One of the most closely watched economic indicators will be announced this week. On Friday April 4th, the non-farm payroll number along with the unemployment number will be released. Both will probably be non-pertinent, insignificant, or distorted. Non-farm payrolls will be spun to achieve the desired effect of strong hiring.
Yet, the monthly numbers have been locked in an anemic channel for years. A strong number would be 250K or more. A strong channel would be 250-300K per month for multiple months. If or when this happens, one needs to peel back the onion and look for the average hourly or yearly income to be improving dramatically too.
It is then, (once this happens) that we can look forward to true lasting improvement in the labor market. Secondly, the healthy range for unemployment is 5-6%. However, what is rarely mentioned is that more and more workers are merely giving up their search for employment.
They drop off the employment rolls which subsequently allows the unemployment rate to drop- not because more people are employed but less people are looking for employment. Knowing the above data and correlating it to how equities could trend in the future will significantly increase the likelihood of loss avoidance while capturing gains this year and next. Never forget to combine both loss avoidance and gains in investing, or else you could be subject to what the markets decide to give you with respect to losses and gains this year, next year and for the rest of your investing life.
Just for comparison-in 2007 -145M+ employees in America made an average annual salary of $54K. As of 2013-140M+ plus employees in America make $50K annually.
The math is simple-the difference of $4K reduction in salary is a loss of disposable income of approximately $560 billion less in earnings per year since 2007. That does not take into consideration that we have more than 5M less workers. This evaporation of income in a consumer fueled economy is devastating, hence the anemic recovery of the last few years.
On a brighter note, investors that do not depend simply on increasing indexed returns will be rewarded-no fooling.
DISCLOSURE: Opinions and estimates offered constitute the judgment of MCS and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
This article was written by Metropolitan Capital Strategies CEO Sharon Snow and Chief Investment Officer David Schombert.