Friday, May 6, 2011

Great Jobs Report

The Lehmann Letter (SM)

The stock market rallied strongly this morning following a great jobs report from the Bureau of Labor Statistics:

Employment grew by over 200,000 in February, March and April. That's good news.

Job growth

(Click on chart to enlarge.)

Recessions shaded

The chart makes clear that job growth has to be that strong, month after month and year after year, to achieve and maintain full employment. Let's hope the good news continues.

The stock market had trouble earlier this week because of weakness in the commodity markets. Prices for oil, gold and silver fell. Indexes for a broad range of primary products tumbled. That sent a signal that commodity speculators questioned the strength of the economic expansion. They thought stagnating demand would inevitably limit price inflation. Stock-market investors prefer mild inflation but not weak demand. They dumped stocks in response.

Commodity prices stabilized today because the strong employment report signaled robust demand and contradicted earlier fears that the economy is stalling. That's why oil and stocks are up.

But the jury remains out. Demand has recovered sufficiently to boost employment. It must keep growing for both jobs and the stock market to keep gaining.

(The chart was taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2011 Michael B. Lehmann

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