Friday’s jobs number came out and the market yawned. The Bureau of Labor Statistics reported 211,000 new non-farm payrolls for April along with a new decline in the unemployment rate to 4.4%. At first the market didn’t know what to make of the number, but after an initial but brief sell-down, the indexes caught some wind in their sails and closed higher across the board on lighter volume.
What I find so puzzling about the unemployment rate is the fact that in the “old days,” by which I mean the days before quantitative easing, “full employment” was defined as being in the range of a 5 to 5.5% unemployment rate. In the past, when the market was in rally phase and the unemployment rate approached these levels and we got a strong jobs number, the market would tank.
That was because it was viewed as a sign that things were heating up. Consequently, investors would fear that Fed would have to come in and hose everything down by raising rates. Today, the data come in very much like the Scarecrow in the Wizard of Oz as it often points in two directions at once.
And in those days, when unemployment was dropping like a rock, we were seeing 3-4% economic growth, at a minimum. These days, the great paradox is a 4.4% unemployment rate, well below what is alleged to represent full employment, occurring in conjunction with utterly picayune GDP growth of 0.7%.
But the rub here is that pondering this type of stuff is absolutely pointless. No doubt, one can get themselves rather worked up with disgust over the incongruity of low unemployment and weak GDP growth. But the bottom line is that it won’t make you money in stocks, period.