Job Growth Continues
Job Growth Continues. The U.S. Federal Reserve is in a conundrum. Inflation is high, although it’s slowing, but job growth continues, making their job more difficult. Threading the needle and achieving a soft landing is more challenging. Economists expected 200,000 net additions in November. Instead, the report showed that employment increased by 263,000, and the unemployment rate was unchanged at 3.7%. Moreover, November is the 23rd straight month of rising job numbers.
Headlines suggest that large companies are laying off workers in large numbers. But that is obviously not the case except in tech. For example, Amazon (AMZN), Meta (META), Twitter (TWTR), Salesforce (CRM), and Cisco (CSCO) are laying off workers. But most other industries are hiring quickly, trying to replace workers lost during the pandemic.
Granted, job growth is slowing, but a number over 200k is excellent. Furthermore, wages were ~5.1% higher than last year. So again, these are solid numbers, although wage growth is still lagging behind inflation, even after it moderated since peaking in June.
Overall, hedge fund managers and Wall Street experts expecting a steep recession are premature. It may still happen, but the job numbers do not support the hypothesis.
Stock Market Performance Overview
The stock market had another positive week, despite fears about a recession and too-strong job numbers causing even higher interest rates. Eight of the eleven sectors were up. Reversing the trend for 2022, the Dow Jones Industrial Average (DJIA) underperformed the other indices. Also, as shown by data from Stock Rover*, all the major indices were positive, with the tech-heavy Nasdaq doing the best.
The Communication Services, Healthcare, and Cyclicals sectors had the best week. However, Energy, a leader for much of 2022, declined another week, performing the worst. Utilities and Financial Services also had poor weeks.
For the year, the Dow 30 is doing the best, and the S&P 500 Index is still in a correction, while the Nasdaq is still in a bear market. The Utilities and Consumer Defensive sectors are now positive for 2022.
The dividend growth investing strategy has performed relatively well, outperforming the S&P 500 Index and Nasdaq in all instances. The table below shows their performance by category. All categories are now in positive territory except the Dividend Challengers.
|Category||YTD Return (%)|
Elevated inflation continues to cool. The Personal Consumption Expenditures (PCE) fell further to 6.0% in October 2022. It peaked at 7% in June. Also, taking out volatile food and energy prices, the core PCE was only 5%. While some economists and forecasters have predicted hyperinflation, it has not yet happened. Instead, stabilizing demand and supply combined with higher interest rates have seemingly caused inflation to trend downward. The stock market liked the lower inflation reading and surged.
Rail Strike Averted
While many readers are focused on the divisions in Congress, the parties came together and passed a bill to avert a rail strike. A rail strike is estimated to cost the United States roughly $2 billion per day in lower economic output. The bill enacts a new contract providing railroad workers with a 24% increase in salary from 2020 through 2024, immediate payouts averaging $11,000 upon ratification, and an additional paid day off.
Final Thoughts on Job Growth Continues
Job growth continues even though the Fed is aggressively removing liquidity and stimulus from the U.S. economy. It is likely that they will slow the pace of interest rate increases
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Dividend Increases and Reinstatements
Search for a stock in the list of dividend increases and reinstatements. This list is updated weekly. In addition, you can search for your stocks by company name, ticker, and date.
Dividend Cuts and Suspensions List
The dividend cuts and suspensions list was most recently updated at the end of November 2022. As a result, the number of companies on the list has risen to 576. Thus, well over 10% of companies that pay dividends have cut or suspended them since the start of the COVID-19 pandemic. The list is updated monthly.
Fourteen new additions indicate companies are starting to experience headwinds in November 2022.
The new additions were Southern Copper (SCCO), Lumen Technologies (LUMN), B&G Foods (BGS), Sturm, Ruger (RGR), United-Guardian (UG), Generation Income Properties (GIPR), Medalist Diversified REIT (MDRR), BP Prudhoe Royalty Trust (BPT), Devon Energy (DVN), Fortress Transportation (FTAI), Sachem Capital (SACH), MV Oil Trust (MVO), VOC Energy Trust (VOC).
The long-term means of these two ratios are approximately 16X and 17X, respectively.
The market is still overvalued despite the recent correction and a bear market and rebound. Earnings multiples of more than 30X are overvalued based on historical data.
S&P 500 PE Ratio History
Shiller PE Ratio History
Stock Market Volatility – CBOE VIX
This past week, the CBOE VIX measuring volatility was down about 1.5 points at 19.06. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 Index options. It is commonly referred to as the fear index.
The yield curves are the 10-year U.S. Treasury Bond minus the 3-month U.S. Treasury Bill from the New York Fed and the 10-year U.S. Treasury Bond minus the 2-year U.S. Treasury Bond from the St. Louis Fed.
The Conference Board’s Consumer Confidence Index® decreased in November to 100.2 (1985=100), down from October’s downwardly revised 102.2 reading. The index is now at its lowest since July’s 95.7 reading and marks two consecutive monthly declines. The Present Situation Index, based on consumers’ sentiment toward current business conditions and the labor market, dropped to 137.4 from a downwardly revised 138.7 the previous month. Based on consumers’ six-month outlook for income, business, and labor market conditions, the expectations index also declined, down to 75.4 from 77.9 the previous month. A reading below 80 for the expectations index is considered recessionary. In addition, the share of consumers planning to purchase homes, automobiles, and big-ticket appliances decreased.
The Bureau of Economic Analysis reported that personal income jumped 0.7% in October – 0.4% when adjusted for inflation. The reading is up from 0.3% and an inflation-adjusted 0% in September. Personal consumption expenditures (PCE), a measure of consumer spending, increased 0.8% and an inflation-adjusted 0.5% in October, up from the previous months’ 0.6% and inflation-adjusted 0.3% reading. Increases in both goods and services drove October’s PCE. While new motor vehicles and gasoline, and other energy goods led the way in goods, the most significant contributor to services was spending on food services and accommodations. Partially offsetting the PCE reading were decreases in financial services and insurance.
The U.S. Bureau of Labor Statistics reported 263,000 jobs were added in November. October’s reading was revised (+23,000) to 284,000, and September was revised (-46,000) to 269,000 for a net of (+23,000) jobs. The unemployment rate was unchanged at 3.7%, as the number of unemployed workers was essentially unchanged at 6 million. Job gains were reported in leisure and hospitality (+88K), healthcare (+45K), government (+42K), construction (+20K), information (+19K), and manufacturing (+14K). Payrolls dropped in retail (-30K) and warehousing (-15K). Average hourly earnings increased by 0.6% in November. At $32.82, average hourly earnings are up 5.1% from a year ago.
Thanks for reading Job Growth Continues – Week in Review!
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.