Jury is out on US jobs data

The US Department of Labour‘s latest job statistics, showing 63,000 non-farm jobs were eliminated in February, are disquieting but should not be read as conclusive evidence that the US economy has gone into recession, says Cory Gilchrist, manager of Gartmore’s US Opportunities Fund and the SICAV US Opportunities Fund.

The 7 March release of the jobs numbers, which are often subject to revision in either direction, had the effect of unnerving investors given the unexpected job cuts.“This is a very challenging market at the moment. We are paying close attention to every data point from all sources as we seek to identify inflection points in the US economy and other regions of the world,” says Cory at Colorado-based Marsico Capital Management, Gartmore’s US sub-adviser.

Certainly, the economy is on high alert, with, among other factors, oil prices surging and credit markets deteriorating on an almost daily basis, comments Cory. However, the ‘big easing’ by the Federal Reserve and the prospect of further rate cuts later in the month – possibly in the magnitude of 50-75 basis points – should eventually have the desired effect, he adds. Plus, the Federal Reserve announced on 12 March that it would, together with other major central banks, inject liquidity into money markets. Following the announcement, the Dow Jones Industrial Average saw its biggest increase in points in more than five years.

Also, on a positive note, global growth appears to be intact and this is less dependent than before on the US economy, observes Cory. Consequently, the US Opportunities Funds continue to favour US-domiciled companies with exposure to global growth. An example of such a holding in both Funds is fast-food company McDonalds, whose February same-store sales were boosted by growth in European revenues. Another strand of the current approach is seeking out unique unit-growth companies, such as Google (notwithstanding recent blips earlier in the year).