Category Archives: employment

US wage growth and lower oil prices

January 25, 2016 By in Uncategorized, wage gains Tags: , , , 1 Comment

For the past year or so, income for low-paid workers has been growing steadily at about a 4% annual rate, double the speed at which income has been expanding for workers in general.  In addition, it seems to me that low-income workers benefit the most, in percentage terms, from the fall in energy prices.

This is not to say that low-income workers are exactly feeling flush.  But in incremental terms, they’re becoming better off at greater speed than their high-income counterparts.

In addition, many of the firms patronized by the wealthy, especially luxury goods purveyors, are international concerns exposed to things like the ongoing shift in China’s spending away from Western goods to domestic, as well as the lower value in dollars of their foreign sales.

Both trends suggest a shift in Consumer Discretionary exposure away from large multinationals and toward smaller, US-focused firms that cater to the man in the street.  The trick, though, is to find companies where the benefit from higher sales is greater than the increase in the wage bill for lower-income employees.  TGT, anyone?

Employment Situation, October 2015

November 6, 2015 By in economics, employment, Employment Situation report Tags: , , , , , Leave a comment

The Bureau of Labor Statistics, part of the Labor Department, issued its monthly Employment Situation report for October this morning at 8:30 est.

After two below-trend reported jobs gains in August and September, the October figures were very much above trend, at a gain of +271,000 net new jobs.  Revisions to the prior two months were mildly positive, at a total of +12,000, but didn’t change the general picture of shifting into a lower economic gear painted by those ES reports.

The main significance of the October report, I think, is to reaffirm the health of the economy and to remove any hesitation the Fed might have had about raising interest rates slightly next month.

In futures trading, Wall Street is so far taking a ho-hum attitude to this news.  S&P futures have declined by about a quarter of a precent from where they were before the announcement.

 

the jobs report and last Friday’s trading

October 5, 2015 By in Current Market Thoughts, employment, Employment Situation report, securities markets, stock market, Trading Tags: , , , , , , , 1 Comment

I had decided last week to write today about what happens in an overall market when one or two significant sectors are performing poorly and have weak future prospects.  Is the rest of the market indifferent to the laggards?   or do the weak sectors work to sap the strength of sectors where business is good and the outlook favorable?  This is potentially important, given the miserable performance of the Energy, Materials and Industrials sectors–and the likelihood of no positive news for these areas of the stock market for a considerable time to come.

After I saw the sharp negative reaction of the market to the so-so Employment Situation report released Friday morning, I decided to push that post back until tomorrow and write about Friday’s market action instead.

 

There’s been  lot of discussion recently about the role of computerized trading in influencing the day-to-day, or hour-to-hour, direction of stocks on Wall Street.  Understanding what effect this trading is having on stocks is the first step in the stock market’s judo-like process of beginning to use the momentum of such trading against itself.  For investors like us with long holding periods in mind, one might argue that day-to-day volatility has little significance.  Even so, it seems to me it’s important to be able to read the signals the market is sending    …alao, understanding the rhythms of daily trading can be some help in determining the timing purchases and sales we may be thinking about for strategic reasons.

 

Last Friday, stock index futures fell immediately on the Labor Department release of the monthly ES report.  Stocks fell sharply at the open, an hour later.  Equities remained depressed for about an hour, before beginning a steady ascent through the rest of the day.  The S&P 500 closed on its high.  This is a particularly positive sign, since professional traders tend not to want to hold positions over the weekend if they have even the slightest worries.

On the surface, the ES report isn’t encouraging reading.  The economy gained 142,000 jobs last month.  That was substantially below the average gain for the past year, and it was much less that the 200,000 new positions that economists had estimated.  More than that, the two previous months’ estimated job gains were both revised down.  All of this was emphasized in media reports that were available a minute or two after the 8:30am edt release of the information.

Several important factors weren’t mentioned, however:

–economists’ estimates of +200,000 new jobs were, as usual, very close to the average monthly gain in jobs over the past year, leading me to conclude that getting this figure right is not their highest priority

–that’s understandable.  The Labor Department says that the monthly job figures from its Establishment survey are correct to within +/- 100,000, meaning a “miss” of 50,000 or so jobs contains no statistically significant information

–we’ve seen outlier months occasionally over the past several years.  In each case, job gains have soon returned to trend

–the latest JOLT (Job Openings and Labor Turnover) Survey from the Labor Department shows that the country has 5.7 million unfilled jobs at present, a figure 25% higher than at the previous economic peak in 2007.  This is also an all-time high for the JOLT tally, which makes it hard for me to believe that the September jobs report heralds a significant downshift in US economic activity.

How do I read Friday trading?

I think computers programmed to read news services pushed the market down, both in pre-market futures trading and in the first hour of actual stock trading, as well.  Human traders (smarter computers?) waited for the downward momentum to exhaust itself and, recognizing that this initial move was a mistake, then began buying.

