The United States is slowly but surely emerging from the recession. According to the Department of Labor 227,000 new jobs were added to the US economy in February of this year. Certainly, companies with growing business and growing profits add employees, but can one make stock profits from increasing employment numbers? We are turning the question around in order to consider where stock profits might as the United States economy improves over the next year or so. When we see positive employment numbers we know that companies are hiring. What we see in news reports is that efficiency has leveled off in US manufacturing and other sectors. Companies have exhausted the capacity of their workers to put in more hours and work more productively. So, they are hiring. The usual approach to stock profits from increasing employment numbers is to look at who is hiring. The same companies that are hiring may well show higher profits on their financial reports in the quarters ahead. But, where else will we see stock profits from increasing employment numbers? How do we go about picking new winners in the market in the months ahead?
Expected Business Growth and Profits
So, your friend has been working extra hours training in new help on his job and is too exhausted for Sunday morning basketball. Instead of complaining about it why not ask him what is going on at work? Maybe the company is expanding, adding people, and expecting more business. Your next stop should be one of the online finance sections where you will look up the company that your friend works for. What is it selling for and what is its price to earnings ratio? Maybe, while your friend is raking in overtime pay, you can cash in when his company’s stock pops up with a good earnings report next quarter. Today’s value investing could be quite profitable for those who scout out underpriced stocks with potential.
What Do People Do with Their Money?
When folks are unemployed or only working part time they don’t spend like they do when times are good. So, when 227,000 new folks are getting a pay check, where are they spending their money? Think of where you would go with your first paycheck in a year or two. Kids clothes and shoes, a nice meal in a restaurant, a new suit or dress, a trip to the home improvement store, and long needed repairs for your car might be high on the list. Later on a weekend for two in a downtown hotel, a new car, a real vacation, and luxury items could be on the list as well. Think about the dismal US housing market and how rents have gone up because no one has the cash or credit to buy a house or condo. Then think about large home builders, construction supply companies, and all of those folks who make and sell carpeting, draperies, and kitchen appliances. As rising tide often does raise all ships and stock profits from increasing employment numbers can come from where the newly employed will spend their money. A couple of years ago it was a valid question to ask, why invest in American real estate . Now the question is, why not?
How Good Can It Get?
The unemployment rate fell for six months straight through January. Despite adding a quarter of a million jobs to the economy the rate did not fall this last month because half a million folks found hope and started looking for work again. The Greek debt dilemma seems to be fixing itself. It Europe does get its house in order the threat of a global downturn will be alleviated. The US Federal Reserve seems to have managed the money supply issue well, injecting needed liquidity into the monetary system while avoiding excessing inflation. The iffy world economy has kept energy prices from rising too fast. The economic recovery in the US is broad based and includes services as well as mining and manufacturing, which hopefully implies a continued recovery. Also, the high number of government layoffs from last year are largely a thing of the past. That said, the smart investor will be wise to engage in a fundamental analysis of stocks in search of stock profits from rising employment numbers