On Thursday of this week, the S&P 500* hit yet another new high. That was good news but not entirely unexpected – especially if you are a regular reader of this newsletter.

But, this morning some new jobs data is out and there are headlines aplenty casting a less than positive tone. For example, CNBC reported:

“Job creation fell sharply in May with just 138,000 new positions created, while the unemployment rate declined to 4.3 percent, according to Labor Department data released Friday.”

And yet, as I am writing this, the dominant color on our office computer screens is green – indicating share prices are in positive territory for today’s session, thus far. So, what’s up? Is the economy stalling or is the trend toward slow and steady growth still intact?

For clarity, one thing we can look to is some internal data on the jobs picture.

In contrast to the Labor Department’s report is one from ADP. The ADP report is developed jointly with Moody’s Analytics and was released ahead of Friday’s Labor Department’s nonfarm payrolls report.

The main difference between the two reports is that the Labor Department report includes public (government)-sector jobs while the ADP report is private-sector jobs only. Very noteworthy is that the ADP National Employment Report showed private payrolls increased by 253,000 jobs last month, beating economists’ expectations for a gain of 185,000 jobs. (Private payrolls also rose by 174,000 jobs in April).

Corroborating this data is the latest from the NFIB, as pointed out in this from the Wall Street Journal:

“Hiring at small businesses surged in May, according to the monthly National Federation of Independent Business survey. Owners of small companies report an adjusted average employment increase of 0.34 workers per firm over the past few months. “Few readings in the past 43 years have been higher,” says NFIB Chief Economist William Dunkelberg. This is the strongest report since February of 2006.”

Owners of small businesses are planning to continue the surge. “A seasonally adjusted net 18 percent plan to create new jobs, up 2 points and the best since November 2006,” adds Mr. Dunkelberg. And he has more good news for workers: “Reports of compensation increases gained 2 points to a net 28 percent, historically very strong.”

For those who insist that where there are ponies there is also horse-poop, here’s your dish of bad news: hiring HAS slowed. However, the reason is not lack of demand from employers!

In that NFIB report, their Chief Economist, William Dunkelberg says this jobs swell would be even greater if potential employees wanted to work as much as employers want to hire them:

“Fifty-nine percent reported hiring or trying to hire (up 4 points), but 51 percent (93 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Nineteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 3 points), 10 percentage points more than were concerned with weak sales.”

OK, now back to the other side of the coin. While there are myriad reasons that attempt to explain why we have an appallingly low labor force participation rate, one need not lose sight of a fundamental fact of economics – supply and demand.

If employers are truly in need of persons to hire (and they are) they will participate in producing solutions. Among the possible tactics would be job training and more attractive wages. The former takes time and the latter costs money.

While having to face increasing costs is not generally welcome on the employer side, advancing wages predictably has a therapeutic effect on a society’s attitude towards purchasing and consumption. That can only be good for the markets.
Market Minute 5/26/2017 – Sell in May

And again, the fallacy of ‘Sell in May’ shows that Mr. Market’s actions cannot be fit into a neat group of sayings. US markets, as generally indicated by observing the S&P500 Index* finished May up by a positive 1.2%. The more tech-oriented Nasdaq Index* was up a terrific 3.38% for the prior month, and many foreign and emerging markets were even stronger.  

It is obvious to me that it’s best not to try to time your investment by the calendar, or tea-leaves, or some other outside indicator. We believe that it’s best to look at the technical indicators of the indexes and stocks themselves.  

With continued new highs in the equity arena, this is not the backdrop of a weak market. And in that vein, and with a GDP expected to be greater than 3% for Q2, and an excellent earnings season now finishing, this appears to be a time to be invested in stocks, not a time to be afraid of markets.

Mr. Market can change his mind, of course, but for now let’s enjoy the positive markets.

Note: Market returns courtesy of FastTrack software

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at info@denkinvest.com.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.