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The job market's stumble can be blamed on one thing
(Flickr/awcphoto)
The May jobs report, in a word, stunk.
The 38,000 net jobs created was well below the expected 160,000, and it seemed that every sector except healthcare saw labor weakness.
This has raised worries of a serious slowdown or recession in the US, whether it be debt-fueled or caused by a drop in profits. According to Wells Fargo Investment Institute, however, it is just a blip.
Tracie McMillion and Veronica Willis, strategist at Wells, noted that downturns in the jobs report reading had often come after corrections in the stock market. This has happened six times since 2012, according to a chart from McMillion and Willis, most recently at the beginning of this year. Encouragingly, the strategists said, each time stocks have rebounded, so has the labor market.
(Wells Fargo Investment Institute)
Basically, businesses either see a stock market drop-off as a sign of things to come or see a reduced ability to hire as they see their value sink. This effect does not show up until a few months later, but as the market has since recovered so too will the jobs numbers.
Other economic indicators — from housing starts to jobless claims — have not yet faltered, the Wells strategists said.
"Leading economic indicators have been improving — suggesting that a recession later this year is not impending and that the economy should improve after this year's weak start," the strategists wrote in a note to clients.
In short, McMillion and Willis believe that this too shall pass.
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