On the surface, the economy appears to be holding up strong.
October’s jobs report displayed numbers that bounced back in the aftermath of this summer’s active hurricane season, although the 261,000 jobs added fell well short of the 310,000 that had been estimated by economists.
The unemployment rate fell by 0.1 percentage points to 4.1%, the lowest number since December of 2000, while the number of unemployed people decreased further to 6.5 million.
Aside from the jobs miss, those numbers seem rosy at first glance. But many analysts who dove below the headline numbers were less than impressed.
“For investors looking to gauge the economy’s health, the quality of jobs is more important that the number of jobs created,” said Trevor Gerszt, CEO of Goldco. “Creating large numbers of temporary jobs or jobs in less-productive sectors of the economy isn’t going to create economic growth,” said Gerszt, also a Newsmax Finance Insider.
More than one-third (88,000, or 34%) of the jobs created in October came from “food services and drinking places,” i.e. waiters and bartenders. “The economy can’t be considered strong as long as the greatest job growth comes from sectors that don’t contribute to continued future growth,” said Gerszt.
“As with many aspects of the economy, the headline sounds good, but not as good once you get into the nuts and bolts,” said Andrew Packer, editor of the Resolute Wealth Letter.
“So far, President Trump’s promise to be the best jobs president in history has fallen short of its goal. High-quality jobs that pay a middle-class wage remain elusive in this economy,” said Packer, a Newsmax Finance Insider.
Equally disturbing to many analysts was the continuing low rate of labor participation. October’s labor force participation rate slid to 62.7% as a result of a record 968,000 people leaving the labor force. That exodus of people from the labor force is what was largely responsible for the decrease in the unemployment rate.
Some of that change in the participation rate is demographic, as the baby boomer generation is starting to retire. However, millions of Americans thrown out of work who have also exhausted unemployment benefits are no longer considered looking for work, even if they are. As a result, real employment may be higher than indicated by official statistics.
According to Gerszt, “Headline numbers continue to mislead investors into thinking that the economy is robust and growing strongly, but that’s not the case. Underlying economic fundamentals remain weak, and investors need to think about protecting their assets before the next downturn. We see these job numbers continuing to make a strong case for investing in gold.”
“Given the disconnect, between rosy news, high stock market valuations, and a still-sluggish real economy, it makes sense for investors to hedge their stock positions with assets like gold,” says Packer.
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