Another great day for investors with all major indices closing at record highs, and the S&P 500 enjoying its hottest winning streak in 20 years.

Obviously, the stock market bias is to the upside, but a modest start to the session took a sharp turn higher after House Republicans passed a budget.   After the close, the Senate Budget Committee passed its own budget resolution, which must now be voted on by the full Senate.

Market breadth continued to be overwhelmingly positive, although I think there are still enough daily decliners to dispel the notion of irrational exuberance. 

Stocks of the day:

• Netflix hiking it price by 10% or a buck – which goes to one of my central investing tenets, nothing beats pricing power.
• Amazon was picked by GE for their cloud service; this is a huge win for their AWS division.

After the bell, Costco posted earnings results that beat the street on revenue and earnings as US comp store sales rose 6.5%, but the stock is edging lower.  The big news this week is Costco selling $1,000 ‘Emergency Food Kit’ that can keep a family fed for a year.  See you Saturday Costco.

Helen of Troy beat on earnings with bottom line numbers $0.29 better than expected, and the initial reaction were the shares edging higher.

The Crazy Puzzle that is the Jobs Situation

The biggest economic report of the month is out in the morning: the jobs report from the Bureau of Labor Statistics. 

Coming into the week, consensus was for 90,000; although, estimates run from 45,000 to 240,000. There will be noise in the report because of hurricanes Harvey and Irma, but there are also serious conundrums or as Winston Churchill put it:

A riddle wrapped in a mystery inside an enigma: but perhaps there is a key.

Full 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, plus total employed part-time for economic reasons.

That 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 is how much room is there for greater job creation?

Record Jobs Openings (mystery)

So if the nation is at or near ‘full employment’ how can there be a record 6.2 million job openings?

Quits & Wages (enigma)

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

Today’s Session

The jobs report came out worse than expected at a loss of 33,000, but so much of the report is associated with hurricanes in Florida and Texas.   There are some positive nuggets that matter more than the headline, and I’ll discuss them in the afternoon note. 

 

Comments

Charles: My limited experience in small business as a manager during the '80s and '90s was that any time the government reported an unemployment rate < 5%, it was very difficult to hire people, especially people who were qualified or would do the job. (I suspect that this has changed due to the redefinition of the unemployment rate during the past 2 decades.) As a consequence, most new hires were entry level. What affect does the fact that so many people dropped from the work force (during 2009-2016) and now want back in, may be hired at entry level rates. Also, these people re-entering the work force may never have really had a job above entry level and dropped out during the "Obama recovery" which didn't offer much opportunity for advancement. Could this be affecting the labor rate lower? Joe on 10/6/2017 12:43:20 PM

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