Jobs: The good news and the bad news
Ready for some more twisted Wall Street thinking? Good news for workers - could be bad news for investors.
Investors are looking for solid job growth in the report due Friday. Nonfarm payrolls are expected to show an increase of 225,000 jobs in July, a tad better than the 223,000 growth reported in a month ago, says Bespoke Investment Group.
That's great news if you are looking for a job. It's not great news for investors. Why the disconnect? The better the job growth picture looks, the more convinced investors are the Federal Reserve will get the guts to boost short-term interest rates. And while investors are happy to see economic growth, they also know fighting the Fed is often a losing battle. Investors' complicated relationship with job growth is clear when you compare market reactions to job reports when they're better or worse than expected. Over the past two years, nonfarm payroll numbers have beaten expectations about half the time, Bespoke says. On those days, stocks have gained 0.16% on average on the news. But these market gains after better-than-expected jobs numbers have eroded over time. The fear good job numbers means higher rates is overwhelming the fact the economy is good enough to give companies the courage to hire in the first place. Stocks actually fell 0.1% in early June after the better-than-expected jobs report, Bespoke says. And stocks jumped 0.7% in early April and 1.4% in May when the jobs number came in worse than expected.
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