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Accelerating U.S. job growth could help bolster risk-on investing

TradingPub Admin | March 26, 2013

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Job creation in the U.S., which has been picking up lately, could easily serve to bolster the sentiment of market participants and cause them to engage in more risk-on investing behavior. 

As a result of this rising confidence, a wide range of assets could move higher in value - including stocks, commodities and real estate. 

Rising demand
Bloomberg reports that many corporations are hiring people since they need to meet the growing demand for their goods and or services. Another factor contributing to the rising payrolls in the nation is the growing ease that smaller firms are having in obtaining credit to pay for their expansion plans. 

The broader business climate is a key contributor to this demand, and there are various signs that the broader U.S. economic recovery has been picking up in its strength, according to the International Business Times. Jobless claims have been dropping, corporate profits have been strong and the manufacturing sector has been showing signs of growth. 

"The economy is on the rebound," Paul Diederich, the president of the West Fargo, North Dakota-based heavy-construction company Industrial Builders Inc., told Bloomberg. "We have some projects in our backlog." 

The construction executive told the news source that during the summer, he plans to bolster the company payrolls, pushing them to higher than 300. He has recently picked up another two managers, and is currently hiring "in the hope that when the weather breaks, we'll have the need to put these people to work." 

Stronger job growth
Data provided recently by the Labor Department indicated that U.S. employers added 236,000 net positions in February. Federal Reserve Chairman Ben Bernanke noted the new situation during a recent press conference, saying in a statement that 
"Labor market conditions have shown signs of improvement in recent months." 

In the communication, the Fed chief noted that various signs of a robust economy, including Americans working more hours on average per week and the nation creating more jobs. He said that the central bank will continue its existing policy of purchasing $85 billion worth of debt-based financial instruments per month - which includes $45 billion in long-term Treasuries and $40 billion of mortgage-backed securities - in order to keep interest rates low and stimulate the broader economy. 

Sinai said that the labor market is in a stronger phase, telling Bloomberg that "the new normal is 200,000." He predicted that payrolls could rise by as much as 216,000 in March. Russell Price, a senior economist at Ameriprise Financial Inc., was also optimistic about the future of the labor market, projecting that the nation's employers will add 2.5 million to their payrolls in 2013. He said that the figure "may be a little bit on the conservative side." 

Economic strengths
The International Business Times that that U.S. economy has many strengths, and has been able to create new jobs and also gains in gross domestic product (GDP). The country has been able to adapt to economic challenges and continue to thrive regardless of broad headwinds.

The nation has managed to create an average of 205,000 per month in November, December, January an February, and there are also some industries that could potentially help be major engines of job growth in the nation, including energy and sophisticated manufacturing, according to the news source. 

If the nation does indeed create jobs at a faster pace and also have a strong economic expansion, these factors could easily prove bullish for the stock market, as Sinai predicts that the benchmark S&P 500 Index will surge to 1,600 this year, Bloomberg reports. 

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