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I’m sweating on a great US jobs number, which is out tonight (our time) and could be a huge story Saturday morning.

Brexit shocked. Mal-exit avoided. Not a US Jobsexit! No!

Peter Switzer
8 July 2016

By Peter Switzer

Brexit shocked us and it looks like we’ve avoided Mal-exit as the Coalition climbs towards a majority, but today we should be praying that there’s no US Jobsexit of jobs. No, I’m not praying for American jobs in the sex industry — that would be a US Job-sex-it. 

I’m sweating on a great US jobs number, which is out tonight (our time) and could be a huge story Saturday morning. Of course, if there’s no exit of new jobs created from the US economy, probably it won't rate a mention on our usual and beloved news services.

However, if the number of jobs created in June is like the one that shocked the markets in May, where 38,000 showed up while 164,000 were expected, then out will come the R-word for recession. And we really don’t need the R-word for the USA. In fact, if the US economy looks set for a recession, the stock market would collapse and that would grab the attention of all news services.

But before you get too scared, which is not something I usually do, Goldman Sachs came out with its best guess at 210,000 jobs. Go Goldman! 

One day I’ll have to turn negative to prove I’m not always a perma-bull but I do need the economic evidence in particular to get bearish. To prove I’m not alone in being bullish, with the Professor of Finance at the Warburton School at the University of Pennsylvania, telling CNBC two days ago that stocks could be up 15% by year’s end on Wall Street. Gee, I hope he’s right.

"If we get a good second half of the year earnings-wise, then I think the market could be up 10 to 15 percent," he predicted. And if jobs and growth go higher (Malcolm said it, so you’ve heard it before), then earnings for companies should be good and that would propel stock prices higher.

Frankly, I think he’s being very optimistic but when the Yanks get positive, they can over-arc it. Love them for that aspect of their unique national personality.

Interestingly, Jeremy seems to be ruling out a Donald Trump shock to the stock market, which I can’t courageously do yet, and so it’s the economy, stupid (as Bill Clinton once told us) that has to be the game changer to make Stiegel be right.

And the jobs number tomorrow is seen as an important gauge for the US economy’s path going forward.

So if there’s another low number that shocks the market (an exit of jobs if you like), then the stock market could slide big time. Of course, in this crazy world, bad economic news for the last eight years has led to the stock market thinking that this means interest rates will be cut and the money supply will be expanded. With interest rates near zero or even negative, one day central banks will be seriously doubted and bad economic news will mean bad stock market news!

That’s the important link that our Prime Minister didn’t ram home during the election. He simply brought up “jobs and growth” but didn’t explain its significance, like a salesman would in trying to flog a great and important product.

If Goldman is wrong and a bad number happens, the doomsday merchants will say they’re right and the USA is heading towards recession and the stock market could say “right, we’ve bought on bad news before because the central bank would come to the rescue but their rescue is not working, so it’s sell time!”

Who knows, another bad number might be tolerated. but I doubt it.

Happily, the run of economic news has been on the improve for the US. First quarter growth was upped from 0.8% to 1.1% but economists think the second quarter will come in over 2% and could be 2.5%. This week, we saw the ISM non-manufacturing index rose from 52.9 to 56.5 in June. This measures the services sector that employs 80% of Americans and this reading is at a 7-month high.

More specifically, the June ADP survey, which looks at private sector job creation in the States, came in this week at 172,000 rather than the predicted 159,000, which I hope is a good omen for the jobs report tonight.

There was a time when I hung out for the weekends not just to relax and be with my family and friends, but it was good to see the sports results and a few games. That was then. This is now and I watch the run of economic and market data and when it’s good as I predicted or hoped for, it’s an adrenaline pump.

Yeah, I know it sounds kind of nerdy but given the importance of economic growth to everything from job creation to family happiness to future positivity and even to political stability, I think it’s one of the most important games in town.

And anyway, anything worth doing is worth doing for money!

Let’s pray for a no US Jobsexit.

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