Chris Puplava | Sep 12, 2013 01:07AM ET
Following the leading indicators of employment have been great tools towards helping investors stay on the right side of the investment tracks, and why I check in on them from time to time. I first checked in on various employment indicators in March, which argued for higher stock prices and in May ran an update (see link ) that suggested higher stock prices into the fall. Those same indicators are calling for further employment gains heading into 2012 and suggests the unemployment rate could reach 6% by next year, all of which would obviously be bullish for the stock market.
Leading Employment Indicators Suggest New Highs Ahead
Shown below are two indicators, US Job Openings and the Conference Board Employment Trends Index, which both suggest payrolls continue to climb heading into the spring of 2014.
Looking at the long-term history of the Conference Board’s Employment Trends Index paints a very encouraging picture. Shown below is the Employment Trends Index along with its 20-month moving average (20-Mo MA). As long as the index is above its 20-Mo MA the economy has been in expansion mode and the stock market is in a bull market. However, several months before the onset of a recession the index falls below its 20-Mo MA serving as an early warning for investors. The Employment Index also tracks the stock market closely, though with less volatility, and as long as the Employment Index is heading higher dips in the market typically serve as good buying opportunities.
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