Despite Adversity, Job Growth Remains Strong

By Kostya Etus, CFA®, Head of Strategy, Dynamic Investment Management

Economic Update

Interest rates rise, inflation persists, Ukraine and Russia remain in conflict, and yet job growth and production remain strong!

JOBS: All eyes were on the October 7 jobs report as non-farm payrolls increased by 263,000 and the unemployment rate fell to 3.5%, tying the lowest level since 1969. So far in 2022, average monthly payrolls are up $420,000. Additionally, the data showed that people voluntarily leaving their jobs reached 15.9%, the highest level since 1990—typically, employees aren’t quick to leave unless they think they have better prospects. PRODUCTION: Earlier in the week, the Institute of Supply Management (ISM) Manufacturing and Services Purchasing Managers’ Index (PMI) data was released. Manufacturing declined to 50.9%, however being over 50 means it’s still in expansion territory. Services, which make up a larger portion of the economy in the U.S., came in at a strong 56.7%. Both metrics have stayed above the key 50 mark since the COVID crash in 2020.

BOTTOM LINE: Despite the headwinds, the U.S. economy appears to be on stable footing and the above data would suggest that we are not in a recession.

See the Forest Through the Trees
Market performance this year looks bad, but does the picture change when we take a step back and look at a broader view? We don’t have to go far back—let’s say three years—to see what stands out:

1. Looking at the chart below, “The Trees,” the stock market is in bear territory this year, down more than 20% and has generally trended down—not a pretty picture.

2. Zooming out with the chart below, “The Forest,” the market is currently at the same level as the start of 2021. So, we have simply given back what we earned last year.

3. Lastly, let’s not forget that 2020 was a pretty good year for the market despite the COVID crash. Add it all together and we’re actually up close to 30%—a great looking picture!

THE TREES

S&P 500 YTD 2022 Return Through 10-10-2022 (-23.26%)

Source: Morningstar Direct. S&P 500 TR USD 01/01/2022-10/10/2022. Past performance is no guarantee of future results.

THE FOREST

S&P 500 3-Year Return Through 10-10-2022 (+29.13%)

Source: Morningstar Direct. S&P 500 TR USD 10/11/2019-10/10/2022. Past performance is no guarantee of future results.
As always, we recommend staying balanced, diversified, and invested. Despite short-term market pullbacks, it’s more important than ever to focus on the long-term, improving the chances for investors to reach their goals.

Important Disclosures

This commentary is provided for informational and educational purposes only. The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. This is not intended to be used as a general guide to investing, or as a source of any specific recommendation, and it makes no implied or expressed recommendations concerning the manner in which clients’ accounts should or would be handled, as appropriate strategies depend on the client’s specific objectives.

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These materials do not purport to contain all the relevant information that investors may wish to consider in making investment decisions and is not intended to be a substitute for exercising independent judgment. Any statements regarding future events constitute only subjective views or beliefs, are not guarantees or projections of performance, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond our control.

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