Job Report Statistically Irrelevant

The job report today came in at +117,000, creating an unemployment number of 9.1% vs. last reported 9.2%. The error margin is +/- 100,000. This means that the number is statistically irrelevant. Yet our news media and low-level talking heads in the financial industry choose to play it up as if it’s the beginning of economic recovery.  This won’t last long since the markets are already giving up the plus side.

In order for the number to be statistically relevant, new jobs created would need to be 4 times greater or more. To have any meaning at all we would need to see a monthly increase in the 300K plus range over an extended period of time. As it is, it would take decades for the current number to have any impact at all!

Other irrelevant numbers are the S&P 500 and DOW indexes, which have barely moved this year, yet the media has continued to hang on every 100 point move in either direction. They love to squeal about the VIX volatility index; why anyone would follow this redundant number which tells you only what is currently happening is beyond me.  I remember when 100 DOW points meant a 10% move, but today it’s just 1% or less and yet receives even more attention. There really must be no real news to report these days or they would completely ignore these things (um, sure).

All of this implies two important things: 1) you can’t invest according to the news headlines, and 2) this truly is a trader’s market, maybe the best ever. The first item is not a shocker, and if you have been watching the markets for any length of time you’ve even heard the culprits themselves (reporters) state that you can’t just follow the headlines. The second is the real revelation which any savvy investor should be taking note of.

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