Jobs, jobs, jobs

Correlation is not causation

   Hurricanes or no, the U.S. economy added 261,000 jobs in October, led by food services and drinking places, according to the Bureau of Labor Statistics. The gain offset a decline in September, the agency said, due largely to the impact of Hurricanes Harvey and Irma.
   Professional and business services, manufacturing and health care also posted increases.
   All together, the growth brought the unemployment rate down another notch, to 4.1 percent. In addition, the number of people out of work declined by 281,000 in October, the BLS reported.
   So what does it all mean? As the jobless rate remains at full employment level, people looking for jobs are finding them and, coupled with the separate look at national output (Gross Domestic Product), which grew at an annualized pace of 3 percent in the third quarter of this year, it means that America is doing well.
   Moreover, the economic recovery of the past seven years is continuing, and investors in the stock market are recognizing that as they push Wall Street averages to record levels.
   That does not mean, however, that continuing economic recovery will boost the stock market to higher and higher levels. Nor does it mean that higher stock indices are a barometer of future national economic performance. Stock prices are a reflection of investor attitudes, not of consumer purchasing and corporate production.
   Correlation is not necessarily causation.
   The stock market crash of 30 years ago was largely caused by automated computer-driven sales, not of human reflection on what a dip might portend. The machines were programmed to sell if they perceived a drop in prices. In turn, this tipped other computers also to sell. Result: An avalanche of selling.
   Since then, experts have modified their computer selling instructions to account for occasional slight dips, telling them not to panic.
   But does that mean humans are immune to panic selling? No. But it does diminish the risk.
   All that said, there is still the chance that the market averages have reached the point where a "correction" is in order.
   Or, as J.P. Morgan is reported to have said when his elevator operator asked him what the market will do, "It will fluctuate."