America’s Money

By David Lee Smith, Ph.D

If you followed last week’s topsy-turvy newsworthy events through to Friday—and especially if you’re an investor—you may still have a smile on your face. While Monday through Thursday brought us everything from the goings on at a NATO summit in Brussels to the latest saga of impeachment hearings in Washington, Friday’s fare involved a release of figures that quantified America’s jobs growth during November.

America is Working

Those numbers surprised even unabashedly bullish economists and caused television talking heads to double down on their use of the words “fantastic” and “terrific.” The biggest number–literally and figuratively–involved the 266,000 hires that occurred in November, a 42% hike above the 187,000 that had constituted the consensus expectations of economic seers. At the same time, the unemployment rate for the month ticked downward to 3.5% from 3.6%, thereby revisiting the lowest level since 1969.

And to make for a trio of positives, average hourly earnings rose by 3.1% year over year, also slightly topping economists’ expectations.  Further, to negate the possible conclusion that November’s jobs numbers constituted a lonely island of impressive growth, the comparable metrics for September and October were increased by a total of 41,000 jobs.

By the Numbers

  • 266,000 new hires: 42% above expectations
  • 3.5% Unemployment: lowest since 1969
  • Avg Hourly Earnings up 3.1% year over year

Additional Strong November Numbers

While we’re indulging in a retrospective of trends in November, it’s worth noting something of which you may already be aware: The equities markets also acted impressively during the month. Specifically, the S&P 500 rose by 3.63%, while the Dow was up 4.11%, and the Nasdaq increased by an especially impressive 4.64%. At the same time, sales of existing homes were up for the fourth month in succession; and the new home numbers came in at the highest level in more than a decade.

Another Student of the Market Weighs In

Now, if you haven’t had enough positivism tossed your way in the above paragraphs, let’s look at some of the observations rendered about the status of the economy and the markets by my colleague and fellow economist George Parks. Among George’s salient points:

  • Microeconomic indicators are also on the positive side. For this he points to the most recent earnings season, wherein results came in above expectations.
  • Stocks are a bit expensive based on fundamentals, but they’re less expensive than other asset classes.
  • In the face of the solid circumstances recounted above, the global economy and trade are the key outliers.
  • Historically, December has been one of the best months for equity market appreciation.

George also makes a perspicacious point about the economy and its potential for sustainability that I haven’t heard from others. As he says, “One observation is the lack of excess. Many past recoveries have created a euphoria that caused big increases in spending on plant, equipment, technology, new hires, and wage increases. It just seems there has been more moderation since the Great Recession. No obvious bubbles.”

The American Economy Stands Virtually Alone

Not long ago I penned an article for the American Values newsletter that discussed how our nation is an economic oasis in a world of hurt. Fortunately, our country is even more of an oasis now than it was when that article was published. So, despite all that is humming along economically in our country, we must remain cognizant that places like Iran, Hong Kong, China, Syria, Japan, Russia, and much of Europe are contending with basic economic or human rights issues.

Indeed, even our ally England is seemingly being browbeaten by Brexit’s interminability as to its ultimate passage and implementation. The simple message here is that, unless, for instance, a trade pact with China is agreed to and adopted in the reasonably near term, and unless some other major nations gain stronger economic footings, the U.S. could be hard-pressed to singularly hold the line against what has become a vast global malaise.

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Where is our money headed next?

But despite our global concerns, with December’s typical strength in the U.S. markets and given what we now know of November’s strong economic results, it’s difficult to envision this month capping off 2019 in anything less than the finest of fashions. And ditto 2020. Watch for another solid year, the potential disruptions of a quadrennial election notwithstanding. All in all, anything approaching a recessionary swoon hardly appears imminent.

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