Sunday, December 08, 2013

Jobs, jobs everywhere,right?

Stocks jumped on Friday because of the good news on the jobs front right?  Well, that's what all of the fluff pieces seemed to say on Friday so why question it.  However, haven't we been conditioned to think - good news equals the end of the Fed actions in the market which would have to be bad for stocks?

Well, the lesser told story Friday was that of GDP (our economic output as a nation).  The third quarter growth in GDP came in above expectations again and that on the surface sounds good.  However, an unusually large portion of this growth was due to inventory build up.  The least reported story of the week was that many economists started cutting their forecasts for growth in the 4th quarter on Friday due to this inventory build up in the third quarter.  Some have cut their forecasts to as little as 1% growth.  This is the sort anemic growth that doesn't let the Fed end QE and thus, stocks were mostly up on Friday because of reductions in Q4 GDP estimates means the Fed will not taper in December.

Now, that's a more complicated story than "Yeah, 200,000 Walmart greeters were hired so stocks were up" but it's closer to the truth.

Overall, it was a decent jobs report though there are some inconsistencies that are hard to explain.  Retail hiring seems to be close to 2012 indicating that retailers have confidence that we are all going to go out and overspend again this year.  However, as a fun little real world experiment you should go to a Home Depot on a weekday and do a slow walk of the store.  I was asked by 7 different salesmen if I needed help.  Staff outnumbered customers about 4 to 1 when I was in the store.

I'm still putting a 20-25% chance of a reduction of the Fed's efforts coming out of the Dec 2013 meeting but the consensus is definitely shifting to the Jan or Mar 2014 meetings.

Cheers!




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