Although I think my analysis is correct–Friday’s trading pattern was very unusual–I also find it very odd that someone (actually lots of someones) would be content to trade on a government report + questionable sentiment indicators.  But maybe that’s the world we’re in today.   If anything, it argues for higher day-today volatility.  It also suggests that there’s money to be made for those with better-than-newspaper knowledge, a trading temperament and time to watch the market closely.

 

 

 

 

Georgetown: Good Jobs Are Back

August 18, 2015 By in economics, employment, Employment Situation report, median incomes, wage gains Tags: , , , , , , , Leave a comment

Georgetown University’s Center on Education and the Workforce published an interesting analysis on the growth of employment during recovery from the recent recession.

The report counters what it describes as media portrayals of the recovery as being built on the creation of low-playing, low-skilled, benefitless, no-advancement positions as, say, baristas, Uber drivers and hamburger flippers.  Georgetown points to both the New York Times and the Wall Street Journal as among the culprits, citing articles written from 2012-15.  While this characterization may have been true in 2008-2009, the opposite has been the case during the five years since.

Over the past half-decade, job growth has been driven by “good jobs,”  which Georgetown defines as being in the upper third of their occupations by median wages.  Such positions pay $53,000/ year, or 26% more than the median for all full-time workers.  86% of “good jobs” are full-time, 68% offer health care benefits and 61% an employer-sponsored retirement plan.  Such benefits are typically add 30% in ecnomic value in addition to wages.

How can the media have been so wrong?

It’s because reporters have examined employment data by industry–looking at the types of products and services provided–rather than by the position being filled.  In other words, the reporters ended up counting a software engineer, an accountant or a marketing executive hired by Starbucks as a barista.

Looking at positions instead of industries, paints a different picture.

“Good jobs” have accelerated sharply since 2010.  Comprising 2.9 million out of 6.6 million total new jobs, they are dominating the recovery.  There are more “good jobs,” and more low-paying ones, today than there were in 2008.  Middle-wage jobs, however, are still 900,000 below their pre-recession levels (no explanation given by Georgetown for this).

 

The Georgetown report also shows that from 2010 on, workforce participants without at least some college have actually lost jobs across all wage categories–high, average and low–even though employment was expanding rapidly.  There are 39,000 fewer workers in “good jobs” who have high school diplomas or less (during a period when 3.1 million net new employees were hired), 280,000 fewer in average-paying jobs (2.1 million hired), and 159,000 fewer in low-paying ones (1.9 million hired).  It’s unclear how much of this replacement is due to employees upgrading their credentials, how much to changes in the labor pool, how much to changes in hiring practices…  In addition, college graduates made up 97% of the “good job” hires, 62% of the average-job hires and 39% of the low-paying hires.

 

I’m mostly interested in the economic implications of the Georgetown study.  But I find the report’s comments (p. 6) on the implausibility of the media articles to be interesting, and a little disturbing, as well:

“We find these media stories to be counterintuitive because they disagree with the well-established cyclical patterns of economic behavior. The consensus among economic researchers is that the economy has seen a strong shift toward college-educated workers since the early 1980s. The long-term shift in hiring, the increased economic value added, and the wage premium of college workers have persisted and strengthened for more than 30 years in periods of both recession and recovery. If the reports that the economic recovery was only producing low-wage, low-skill college jobs were true, they would suggest a profound reversal of structural trends in technology and globalization in place for decades. This seems unlikely given the weight of continued evidence to the contrary.”

I read this paragraph as addressing the issue of whether reporters just wrote pieces off the top of their heads or whether they may have simply been repeating the results of interviews with informed sources in the world of economics or government.  Georgetown seems to be saying pretty strongly that no credible person could possibly have told them anything remotely like they were printing.

 

 

 

 

Employment Situation, July 2015

August 7, 2015 By in employment, Employment Situation report, wage gains Tags: , , , , , Leave a comment

the report

At 8:30 am eastern time, the Bureau of Labor Statistics of the Labor Department released its monthly Employment Situation report for July 2015.

The figures, a gain of +215,000 jobs, all but 5,000 of them in the private sector, were virtually identical with the consensus estimates of domestic macroeconomists.  Revisions of prior months’ data were mildly positive–a total gain of another +14,000 jobs.

Wage gains continued at an unremarkable +2.1% year on year advance.  The unemployment rate remained steady at 5.3%, which is low by historical standards.

significance

It seems to me that this report pretty much removes any doubt that the Fed will begin raising the Fed Funds rate next month.

As I’m writing this, financial markets seem to be taking the news in stride.  We’ll see more as the day progresses.

What this report reinforces, as have prior ES reports in 2014-15, is that the economy in the US is growing strongly enough to create jobs for all those leaving schools and entering the workforce for the first time, plus another one million or so positions a year to eat into the rolls of the unemployed.