unemployment

Inflation Threat: Is It Real?

      Employment growth is the key to inflation. Today the employment report was released by the BLS. A reasonable 213,000 net new jobs were created yet unemployment rose from 3.76% to 4.05%, which was rounded off to a 0.2% increase. This is because when the economy improves the discouraged hidden unemployed come out of hiding and seek employment. Based on the fact that the prime age group aged 25-55 used to have an 83% participation rate and this is now about 1.3% lower, then that may signal that there are at least 1.3% hidden unemployed, although this needs to be calibrated with the total work force and not merely prime age group.     People worry about rising wage inflation but

2018-07-06T10:03:05+00:00July 6th, 2018|mayflowercapital blog|Comments Off on Inflation Threat: Is It Real?

Low Unemployment Rate Very Misleading

   The unemployment rate was released today by the BLS showing a drop in the rate to 3.8%. But two-thirds of the improvement in May was due to labor force dropouts and on third due to actual growth. The crucial “prime” age cohort of age 16-54 had a reduction in their Labor Force Participation Rate (due to dropouts), while the age 55+ group had an increase in participation.   Employment had increased by 1.69% annually since 2012. The average job gains of 207,000 per month this year are far below the gains of 320,000 per month in the 1990’s. Since February, 2015 monthly payroll gains declined from 265k to 223k in a downward trendline. Labor Force Participation Rate was 67%

2018-06-01T18:04:16+00:00June 1st, 2018|mayflowercapital blog|Comments Off on Low Unemployment Rate Very Misleading

Record Low Unemployment: Will Inflation Get Out of Control?

  The Employment Report released by BLS today said unemployment dropped to 3.9% and 164,000 new jobs were created. That seems like it is a full employment economy which threatens to increase inflation and cause rising interest rates. However, very little real wage growth has occurred. Wages have been rising 2.7% but CPI is 2.0%. The token 0.7% real increase in wages is nothing after workers spent the last ten years waiting for the economy to improve. Typically when full employment is reached it becomes a bidding war to hire workers and pay rates beat inflation by at least 2 or 3 percent. The current climate of very low real wage increases implies we are not in an inflationary true

2018-05-04T14:37:21+00:00May 4th, 2018|mayflowercapital blog|Comments Off on Record Low Unemployment: Will Inflation Get Out of Control?

Employment Report: Lower Rate of Employment Gains Results In Stock Crash

The employment report was released today by the BLS with a significant decline in the new jobs at only 102,000 new jobs, only a third of last month’s. The 60 day average, adjusted for excluding volatile retail and construction jobs, was 165,000 which is near the long run average of 170,000. Thus employment continues to grow slowly. The economy needs 125,000 new jobs simply to offset population increase so the net increase adjusted for that was only 40,000 a month using a two month average. That’s a 0.35% annualized rate of improvement in the unemployment rate. Wages have been rising recently at about 1% faster than inflation, although this late in the cycle, with unemployment at 4.1%, real wage gains

2018-04-06T14:50:04+00:00April 6th, 2018|mayflowercapital blog|Comments Off on Employment Report: Lower Rate of Employment Gains Results In Stock Crash

Employment Report’s Huge Gain Very Misunderstood

Today the monthly BLS employment report was released showing 313,000 new jobs, a much higher increase than the typical 170,000. Nominal hourly wages up 3.2% annualized (using 3 mo. average); YoY up 2.6%. David Rosenberg says wage gains are real; and says the report is a “perfect report”; importantly that manufacturers added 100,000 jobs instead of the low wage service jobs.     Economist Mike Bazdarich has an excellent commentary, using his methods, showing only modest, gradual increase in employment and wages occurred when excluding two volatile occupations.     ECRI says unemployment rate actually increasing in recent months if one looks down to the third decimal place. Remarkable: “All of the growth in jobs since 2000 has been among those 55

2018-03-09T14:40:40+00:00March 9th, 2018|mayflowercapital blog|Comments Off on Employment Report’s Huge Gain Very Misunderstood

