Can the economy continue to grow without a meaningful improvement in the job market? The stock market seems to think so.
This morning we got bad news on the jobs front from a number of sources.
Yet, equities markets are up nearly 3 percent. Why?
Because manufacturing in the US grew much more rapidly in August than forecasted by the pundits, many of whom were actually looking for a decline. Meanwhile, we also learned today that manufacturing in China grew rapidly in August after a very weak July.
These events more than offset ADP's widely-followed report that private sector employment fell by 10,000 in August when the consensus was looking for a 13,000 increase.
Much less followed, but perhaps equally significant, online advertised vacancies dropped 57,100 in August to 4,236,200, following an increase of 139,200 in July, according to The Conference Board Help Wanted OnLine Data Series. This is disconcerting, since besides networking, most people look for jobs online these days.
So, the big question is: How can the economy grow if joblessness does not come down? The left criticizes companies for refusing to hire despite sitting on a record amount of cash. Critics on the right insist if the government cuts taxes and regulations, businesses will start to hire again.
Of course, the issue is a little more complex and nuanced than can be debated on FOX and MSNBC.
Yet it is also simple. As manufacturing continues to grow and exports to countries that are growing continue to increase, at some point companies will eventually determine if they hire new people, they'll generate more business. That has always been the criteria, except at the top of economic cycles when companies over-hire. It's Risk vs. Reward 101.
As companies receive more orders, they require more goods or services from suppliers. They then hand off more business to distributors. This also impacts accounting firms, law firms. Even publishers will see an uptick in advertising, although which medium is the recipient is still up in the air.
Local sandwich shops also will benefit. As more people are hired, housing rebounds. You get the idea.
So, let's continue to worry about jobs and unemployment. No doubt we are experiencing a crisis in this country.
But, don't underestimate the value of other strong economic data. They could portend good things sooner rather than later.