Retail ETFs Still Thriving Thanks to Jobs Data and Wishful Thinking

The U.S. shed more than 250,000 jobs, but this is apparently a good number. Economists had forecasted 325,000 job losses.

Officially, unemployment has now dipped from 9.5% to 9.4%. Pundits are now questioning whether we will still see 10% unemployment or not.

Yet even a casual observer would have difficulty understanding how 1/4 of a million people can lose their jobs while the overall unemployment rate declines. A statistical aberration? Not really, if you have 500,000 or so folks leaving the workforce altogether (Think "Forced Retirement"), the unemployment rate of those who "participate" in the labor force will drop.

In truth, there are scores of people who have moved out of the workforce who want jobs; unfortunately, there are none to be found. Indeed, I've encountered a fair number of "50-somethings" who have completely given up on trying to find employment.

But enough economic reality for the moment. It's clear, even to the most pessimistic commentator, that "this" recession is toast. What's not clear is whether there will be any meaningful expansion for the U.S., or whether the next few years will see stagnant growth with higher-than-targeted inflation.

The financial markets don't zoom ahead without resistance. The uncertainty over what type of economic environment will emerge from the current recession should give the markets reason to pause.

That said, if there's one area that should surprise every market watcher, it would be the success of retail ETFs. Save the big box stores, retailers failed miserably in July and they showed little evidence that a back-to-school surge was in the making. Worse yet, with more and more folks not working… by choice or by layoff… who would expect goodwill for this consumer sub-segment?

Nevertheless, SPDR Retail (XRT), PowerShares Dynamic Retail (PMR) and the Retail HOLDRS (RTH) are all performing exceptionally well. Of the 3 retail ETFs, 2 of them have register 1-year gains (XRT and PMR). Moreover, all of them are crushing the S&P 500 SPDR Trust (SPY) — an ETF that still remains 20% below where it was on August 8, 2008.

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.