Employment Situation, April 2017

Happy Cinco de Mayo!

I’ll finish my value investing comment on Monday.

This morning, as usual, the Bureau of Labor Statistics of the Labor Department released its monthly Employment Situation report.

The April ES revises down the weak March figures from +98,000 jobs to +79,000.  However, the April figures have bounced back to +211,000 new positions, well above the recent trend of about +175,000 monthly hires.  This development also suggests that March weakness was a result of unusually warm weather at the start of the year that pulled forward hiring normally done in early spring into late winter.

No sign of accelerating wage gains, though.  Salaries continue to rise at about a 2.5% annual rate.   That’s slightly above inflation.  But despite the unemployment at a 4.4% low, there’s no sign of labor-strapped companies raising the ante in bidding for new employees.  That has been typical behavior in past business cycles, and would create the rising inflation (healthy, at this juncture) the Fed is looking for as a signal to tighten money policy more quickly.

Why is this cycle different?

One plausible alternative is that employees are still scarred by the recession and are afraid to make large wage demands.  Another is that employers are replacing labor with capital, in the form of robots/computers.

 

 

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