The Gilmo Report

May 7, 2017

May 6, 2017

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.

The rest of this report is available for Gilmo Report Members only.
The full report will be available 45 days after it is posted. For immediate access: login or subscribe

Gil Morales & Company, LLC (“GMC”), 8033 Sunset Boulevard, Suite 830, Los Angeles, California, 90046. GMC is a Registered Investment Adviser. This information is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to GMC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Gil Morales & Company, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2008-2017 Gil Morales & Company, LLC. All rights reserved.