The most closely watched economic report each month is the “Jobs Report” on the first Friday.  Today’s report was surprisingly strong, with 943 thousand new jobs created last month, a hundred thousand more than expected.  Plus, we learned that the number of jobs created in May and June were even more than we realized.  The unemployment rate dropped to 5.4%, a post-pandemic low, pushing average hourly earnings up 0.4% in one month, which suggests more inflation.  With all the “Help Wanted” signs, maybe today’s report shouldn’t be so surprising, but it is!

The only negative is that the “girl-cession” continues, with comparatively few women returning to the work force.  Hopefully, the re-opening of school and the re-staffing of day care facilities will bring them back within a few months.

Of course, this report is always significant if you’re looking for a job or looking to fill a job, but it is more significant that this report is a clear message to the Fed that it is time to “slow down” and allow interest rates to “normalize” or move up slowly.  Whenever the Fed makes a directional change in interest rates, the stock market tends to over-react.  When rates go up, the stock market usually goes down, but only for a while, before the bargain-hunters push it back up again.

Before the Fed raises interest rates, they will first reduce “quantitative easing” or the buying $160 billion in Treasury bonds and mortgage-backed securities each month.  Before today, most analysts believed the Fed would not begin reducing or tapering those purchases until early next year.  Now, I expect that may begin in the fourth quarter of this year.

During normal a period of rising interest rates, tech stocks under-perform, while value stocks (think:  consumer staples) out-perform.