by Ralph Cole, CFA
Director, Executive Vice President of Research

Earlier in this expansion it was all about jobs. Each month, we would wring our collective hands over how many jobs were created, what kind of jobs were created and whether they were even good jobs. Today, while it is still a market moving number, the monthly payroll report doesn’t seem to carry as much mindshare with Wall Street. Instead we have too many other things to worry about: tariffs, Brexit, an inverted yield curve, etc. However, to us, that is exactly why jobs matter so much; it cuts through the noise and gets to the heart of a growing economy. The bottom line is, if companies continue to hire new workers, this economy will continue to grow.

The first Friday of every month the U.S. Bureau of Labor Statistics announces the total nonfarm payroll for the United States. Today they announced that U.S. companies added 130,000 workers in August. While this number was lower than expected, unemployment remained at just 3.7 percent. As can be seen in the chart below, payrolls have been slowing this year; there are simply too few qualified people for the jobs available. We’ve all seen “help wanted” signs everywhere.

Jobs are important because the U.S. consumer is the largest share of global GDP. If the U.S. consumer were to stumble, our expectations for a global recession would increase.

Another timely jobs indicator are weekly unemployment claims. The chart below shows that weekly unemployment claims remain at generationally low levels. We have not experienced unemployment claims this low since the 1960s, when the size of the working age population was half of today’s level. When unemployment claims start to rise, it is a strong indication that a recession is upon us but that is clearly not the case today.

Week In Review and Our Takeaways

Easing trade tensions and good economic data led to a rebound in equity indexes around the world
Job growth and unemployment claims are timely indicators on the health of the U.S. economy

Disclosures