Stronger Job Gains Are Good News

DEWITT, Mich. - Nov. 24, 2015 - PRLog -- Modest economic growth

October's strong jobs report adds more evidence of continued modest economic growth. Here are the highlights:

• The economy created 271,000 new jobs in October, well above the expected increase of 185,000, according to Bloomberg.

• The unemployment rate fell to 5.0% as expected.

• Hourly wages rose 2.5% over the past year, a bigger gain than expected.

This could suggest that the improving job market is finally leading to broader wage gains for workers. As more people have jobs, they tend to spend more. And consumer spending contributes about two-thirds of economic growth, keeping the economy humming. The strong job gains also reflect the resilience of the U.S. economy despite some concerns about weakness in the rest of the world.

Modestly rising interest rates

Interest rates rose slightly in response to the pickup in job growth, as expected. The Federal Reserve (Fed) has indicated it plans to start increasing short-term interest rates in the not-too-distant future, possibly as early as December. Better job growth and rising wages support ending the Fed's zero-rate policy, and we think it will be a positive sign when the Fed decides the economy is strong enough to handle a small increase in interest rates.

However, we think it's a mistake to focus too much on the timing of the Fed's move. Instead, make sure you've prepared for interest rates to rise modestly with an appropriate mix of stocks and bonds. Looking at the past four times when the Fed has raised rates, stock and bond returns were positive in the year following the Fed's first rate hike.*

Stock market rebound

Stocks have been rising pretty steadily since late September, supported by solid U.S. economic data, better-than-expected corporate earnings and fewer troubles in the rest of the world. That's been good news for investors, and we think stocks can continue to rise over time. But concerns remain about slower growth in China, low oil prices and uncertainty about the timing of the Fed's first rate hike – and we never know when stocks will move sharply. Don't let the return to more normal levels of volatility keep you from investing.

Keep a positive outlook

You may find it hard to stay optimistic when bad news usually makes the headlines. But a positive outlook can help you stay invested and look for opportunities that others ignore. The October jobs report and other recent economic indicators point to continued modest economic growth. Over time, it's the growth of the economy and rising corporate earnings that support rising stock prices. That means your portfolio should have an appropriate amount in stocks, based on your comfort with risk and your long-term financial goals.

Important Information:
*Past performance is no guarantee of future results.