 

Internationally, we saw inflation decline .5% to 2.5% in China for December.  The Eurozone continues to battle unemployment over 12%, however they should strengthening retail sales, rising 1.6% in November.  Japan’s inflation sits at 1.2% and they are attempting to get it to 2% by 2015.  The problem with this is that wage growth hasn’t kept pace with what little inflation they have had.

 

If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.

 

Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services.  Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.  Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.

 

Sources: mfs.com, oppenheimerfunds.com, investing.com, yahoo.com, and morningstar.com

 

* Financial Action, Inc. is a Registered Investment Advisor.