12/10/14   Employment Reports – Who You Gonna’ Believe?

Editor’s Corner

Ron Rowland

The government issued two employment reports last week.  One said more new jobs were created in November than any other month in many years.  The other said November was a lackluster month that barely moved the needle of the nation’s employment gauge.  Both reports were released simultaneously by the Bureau of Labor Statistics.  Which one are you going to believe?

The media glommed on to the more positive of the two and appeared to totally ignore the unfavorable report.  You probably saw headlines trumpeting the 321,000 people added to payrolls.  Indeed, this was an impressive one-month number.  It was the best number since 1999 and 43% higher than the 12-month average.  This data was extracted from the survey of businesses.

The Bureau of Labor Statistics also released the data from its survey of American households.  That report indicated only 4,000 more people were employed in November versus October.  The difference between the two sets of data is not a minor discrepancy.  It is a difference of 317,000, with the employer survey registering a ridiculous 7,925% higher figure.

The civilian population grew by 187,000 in November.  The labor force grew by 119,000 while the number of people not in the labor force increased by 69,000.  As previously stated, the ranks of the employed increased by only 4,000.  Simultaneously, the number of unemployed persons jumped by 115,000.  That’s correct, the increase in unemployed civilians was nearly 29 times larger than the increase in those employed.  Meanwhile, the media headlines led you to believe it was the best month in more than five years.

It is good news the official unemployment rate is at 5.8%.  It is sad that 9.1 million people remain unemployed.  Additionally, 92.4 million people are not counted as part of the labor force, including those that have given up looking for a job.  One of the government’s alternative unemployment calculations, its broadest measure known as U-6, is still registering an 11.4% unemployment rate.

Investor Heat Map: 12/10/14

Sectors

Health Care extended its lead over the other categories this week, putting it firmly out in front.  Real Estate’s three-place jump to second was due more to weakness in the previously higher ranked categories than its own strength.  Financials made the largest gain the past week and moved four spots higher.  Consumer Staples and Technology each fell two places and are now part of a three-way tie with Utilities for the middle ground.  Consumer Discretionary is close behind this trio after slipping three spots.  The Industrials sector remains a laggard in eighth despite getting a boost from low oil prices.  Materials is barely clinging to its positive momentum.  Telecom took a hit, falling a spot to tenth and flipping over to a negative trend.  Energy continues to accelerate to the downside, creating a massive 108 point spread between itself and first place Health Care.

Styles

Growth has taken over the top three spots.  Small Cap Growth was the big upside mover, surging six places to grab the lead.  Former leader Large Cap Growth didn’t go far, landing in second.  The next four categories of Mid Cap Growth, Large Cap Blend, Mid Cap Blend, and Large Cap Value are in the same relative positions as a week ago, although all lost momentum.  Mega Cap was the loser in this week’s shift, falling five places to seventh.  The bottom four categories are the same as last week.  However, Micro Cap and Small Cap stocks bounced strong enough yesterday to put them in contention for a potential climb in the rankings.

Global

China’s stock market is on a roller coaster ride.  Last week, stocks there received a considerable boost from the cross-listing of mainland A-shares on Hong Kong’s stock exchange.  Yesterday, Chinese stocks took their largest one-day plunge in five years after regulators placed tighter requirements on loan collateral.  Our momentum calculations use a few days of smoothing to help filter out temporary spikes.  Therefore, we expect China to lose its first place ranking in the next day or two.  However, China is on top today, taking that honor away from the U.S., which has held it the past eleven weeks.  The U.S. moved down to second, and it is the leading candidate to recapture the top spot once the dust settles in China.  World Equity and Europe swapped places with Europe losing ground.  Japan retained its fifth place ranking, but it, World Equity, and Europe are all barely clinging to their positive momentum readings.  EAFE flipped over to red while maintaining its sixth-place ranking.  The lower ranked regions all posted more negative readings than last week.  The U.K. held its position while Emerging Markets and Pacific ex-Japan both moved up one spot.  Canada tumbled to tenth place as it continues to suffer from falling crude oil and energy stock prices.  Latin America had another bad week and fell deeper into the red.

Note:

The charts above depict both the relative strength and absolute strength of various market sectors, styles, and geographic locations on an intermediate-term basis. Each grouping is sorted (top to bottom) by relative strength. The magnitude of the displayed RSM value is a measure of absolute strength, which is our proprietary method of measuring and reporting the intermediate-term strength as an annualized value.

 


“Hiring Grows At Best Pace Since 1999.”

Wall Street Journal front-page headline on 12/6/14


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