Summary
U.S. unemployment sits at 9% (down from its 10.1% peak), which is an encouraging development. We see additional volatility in this statistic ahead, but we feel that, over a medium-term horizon, unemployment is trending inexorably down.
Recent U.S. jobless claims statistics, and particularly the strength in retail sales, keep us positive on the recovery of U.S. jobs. This is one factor behind our favoring U.S. common stocks generally, and high-yield bonds in select strategies.
Highlights
Ø The unemployment level in the U.S. was 9% as of January 31. While higher than anyone would wish for, the fact that it’s down from a high of 10.1% in October 2009 is encouraging.
Ø New jobless claims have recently trended meaningfully down. This weekly measure of first-time filers for unemployment benefits tends to be volatile, but its persistent direction lower suggests an encouraging story about the improving prospects for U.S. employment.
Ø Highlighted below is the relationship between U.S. Retail Sales and U.S. Non-Farm Payrolls. The two measures have followed each other closely over time. Recently, year-over-year retail sales have remained strong -- well above their historical relationship to payrolls (red oval). We expect that the recent strong pace of retail sales (regardless of the short-term ups and downs) points to a reversal, and possible jump, in the non-farm payrolls numbers in the months ahead. This would be yet another positive sign for future economic growth, earnings and equity markets.
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The opinions in this newsletter are for general information only and are not intended to give specific recommendations or advice. Certain information contained herein has been compiled from independent third party sources believed to be reliable. Hamilton Capital Management makes no representation about the accuracy, completeness or timeliness of the information contained herein or its appropriateness from any given situation.