Market Alert - Afternoon Session

Stocks are, as somewhat anticipated, sleepwalking through another session. This time, however, there is more of a downside flavor to the action.

SP500 -5.46, -0.25%
NADSAQ -18.57, -0.36%
DJ30 -29.89, -0.16%
SP400 -0.30%
RUTX -0.65%
SOX -0.79%

Today chips are off, and that is a lot of the lag in the market.

Oil is off thanks to a larger than anticipated build: 42.04, -0.73

JOLTS was better, showing more hires and fewer quits. More data supporting a stronger jobs market according to the BLS.

That is an interesting point after the productivity report. The BLS says hours worked are up 2.13% per quarter since 2014.
Output during that time averaged 0.94%.
Productivity was -0.4% year/year with the first annual decline in 3 years.

What does that mean?
Current: The difference between jobs worked and output equals productivity. That puts productivity over this period at -1.19%
1979: 2.18% increased Hours - 0.83% output = -1.35% productivity

As noted after the productivity report was released, I said these were 1970's numbers.

According to the BLS, there are more jobs but we are producing less from those jobs. In other words, businesses are hiring more but getting less. How long will they do that? They won't continue doing so, and if nothing changes, they start laying people off. But why would they hire if business was so bad? Perhaps the BLS numbers are, as noted, just wrong?

There is another angle, however. It is the structural change in our economy and jobs market argument I have made. We are still killing off small businesses that historically create the companies that create the breadwinner jobs. Instead, our economy is a service economy with most jobs created in the low way, hourly category. The ACA and its limitations on hours greatly promotes the 'more workers, less hours' model that we are seeing in our economy. Thus you get more people working. Combine that with an economy that is now geared toward low end services and you get more people working jobs that don't require Rhodes Scholars and that frankly don't produce much in terms of hard goods. We are just chasing our tails, working at lower paying jobs, buying fewer houses and major capital goods, spending our money on fast food and other lower end services.

Either way, whichever is correct, the economy is not really healthy.

Anyway . . . the market is sluggish in what could be the 3rd day of a 1-2-3 pullback. Thus far nothing has changed the outlook (other than perhaps productivity?) so you look for a rebound after a quick test. Thus we are letting positions work and hold support if they can.


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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