unemployment

Employment Report Shows Weak Economy Justifies Low Yields

   Today the employment report was released by the government’s BLS showing unemployment dropped to 4.1%. This occurred only because of a massive number of discouraged jobseekers who dropped out of looking for work. The Labor Force Participation Rate dropped from 63.1% to 62.7%, which is more than the percentage improvement in unemployment. There is no wage inflation when compensation costs are covered by increasing productivity. Unit labor costs fell 0.1% YoY rate. Most of the loss of jobs to EM low wage countries is hurting the least skilled people who are inherently less productive than highly skilled people. If there is a predominance of highly skilled people remaining in the labor force and they are increasing their productivity then

2017-11-03T14:02:09-07:00 November 3rd, 2017|mayflowercapital blog|Comments Off on Employment Report Shows Weak Economy Justifies Low Yields

Stop Worrying: Yields Aren’t Going Up

    Yesterday the “Bond King” Jeff Gundlach said the bond bull market is over since the ten year Note hit 2.4%. He’s has been concerned that rates will rise a lot. I disagree. I strongly believe in fundamentals rather than technicals. So what if a data point broke thru a line on a chart? The fundamentals for bonds are ultimately governed by unemployment. But unemployment data is misleading and unclear since people with fake jobs like independent contractors, temps, rookie Realtors with no customers, Uber drivers, waiters with a tipable job with a $2.50 an hour minimum wage are distorting labor market data. First these people lost a good traditional job, then they remained unemployed several years, and finally re-enter

2017-10-25T19:20:29-07:00 October 25th, 2017|mayflowercapital blog|Comments Off on Stop Worrying: Yields Aren’t Going Up

Employment Report Supports Bonds

     Today the BLS issued the monthly employment report showing only 156,000 new jobs were added but the unemployment rate increased by 0.1% to 4.4% as more people entered the labor force. Since the population increase of 100,000 new workers a month means that the jobs increase was really only 56,000 ahead of the population increase, that means on an annualized rate, unemployment will be reduced by only 0.46% in a year, before counting the actions of discouraged job seekers trying to reenter the market. An unemployment rate this low is close to full employment but some economists feel that there are roughly 1.5 percentage points of hidden, discouraged unemployed people, who if counted, would make the true unemployment rate

2017-09-01T15:34:17-07:00 September 1st, 2017|mayflowercapital blog|Comments Off on Employment Report Supports Bonds

Employment Report Casts Doubt On Inflation

    Today the monthly employment report was released showing job gains of 222,000, which is typical. Beneath the surface the data shows that in the private sector job losses were 43,000. In the Prime age group of people aged 20 to 55 employment declined 135,000. Perhaps the net gain in jobs came from senior citizens who got a civil servant job and who are desperate to work to make up for low returns on their bank accounts? The real measure of job growth is wage growth but that only grew at 2.5% YoY, not much over inflation. Typically this late in the cycle job growth should be manifested in a bidding war for workers resulting in significant wage growth. The

2017-07-07T14:56:21-07:00 July 7th, 2017|mayflowercapital blog|Comments Off on Employment Report Casts Doubt On Inflation

Weak Jobs Report: Good News For Bonds

    The monthly employment payroll based report was released by the BLS today showing only a 138,000 jobs gain. When netted against the 125,000 monthly population increase this is almost no net gain at all. The labor force participation rate continues to be about 2% below normal which implies 2% of the population are the hidden unemployed and thus the real unemployment rate is about 6.3% instead of the official 4.3%. The normal trend for wages is for them to increase about 4.5% a year at the top of an economic cycle, yet now despite being near the top of a cycle the wages are only increasing 2.5% a year. This 2% shortfall below expected wage inflation is a sign

2017-06-02T13:20:24-07:00 June 2nd, 2017|mayflowercapital blog|Comments Off on Weak Jobs Report: Good News For Bonds

Employment Report Doesn’t Show Inflation Returning

The Labor Force Participation Rate dropped from 66.2% in January, 2008 to 62.9% today. The 3.3% underperformance means that 3.3 percentage points of workers divided by 66.2% who were participating has declined by 5% since the economy topped out in 4Q2007. Today the unemployment rate was released showing it went down to 4.4%, yet PCE inflation is only 1.6%, workers are not getting real wage increases, and the ten year Treasury yield today was unchanged from yesterday at 2.35%. If those missing 3.3 percentage points of workers were willing to go back and search for work and insist on being counted as an unemployed person then the unemployment rate would be 3.3 plus 4.4% equals 7.7% unemployment rate. However, due

2017-05-05T13:35:45-07:00 May 5th, 2017|mayflowercapital blog|Comments Off on Employment Report Doesn’t Show Inflation Returning

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

2017-03-10T13:40:46-08:00 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

2017-02-16T11:44:26-08:00 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

2017-02-03T13:31:40-08:00 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,

2017-02-01T14:05:44-08:00 February 1st, 2017|mayflowercapital blog|Comments Off on Is 4% the True Sign of the End of The Bond Bull Market?