Lots of folks are saying the stock market is up too much and can’t keep going, but in reality it’s only a sidebar to the real story: the economy.

Economic data out yesterday underscores the fact that the wheels of commerce are moving, and each day we are getting more evidence of the economy strengthening. Just this week we’ve seen evidence throughout all niches:

  • Housing
  • Manufacturing
  • Services
  • Autos

The thing is, in some ways the market is not only just catching up to this reality, but it’s also acting as a harbinger of things to come with respect to the economy. That was always the traditional role of the stock market, and we might be back there after a long stretch of mania, hysteria, interference and more recently indifference.

The biggest economic report of the month came out this morning: the jobs number from the Bureau of Labor Statistics.

Coming into the week, consensus was for 90,000 new jobs – although estimates ran all the way from 45,000 up to 240,000. The final tally came in worse than expected at a loss of 33,000 jobs, which is actually the first monthly decline in seven years. The key here is that this report is directly impacted by the hurricanes in Florida and Texas. Plus, there were some positive nuggets that matter more than the headline, and I plan to pore over those this weekend.

The Employment Riddle

The official unemployment rate is 4.4%, but a better measure is the U6 rate, which takes into account total unemployed, all “marginally attached” workers (those not actively looking for work but who have in the last year), plus those employed part time but would prefer full time if they could get it.

The number has come down dramatically in the past year but has been stuck at 8.6% for three straight months and remains significantly higher than the low of 6.9% back in December 2000. The question now is how much room is there for greater job creation? And if the nation is at or near “full employment,” how can there be a record of 6.2 million job openings?

So there lies the perfect employment storm – more openings and a smaller worker pool, yet people are still reluctant to quit their jobs. In my opinion, this is the time people should be quitting in droves for bigger paychecks elsewhere. It’s just not happening – yet!

If and when it does, you can expect wages to finally show growth. More money means more spending, and that in turn means an even stronger economy and more great opportunities in the stock market.