Why Today’s Market Shrugged Off Friday’s Job Data
Although Friday’s payroll data was admittedly weak, it is still premature to
assume that the current economic recovery won’t reach self-sustaining levels. In
fact, two leading indicators of the job market paint a more optimistic picture.
1)Â According to the National Federation of Independent Business (NFIB)
Survey, hiring plans by small businesses (7,200 were surveyed) increased to
their highest levels in two years, and the index is now up sequentially for a
fifth straight month. This development is significant since small businesses
employ most of America’s workers. As can be seen in the chart below, the NFIB
employment index typically leads payroll data by a month. Â
2) The job component in last week’s non-manufacturing ISM survey hit its
highest level in two years and was above the boom/bust 50 level for the third
month in a row, indicating expansion.
Indeed the equity investors will need to see a marked improvement in the
payroll data in the months ahead for the S&P 500 to continue its
ascent into year end. But the building momentum in business spending, which I
discussed on Sept. 3, coupled with the impressive rebound in corporate profits,
suggests that this it is only a matter of time before the job market improves.