Sunday, 11 March 2012
Employment growth US in line with SP500
Again surprised the employment growth in the US to the upside, 227,000. Better than the consensus of 204K but less than the visions of Elfenbein of Crossing Wall Street. The government only shed 6,000 jobs and seems to have fired enough civil servants. The unemployment rate didn’t decline even while in a normal month 140K employment growth is enough to stabilise unemployment rates. Now there are suddenly a lot more people that are searching for a job and have enough confidence to say they are searching for work. The disappointing employment growth for women was bend completely in February. The employment growth was revised higher in the previous months. So everybody was happy (except Plosser maybe)..
The employment growth is at the moment pretty normal for an economy that is already for some time out of a recession. The chart above shows that employment growth correlated pretty well with the strength of the S&P500 in a (four year) cycle. Sometimes it was even a leading indicator. In 1987 and 2000 the S&P was much higher than the employment growth suggested, that should have been a warning. Equity markets do well when the employment growth accelerates, so it is not that strange that so many people try to forecast what the employment growth will do.