The US Jobs Report: Take it With a Pinch of Salt

Friday’s eagerly anticipated US jobs report — for some reason the world’s most tradable data release — didn’t disappoint the bulls. According to the Bureau of Labour Statistics, the US economy added 288,000 jobs in April, far greater than expectations of a 218,000 increase. The unemployment rate dropped from 6.7% to 6.3%. Good news!

It didn’t matter that nearly one million people dropped out of the labour force, which was the driving force behind the lower unemployment figure. Nor did it matter that average hourly earnings rose 1.9%, below expectations of 2.1% growth (suggesting that the jobs growth is lower quality).

No one really cares about drilling down on the data. The headline said the economy added 288,000 jobs and media outlets duly reported it. Therefore, that’s what everyone believes.

The market liked the (headline) number. At the open, stocks rallied and gold was in the process of taking another employment data related beating. But then it all turned around. Stocks sold off, gold and bonds rallied.

After ignoring the escalating tensions in eastern Ukraine for months (the Fed will sort it out) the market decided to sit up and take notice on Friday. That’s because tensions escalated even more. Fighting in the southern city of Odessa broke out and left 42 mostly pro-Russian supporters dead.

Now there will be retribution. It doesn’t look like this situation will die down at all. Like Syria before it, Ukraine is now a plaything of the major powers. Europe and the US want Ukraine to turn West, and merge into the EU trading system. It was set to do this late last year when then President Viktor Yanukovychbaulked. Soon after he was gone… 

Russia sees Ukraine as natural part of the country. Indeed, there are many parts of Ukraine that sees itself as Russian. Hence the tug-of-war. Unfortunately, it’s the citizens that suffer the most. Expect the situation to get much worse before it dies down. Elections are scheduled for 25 May, which should be interesting. The country is already on the cusp of a civil war (if not already in one), so we doubt democracy will get a look-in. 

Just last week, the International Monetary Fund (IMF) approved a two-year loan of US$17 billion to Ukraine. This new loan follows two other failed IMF packages, which are still outstanding. The West clearly wants Ukraine in its corner, whatever the cost.

So don’t expect this to go away. Not even the Fed can get rid of it.


Greg Canavan+
for The Markets and Money Australia

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Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

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