Wage Inflation Not A Threat To Bonds

    The BLS employment report issued February 2 hinted at a tightening labor market and thus rising inflation. But the facts are that the JOLTS survey issued February 6 said new hires fell to 5.488 million from 5.493 million in the past month. Also, since the population is growing then at least 0.1 million new jobs are needed each month just to have the unemployment rate stay the same. The BLS employment report referred to rising wages but those were mostly in supervisorial positions and concentrated in finance. So a commissioned stock broker getting a year end bonus (caused by bubble economics) may have accidentally created the impression that all workers are getting inflationary pay raises, and thus triggered the

2018-02-07T18:25:10+00:00February 7th, 2018|mayflowercapital blog|Comments Off on Wage Inflation Not A Threat To Bonds

Stocks Crash As Better Employment Picture Threatens Stocks

   Today the BLS published the monthly employment situation payroll report: 196,000 net new jobs, 2.9% annual raises, but Dave Rosenberg says it is weak with U6 unemployment going up, and a lot worse for African-Americans at 7.7%, it was 6.8%. Average hourly earnings for nonsupervisory employees, who are 80% of workers, rose 0.1% month over month; year over year 2.4% or only 0.8% real rate for nonsupervisory workers. Core durable goods order using real per capita data is doing poorly. They grew 1% real a year since the economy got out of recession in 2009, but a clearer picture is from a top to a top so from the 2007 top to now it plunged a net 18% (or

2018-02-02T14:14:10+00:00February 2nd, 2018|mayflowercapital blog|Comments Off on Stocks Crash As Better Employment Picture Threatens Stocks

Bond Yields Slightly Higher With No Fundamental Reason

    The ten year Treasury closed today at 2.65% yield just a hair over one of several trend lines. News items that may have propelled rates higher are reports that the tax cut will produce slightly more stimulus than expected, and that the unemployment rate in some categories is at record 45 year lows. The tax cut, in my opinion can be best viewed by looking at the incremental increase to the deficit of $150Billion a year which is 0.75% of the total federal debt, which is less than the 1.5% rate of inflation. Thus on an inflation-adjusted basis, taxes were not cut. For individuals they may find they save perhaps $800 a family a year but these cuts expire

2018-01-19T15:14:54+00:00January 19th, 2018|mayflowercapital blog|Comments Off on Bond Yields Slightly Higher With No Fundamental Reason

Full Employment and Rising Rates: What Will Happen to Bonds?

Today the BLS issued the monthly nonfarm payroll report: 148k new jobs; less than the 200k expected. Assuming it is needed to have 125k a month to keep up with the population increase then the real increase was 52k, which if annualized, would be a 0.4% improvement in another 12 months, which is a rather weak number. Jeff Snider of Alhambra Partners showed there was a 1.3% labor market growth in 2017; as I see it, the results in 2017 were lowest of any year, from 1995 to 2017, for years that were not in or adjacent to a year of recession such as 2001 or 2007-2010. The chart of labor growth looks like a head and shoulders top based

2018-01-05T16:25:30+00:00January 5th, 2018|mayflowercapital blog|Comments Off on Full Employment and Rising Rates: What Will Happen to Bonds?

Inflation Surprise For The New Year?

   The New Year leads to advisors making annual predictions for the year. One famous advisor who I disagree with said wage inflation and Treasury bond yields will reach 4% in 2018. Currently the ten year Treasury is 2.46% and it would be dramatic if it went to 4%. Inflation, in my opinion, comes from wage increases and full employment which are then used to get loans which increase the money supply. The dominant economic paradigm is for the SP500 companies, that are 75% of the economy, to keep costs under control and cut costs and make profit increases by cutting costs instead of raising prices. It would a huge change for them to decide to start raising prices so

2018-01-02T13:59:27+00:00January 2nd, 2018|mayflowercapital blog|Comments Off on Inflation Surprise For The New Year?