Aug 10
6
Southridge On Employment
Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent, the U.S. Bureau of Labor Statistics reported today. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000
Southridge has mentioned this repeatedly, but in the hours before the all important employment numbers it is important to put it in perspective. Retail continues to lag. Regardless of the today’s numbers and the direction of the market, clients should avoid and/or use rallies to pare back long positions in retail stocks. Below are the charts for the SPX, RTH and the Apparel Sector. Clients should note the underperformance of Retail and especially apparel since the 4/26 2010 market high and in the recent rally from 7/1. Southridge believes that this pattern will continue especially given the bleak charts of Unemployment, Non-Farm Payrolls, New Home Sales and Construction Spending below. 250,000 new jobs need to be added each month to keep unemployment constant, yet the market may be overjoyed today with a one month non-farm loss of 65,000 and a private gain of 90,000 = the consensus estimates.
S&P500 Vs. Retail from 2010 Market High on 4/26
SPX (white) -7%
RTH (yellow) -15%
Apparel Retail (green) -20%+
S&P500 Vs. Retail in last rally from 7/1
SPX (white) +9.5%
RTH (yellow) +5.2%
Apparel Retail (green) -0.6%
Unemployment
Non Farm Payrolls Net Change (+250k per month needed to keep Unemployment constant)
New Home Sales