Great Britain on Sale!
The U.S. economy added 156,000 jobs in September, another solid number.
As expected, stocks fell. That’s because investors interpret continued employment growth to mean that the Fed is more likely to raise rates in December. As we’ve discussed, what’s good for the economy can be bad for stocks if it means that interest rates will rise.
While most investors focused on the top-line job growth number, the report contained a couple of interesting pieces of information under the surface.
First, the unemployment rate rose to 5.0% despite solid job gains. The reason: workers who had abandoned hope of getting a job are looking again. The labor force participation rate is inching up, to 62.9% from a 40-year low of 62.4% last fall. An eventual return to the 66% level from before the financial crisis would signal that the economy has more fully recovered from the Great Recession.
Second, average wages rose 2.6% over the past 12 months. That’s not making anyone rich, but given low inflation it’s a positive development after years of near-zero wage growth. More money in consumers’ wallets, along with rising consumer confidence, can help sustain the recovery, and it could help select retailers (but choose carefully among retail stocks!).
You know who else could do well over the next few months? Travel agents specializing in trips to the U.K. (I know, travel agents are going the way of the buggy whip – but a few continue to ply their trade, right? Work with me.) Because right now, Americans are getting more bang for their buck in England than any time since Ronald Reagan was president.
That’s right: the British pound has plunged, hitting its lowest level in 21 years this morning. The sharp decline happened partly in reaction to Prime Minister Theresa May’s Brexit-related hard line on immigration and partly due to a reputed “rogue algorithm” that exacerbated the selloff. So if you haven’t seen Big Ben or the Crown Jewels, now’s the year to book a trip.
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