110,000 New Jobs in September Fuels 91.7 Dow Jump on Friday
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The Dow Jones Industrial Average rose 91.7 points on Friday, largely on the news from the Labor Department that employers outside the farm sector added 110,000 jobs in September. The report also greatly revised the number of jobs for August from a negative 4,000 to plus 89,000. The Dow is now up 12.9% the year at 14066.01.
As always, what is good news for part of the market is bad new for other parts. Bonds took a hit on Friday because investors grew worried about inflation and lowered their hopes that the Federal Reserve would cut interest rates again. Remember that as interest rates rise, bond prices fall and vice versa.
You have to wonder how accurate the reporting from the government is sometimes. Or at least what variables are in the latest report. For example, the Labor Department first reported a loss of 4,000 jobs in August - the first decline in four years. Then revised that report to 89,000 new jobs. This may be due to how they count teacher jobs. The August report registered a loss of 32,000 teacher jobs, which came on top of 50,000 lost teaching jobs in July. Maybe many of these jobs were counted in the August revision.
In any event, such revisions point out that you cannot make investment decisions based on a few facts. You have to look at trends. As an old saying in the market goes - "the trend is your friend." And one trend that is obvious, and we surely have to account for, is the demographics in this country. The population is getting older!
This fact raises a whole host of issues. There are Retirement issues, Social Security issues, Medicare issues, Long Term Care issues, Inheritance issues, etc.
Take the Social Security issue for example. In 1935 when Social Security was adopted, the worker-beneficiary ratio was 40 workers to 1 recipient. By 1960, that ratio had become 5 workers to 1 recipient. In 1996, the ratio was 3.3 to 1. Statistics indicate that by 2040, the ratio will be close to two people working for every one recipient of Social Security and Medicare.
Today, one out of every six Americans receives payments from Social Security. This includes retired and disabled workers and some dependents. So it is not difficult to see that sweeping reforms are necessary if this country is to continue to provide the security that this program provides. In November of 1997, Alan Greenspan, Federal Reserve Chairman, opined that the Social Security system was "badly underfunded" and that congress should fix it sooner rather than later. As of now, nothing material has happened to change the system. The politicians and former politicians keep warning us that the aging population makes our Social Security and Medicare programs unsustainable. Yet no real solutions have been implemented.
It appears our economic growth in this country has kept the systems going. But what happens if the growth slows down and we fall into a recession? The 110,000 new jobs reported last month is encouraging, but the report also indicated a rise in the unemployment rate by a tenth of a point to 4.7%, its highest in a year. The deteriorating housing market and credit markets continue to take a toll.
So where to invest and how to invest keeps getting more complicated. And as technology keeps advancing at an ever more rapid pace, it is likely to get more complicated. It is important to recognize that demographics will play a big role in what companies produce and what services they will provide. Keep an eye on the trend - it is your friend.
I invite your questions.
Or Contact Jerry Cole at:
509 Center Ave, Suite #102, Bay City, MI
(989) 892-5055
(The opinions expressed are solely those of the author and not Gen worth Financial Securities Corporation.)509 Center Ave, Suite #102, Bay City, MI
(989) 892-5055
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Jerry Cole - Retirement, Investment |
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