Jobs Are Up, Stocks Are Down — What Now?

Here's why the stock market and the jobs report don't match up.

The newest official government jobs report from the Department of Labor brings good news: The economy added a quarter-million jobs in October and the unemployment rate fell to just 3.7 percent — its lowest rate in nearly 50 years.

Meanwhile, wages edged up by 0.2 percent for a 3.1 percent increase over the last year and labor force participation jumped by 711,000 people to 62.9 percent, showing strength in the job market beyond just the topline unemployment number.

While unemployment is at a 50-year low, check out the best money moves to make now.

Why Are Stocks Falling If the Jobs Report Is So Good?

The S&P 500 was down 0.63 percent and the Dow was off 0.43 percent for the day. Casual observers of the financial markets might find it a little frustrating that stocks were on the decline despite the strong numbers in the jobs report. After all, if things are going so well, shouldn’t your 401k benefit? Keep these things in mind:

  • The stock market is not the economy and vice versa. Although plenty of news outlets like to use the stock market as a proxy for the strength of the economy, it’s a bit more complicated than that. Stock markets will reflect the strength of the companies in them. So, although the jobs report was great, Apple sold fewer iPhones than analysts were expecting last quarter and that’s ultimately going to have a bigger impact on the S&P 500 — at least in the short-term.
  • Economic strength probably means continued rate hikes. Remember that stocks and bonds are essentially in competition for your investment dollars. So, wages increasing probably means that the Federal Reserve will continue inching up interest rates to counter inflation and slow growth, which in turn will mean that bonds will have higher yields and become more attractive investments, pulling money away from stocks.

See: Why Warren Buffett Says We ‘Need a Powerful Fed’

What Does This Mean for My Investments?

A solid economy can be a boost to the stock market, but it will likely take longer to show up. More people working and earning higher wages will mean consumers will have more money to spend — which could mean good things for stocks over time. But those gains won’t be realized until those increased sales show up in company earnings reports or with signs of increased consumer spending.

Bonds are likely to continue to grow more attractive as long as the Fed keeps raising its target for interest rates, so investors might see some reason to shift part of their portfolio towards fixed income.

Keep reading to learn why Trump doesn’t want interest rates to go up anymore.

More on Investing and Stocks

We make money easy. Get weekly email updates, including expert advice to help you Live Richer™.

This article is produced for informational purposes only and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Always conduct your own research and consider your investment decisions carefully.