Market Features

Do Jobs Data Point to Deflationary Recovery?

 

The unemployment rate rose 3 percentage points to 9.7% in August. Both the bond and stock markets greeted the monthly employment report as indicating a recovery was near or had already started. Stocks advanced and Treasuries declined (interest rates rose). Both behaviors are expected in an expanding economy, especially in the early stages, as growth is anticipated and inflationary expectations start to rise.

Looking at the past month, however, the stock market and the bond market have been diverging. Since Aug. 6, both stocks and bonds are up. Advances have occurred for the S&P 500 (up 1.9%) and the Nasdaq Composite (up 2.6%). Over the same period, Treasuries have risen in value, and the yield on the 10-year Treasury has fallen from 3.89% to 3.45%. That is a 44-basis-point decline, or 11%. Falling interest rates (rising bond prices) are consistent with deflationary expectations.

Which market has the correct picture? Let's dig into the employment data for an answer. The following table shows the data used in unemployment rate calculations, comparing July and August data.

Data Used in Calculating Unemployment Rate

The following table shows additional data, including the nonfarm payrolls report, which provides the jobs gained or lost, one of the headline numbers found in every daily newspaper. Nonfarm payrolls indicated that 216,000 jobs were lost in August.

Other Employment Data

Note: The U-7 and U-9 unemployment rates are calculated based on a 40-hour week constituting full employment. If someone works a 30 hour week, that counts as 0.75 persons employed (unless they chose to work the shorter hours). U-7 corresponds to U-3, and U-9 corresponds to U-6. Those working part-time by choice are each counted as one full employee regardless of the hours worked.

TheStreet Premium Services    For Personal Service: 877-471-2967

Jim Cramer
Jim Cramer's Action Alerts PLUS:
Trade right alongside a Wall Street pro — enjoy access to his Charitable Trust portfolio and be sent trade alerts BEFORE he makes a move. Learn More
New: ETF Profits
ETF Profits:
Get money-making ideas from the hottest investment vehicle on the planet. Our experts show you how to play various ETF sectors to help pump-up your portfolio. Learn More
OptionsProfits
OptionsProfits:
Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn More
Doug Kass
Real Money:
Our team of professional Wall Street Pros — including Jim Cramer, Doug Kass, and Nicholas Vardy — delivers intelligent analysis, timely trade ideas, and colorful commentary. Learn More
Stocks Under $10
Stocks Under $10:
Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn More
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
blog comments powered by Disqus
Dow Jones S&P 500 NASDAQ 10-Year Note
12,890.46 1,351.95 2,927.23 20.47
Oil *
118.75
UP
6.51
UP
1.99
UP
11.37
UP
0.72
10 Yr
2.05%
SPDR Gold
168.02
+0.05%
+0.15%
+0.39%
+3.65%
Data delayed 20 minutes

Top Stories and Tools

Brokerage Partners

After the Bell

Before the Bell

Booyah! Newsletter

ETF Daily

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

We respect your privacy.
Podcasts

Connect with TheStreet