Better Jobs Numbers Aren’t That Good: Market’s Will Rise Anyway

Shah Gilani|August 7, 2020

This morning the Bureau of Labor Statistics released July payroll numbers. They weren’t even as good as the headline 1.8 million workers added announcement, but that’s another story, which I’ll get to.

The numbers, which all beat consensus estimates, making them appear better, weren’t that good at all.

But that’s not going to stop equity markets from rallying.

Here’s the story behind the headline numbers and why equity markets are headed higher.

Additional Jobs, But the Math Isn’t Adding Up

The BLS headline number, at the top of their website, touting 1.8 million workers added to payrolls in July, is a rounded-up number. The actual addition of jobs in July was 1.763 million. That’s government accounting for you.

While the estimate for jobs gained was 1.48 million, making 1.763 million or 1.8 million, if you prefer, look like an improvement, and the unemployment rate coming in at 10.2%, better than the estimated rate of 10.6%, makes for good headlines, the fact is the numbers aren’t that good in the big picture.

July’s numbers aside, June’s increase in non-farm payrolls was a gain of 4.8 million jobs. May saw 2.7 million jobs come back. July’s increase is less than half the average gain for May and June.

Despite declines in the number of people not working who were working, the total is still 6.7 percentage points higher, and 10.6 million more souls unemployed, than in February.

Of the 1.763 million payroll additions in July 1.464 million went into private payrolls. That means 301,000 new jobs were government hires. To do what? Count the number of unemployed?

Helping the unemployment rate was the “fact” that the labor force shrank last month, as opposed to increasing the prior two months, when the payroll additions were conveniently soaring. That’s government statistics for you.

As positive as the headline numbers have been spun, the fact is the survey didn’t include the last two weeks of July, when infections were spiking, and things were closing down, again, and workers were being “furloughed” or laid-off permanently.

In other words, we’re not out of the woods on the employment and unemployment and jobs front, not by a longshot.

But, that’s understood, and more importantly, being “discounted” by investors and traders.

The Sidelines Won’t Make You A Cent

Another thing that’s quite literally being “discounted” by investors is absolutely incredible companies. The markets are rallying higher, yet investor sentiment is still wary, which is exactly why we keep seeing Friday selloffs.

We may be facing one of the toughest markets we’ve seen since ’09, that much is true, but sitting on the sidelines will only cost you money in the long run. The truth is, the majority of people who sold out in 2009 still haven’t gotten back into the markets, which have rallied 342% since then.

If you’re buying the right companies, you have nothing to worry about, which is why I’m planning to go live for an exclusive event, wherein I dive into a ton of stocks that are clear buys and sells. I’m taking out the guesswork and giving it to you straight.

I’ve got a bunch of stocks that I love, but I want to know what you’re interested in. What do YOU want to hear about? Comment in the box below, and I’ll try to get to as many of the stocks you ask about during next week’s event. And stay tuned, I’m still hammering out details, but you’ll be the first to know when the event goes live.

SO, stocks are getting better. Unemployment is getting better. What next…?

Pull Back the Curtain for the Truth

As long as the numbers aren’t getting worse (meaning we could have seen net job losses in July), as long as there’s another round of fiscal stimulus coming (and everyone knows something’s coming), as long as treatment and vaccine prospects are alive and well, (and they are), investors and traders are going to continue to bet things are going to get better, not worse, like they’ve been betting since March.

They’ve been right and are going to continue to be right. Equity markets are going to keep on rising.

Not because I say so, because of what’s going on right behind the curtain blocking everyone’s view.

On Monday, I’ll tell you what’s “there” and you’ll understand exactly why the stock market’s just getting going.

Until then,

Shah Gilani