unemployment

Huge Jobs Increase. Result: Lower Interest Rates

   The monthly employment report was released by the BLS today showing a big increase in employment of 235,000. Yet bond yields dropped by two basis points today. The unemployment rate declined 0.1% to 4.7%. But if one adjusts for extremely warm weather, the second warmest February in 96 years, then there would have been 181,000 less jobs bringing the total increase of jobs to 55,000 which is less than the 120,000 monthly jobs increase needed to keep up with population growth. The weather adjusted and population growth adjusted number, in my opinion, would be 55,000 minus 125,000 equals negative 70,000 jobs created, implying that the unemployment rate actually rose on a path that will in a year result in

March 10th, 2017|mayflowercapital blog|Comments Off on Huge Jobs Increase. Result: Lower Interest Rates

Employment And Inflation Trends Not A Threat To Bonds

On Tuesday the 14th there was quite an inflation scare which made bond yields go up to 2.51% for the ten year Treasury. Now yields have retreated to the levels of a few days ago at 2.44%. The CPI “headline” Year over Year came in at 2.5% and the core was 2.3%. The YoY CPI has was 2.5% five years ago but decreased later. The root cause of inflation is an increase in hiring and wages, which leads to the use of bank loans, which in turn expands the money supply, causing inflation. But what causes hiring and wages to increase? It is not the increase in wages and work hours for dead end minimum wage jobs, rather it is

February 16th, 2017|mayflowercapital blog|Comments Off on Employment And Inflation Trends Not A Threat To Bonds

Big Hiring Gains Are Bogus And Not Inflationary

Today the BLS issued the monthly employment report (based on the “Establishment” survey, one of two BLS surveys) showing 227,000 new jobs last month. However, 305,000 jobs held by the prime age workers (age 25-54) were lost. This implies that the source of new jobs were either for new, low paid entrants to the labor force or to near-retirement age people who are taking jobs away from others. Wage growth was weak. The unemployment rate went up 0.1% to 4.8%. The U-6 rate, at 9.4%, showing the discouraged, hidden unemployed, is roughly at the same rate that it was during the worst period of the previous cycle, even though the economy is now at the top of an eight year

February 3rd, 2017|mayflowercapital blog|Comments Off on Big Hiring Gains Are Bogus And Not Inflationary

Is 4% the True Sign of the End of The Bond Bull Market?

The Federal Reserve left rates unchanged during today’s meeting. The rate for the ten year Treasury went up to 2.47%. Typically rates rise a few days before the monthly release of the BLS’s Employment Report due Friday morning. A clearer view of rates will probably be offered by the market on Friday afternoon. Some bond experts like Bill Gross say that once the ten year Treasury yield exceeds 2.6% then the 35 year bond bull market will be over. (The market edged in at 2.62% briefly then retreated). Another expert, Jeff Gundlach, said 3.0% is really when the trend line will be broken signifying the end of the bond bull market. Economist Dave Rosenberg said, in a Macrovoices podcast recently,

February 1st, 2017|mayflowercapital blog|Comments Off on Is 4% the True Sign of the End of The Bond Bull Market?

Employment Worsening, Bond Yielding Dropping

The Employment report was released by the BLS today showing 178,000 new jobs, causing the unemployment rate to drop by 0.2% to 4.6%. However 226,000 people dropped out of the work force, thus the job gains were an illusion. The Household survey showed full time jobs declined 99,000 in the past three months. Workweek hours are down 0.5%. In the past three years 571,000 waiters, etc. jobs (where the minimum wage is $2.50 because of tipping) were added, and 34,000 manufacturing jobs were lost. The 10 year Treasury yield dropped from yesterday’s high of 2.49% to 2.38% and is close to halfway between the high of yesterday and the midpoint of the post-election data. An old rule of thumb is

December 2nd, 2016|mayflowercapital blog|Comments Off on Employment Worsening, Bond Yielding Dropping

Sharpe Ratio For Labor Income: A Warning For Investors

The statistic that the average inflation-adjusted wage didn’t increase since 1989 doesn’t dive deeply enough into this topic. When analyzing cash flows for investments one should review the Sharpe ratio showing the excess return divided by the standard deviation (as a proxy for risk). If there is too much risk required to get a certain type of return then the investment isn’t worth doing since on a risk-adjusted basis some of the time the payback might be inadequate in proportion to what one expected to get. It helps to think of a person’s career like an investment in a stock. The risk to workers in the past 30 years is that their jobs changed from a stable full time job

November 25th, 2016|mayflowercapital blog|Comments Off on Sharpe Ratio For Labor Income: A Warning For Investors

Sharpe Ratio For Labor Income: A Warning For Investors

I think the statistic that the average inflation-adjusted wage didn’t increase since 1989 doesn’t dive deeply enough into this topic. When analyzing cash flows for investments one should review the Sharpe ratio showing the excess return divided by the standard deviation (as a proxy for risk). If there is too much risk required to get a certain type of return then the investment isn’t worth doing since on a risk-adjusted basis some of the time the payback might be inadequate in proportion to what one expected to get. It helps to think of a person’s career like an investment in a stock. The risk to workers in the past 30 years is that their jobs changed from a stable full

November 8th, 2016|mayflowercapital blog|Comments Off on Sharpe Ratio For Labor Income: A Warning For Investors

Employment Report Weaker Than It Looks

The monthly employment report released today showed 166,000 new jobs. But adjusted for population growth that’s about 41,000 new jobs. At this rate unemployment will drop from 4.9% to 4.5% in a year. It will take two years to reach 4.0% which is the definition of full employment. The past fourth months had a 222,000 increase so October’s increase was smaller. The main beneficiaries of new hiring are those at the bottom of society. They have many economic weaknesses which will make it hard for them to qualify for a raise or a bank loan and thus this class of worker can’t cause inflation. The workers who can cause inflation are those with above average skills and pay. If they

November 4th, 2016|mayflowercapital blog|Comments Off on Employment Report Weaker Than It Looks

Will Rising Employment Create Inflation And Damage Bonds?

Friday the monthly employment report will be released by the BLS. It may show a significant increase in employment and earnings. This would make interest rates rise and bond prices fall. The big picture is that rising employment is a lagging indicator occurring at the top of a cycle. Economic conditions are usually rosiest just before elections and then after elections tax increases are legislated and that acts to dampen the economy thus lowering employment and thus lowering interest rates. While I expect the EU and Japan to back off from extreme central bank negative rate policy they will still keep rates low and their actions will flow straight through to U.S. bond markets, even if the Fed seeks to

October 5th, 2016|mayflowercapital blog|Comments Off on Will Rising Employment Create Inflation And Damage Bonds?

Employment Report: No Sign of Inflation

The BLS released the monthly employment report showing 151,000 new jobs using the “establishment or payroll” survey and no change in the percentage of unemployed. Since 112,000 new jobs are needed each month to keep up with population growth then the increase net of population growth was only an annualized improvement of 0.3%. At this rate it will take three more years to reach full employment. Since the recovery is already seven years old then a recession will probably happen sooner than the time when full employment is reached. The other BLS survey, the “Household” one, showed a 97,000 increase. When this data is adjusted to compare apples to apples with the Establishment survey then employment fell by 128,000 jobs.

September 2nd, 2016|mayflowercapital blog|Comments Off on Employment Report: No Sign of Inflation