Employment Situation, December 2016

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

According to the release, the economy gained 156,000 new jobs in December, more than enough to absorb new entrants into the workforce.  Revisions to October figures were -7,000 jobs, to November’s, +26,000, meaning the net revision to the prior two months’ data was +19,000 new positions.

While this is a so-so result, we should consider how much may be due to random statistical variations in the data and, more importantly, how much comes from the difficulty employers are apparently having in finding qualified candidates who are currently unemployed.

More evidence that the latter is becoming a more significant issue comes from the rising trend in average hourly wages the BLS is also reporting.  for the 12 months ending in December, wages have been increasing at an inflation-beating 2.9% rate.  If we, methodologically incorrectly, take the December wage gains alone, the year on year increase is 4.6%.

The bottom line:  good news, and evidence the Fed will likely take as prompting it to raise the Fed Funds rate again sooner rather than later.

The Employment Situation, November 2016

The Bureau of Labor Statistics of the Labor Department released its monthly Employment  Situation report at 8:30 est this morning, as usual.

The results were good.  178,000 net new positions were filled during the month, which is right at the average monthly gain so far this year.  Net revisions were slightly negative, subtracting -2000 positions from prior months’ employment estimates.  The BLS also said wages made no upward progress during November, after having jumped a lot the month before.

The only out-of-the-ordinary figure was the unemployment rate, which fell to 4.6% from 4.9% in October.  We’ll likely find next month that the November figure comes from transitory statistical strangeness that will have already disappeared.

What to make of this ES?

Nothing, really.  In fact, I think that as stock market investors, we should no longer be monitoring the ES for signs of potential labor market weakness.  Instead, we should be on the lookout for indications of surprising strength, possibly in the number of new hires, but more likely in the rate of wage gains.

That’s because I think we’re well past the point where we’ve got to guard against economic weakness.  Instead, we’ve got to be alert for signs of the more likely threat–that the pace of interest rate rises will accelerate from the currently anticipated once-in-a-long-while pace..

The first step in adopting this new mindset, I think, is to consider what the endpoint for increases in the Fed Funds rate–and the resulting terminal interest rate point for 10-year Treasuries, which is the closer substitute for stocks in long-term investors’ portfolios–will be.

More on this topic on Monday.

Employment Situation, October 2016

The Bureau of Labor Statistics of the Labor Department issued its monthly Employment Situation earlier today.  The results were not spectacular, but they were good:

–the economy added +161,000 new jobs last month

–revisions to the prior two months’ figures were both positive, totaling +44,000 positions.

Nothing in this to derail the Fed from raising the Fed Funds rate next month.

wage gains

Average hourly non-farm wages in the US were $25.92 in October.  That’s $0.10/hr more than in September and $.18 more than in August.  This doesn’t sound like much.  But the year-on-year growth in wages over the past year has been $.71/hr, which is a wage growth rate of 2.8%.  If we were to annualize the results of the past two months–not a calculation you’d want to bet the farm on–the growth rate is 4.2%.

Maybe too preliminary, but also maybe an early warning of rising wage pressure in the US.  The importance of that is that we would have (finally) reached full employment–meaning also that the Fed switching to rate-raising mode is at best timely.  At worst, it would mean that the Fed is at least a little late to the party.

Of course, given the scary example of Japan repeatedly tightening policy prematurely and snuffing out economic rebounds over the past quarter-century, the Fed has from the outset deliberately decided that later is better than sooner.  Nevertheless, further wage gains will translate into more aggressive Fed tightening moves.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employment Situation, July 2016

This morning at 8:30 edt, the Bureau of Labor Statistics of the Labor Department released its monthly Employment Situation report for July.

The numbers were strong.

The economy created +255,000 new jobs last month.  Revisions to the prior two months’ data were also positive.  The very weak May figures that caused financial markets alarm bells to ring were bumped up from +11,000 new positions to +24,000; the extra-strong June results edged higher to +292,000 from +287,000.

The effect of this ES report, I think, is to dissipate all the concern about incipient economic weakness that caused the Fed to refrain from raising interest rates at its last two meetings.

Although I’ve never been a big fan of financial companies, traditional banking operations, where interest margins on loans have been severely squeezed by years of easy monetary policy, would seem to me to be the biggest beneficiaries of this development.  My guess is that the ES will also encourage the stock market to continue its drift away from mature cash-generative companies to more capital investment-intensive secular growth names.

Employment Situation for June 2016

Mutual funds on Monday.  Today’s post is about the blowout jobs number reported this morning.

At the usual time, 8:30 am edt, the Bureau of Labor Statistics of the Labor Department released its monthly Employment Situation report today.  In it, last month’s paltry +38,000 new jobs figure was revised down to +11,000.  But April’s number was revised up by an almost offsetting amount.  More importantly, June’s new hires were reported at a huge +287,000 new jobs.

The June report goes a long way toward convincing economists that the very poor jobs showing for May is a statistical quirk, not a signal of a major slowdown in the US economy.  …the Federal Reserve, too, which had cited the May figure  + possible fallout from Brexit as reasons to refrain from raising the Fed Funds interest rate as planned last month.

 

Pre-market reaction to the news was at first subdued, with S&P 500 futures trading just above breakeven immediately after the announcement.  But while I’ve been writing this, futures have improved to a gain of about 3/4 of a percent.

 

Wage gains, another aspect of the ES that investors have been looking hard at–for signs of incipient inflation, and therefore the need to hike interest rates more quickly to stave off excessive price level gains–were very small.  Over the past year, wages have risen at a 2.6% rate. That’s higher than the current inflation level, but not by much.

All in all, a comforting report.