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Jobs Report Totally Disconnected From Markets

Tickers in this article: ^DJI ^GSPC ^IXIC

NEW YORK (TheStreet) -- The markets are sending the struggling workforce a genial message: Thanks for the lift.

On Friday, April's headline unemployment ticked lower to 7.5% and nonfarm payrolls increased by 165,000, which boosted the Dow Jones Industrial Average and S&P 500 to historic highs. The problem, according to economists and investment strategists, is that there's disconnect between equity markets and the U.S. labor situation.

"The more active traders -- the ones that are more savvy and more actively involved in the market -- they understand the fact that unemployment doesn't move lockstep with the market" said Randy Frederick, managing director of active trading at Charles Schwab. "Generally what I find is when the market's moving higher, the unemployment rate lags about six to nine months behind."

Major U.S. equity indices popped Friday to milestone point averages as the Dow reached 15,000 and the S&P surpassed 1,600 for the first time ever.


Equities have soared in 2013, led by the Dow's 14% tear, the S&P's 13% gain and the Nasdaq's 12% jump.

A narrow spotlight on Friday's headlines may suggest equities and the labor market are correlated, but a dive into the rest of the employment situation reveals the slow transformation.

In April, hourly wages rose just 4 cents to $23.87, and the average work week showed a 0.2 hour dip to 34.4 hours. The seasonally adjusted U-6 total unemployed rate, which includes unemployed, underemployed and part time, rose to 13.9% from March's 13.8%. For broader context, the U-6 rate was 14.5% in April 2012.

"There has been progress in the last six months, in the last 12 months; it's just that it is achingly slow given how far away from full employment we are," Gary Burtless, a labor economist at Brookings Institution, said in a phone call from Washington D.C. "So if you're unemployed I guess there's no reason to break out the champagne."


The labor force participation rate -- civilians who are employed or actively seeking work -- remained unchanged in April at 63.3%, but has ticked lower from 63.6% in January. A peak at the Bureau of Labor Statistics's participation rate since 2003 reveals a deep decline in the participation rate, which continues to bode poorly for the unemployed.