Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The U.S. Employment Outlook: Bad For Paychecks, Good For U.S. Stocks

Economics / Employment Apr 13, 2010 - 06:25 AM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleJon D. Markman writes: You undoubtedly know by now that the U.S. economy added 164,000 jobs in March. While that was the best number in ages, anyone who looked closely at the payrolls report issued by the U.S. Labor Department would discover that it was actually riddled with problems.


Indeed, the report sends a very clear message: While the March report is consistent with a gradually improving labor market, the numbers hardly convey a sense of an economy that's zooming its way back to health.

Still, as we'll see, this employment scenario could be a good one for U.S. stocks.

When I need insight on workplace stats, I always turn to the great independent labor analysts Philippa Dunne and Doug Henwood, of the New York-based Liscio Report newsletter. Here are their views on the report, along with my added comments:

•Nearly a quarter of the 162,000-job gain came from a 41,000-job gain in goods production, which is very unusual. It was nearly a third of the private sector gain of 123,000. That's a good sign of increased manufacturing.
•Mining and logging were up 9,000, construction was up 15,000 (a swing of almost 75,000 from its average over the last year), and manufacturing was up 17,000. These are all signs of increased basic activity, which is positive.
•Within construction, all the gains were in non-residential and civil; residential fell by 10,000. So that's a plus for commercial real estate and highway construction, but not for the homebuilders.
•Private services added 82,000 jobs, with almost half (40,000) being added by temp firms. Wholesale trade added 9,000, and retail added 15,000. Leisure and hospitality was up 22,000 – mainly because of an exuberant gain in bars and restaurants. We can see the hotel and restaurant stocks have been booming lately, and now we know that the companies are actually seeing business improvement, meaning the action we've seen in their shares isn't just speculation.
•There were some losses in the service sector, with information services shedding 12,000 jobs and financial services a total of 21,000. This is probably a result of bank consolidations, in which a lot of duplicate mortgage and IT positions get eradicated.
•The U.S. healthcare sector added 27,000 jobs – twice February's gain and considerably above the recent average. This supports the recent advance in hospitals shares and the past month's revival in medical stocks of all stripes.
•Without the 48,000 temporary U.S. Census workers, the government ranks would have declined; minus the Census, federal employment was flat, and state-and-local employment was off by 9,000 jobs. This is good news, and surprising. When the public sector siphons workers from the private workplace, innovation and productivity decline.
•A little over half of March's gain was attributable to temporary workers of one kind or another. This is often seen as a negative, but in this case is not – most new workers in past economic recoveries have started out as temps.
•The yearly loss in total employment is now down to 1.8%, and for the private sector, the loss is 2.1%. These are major improvements over the numbers from just six months ago. We need monthly job gains of about 100,000 to keep up with population growth, so we can take comfort in knowing that this month's headline number comfortably beats that benchmark.
•Earnings were remarkably weak, which is the biggest problem. In the new all-worker series, hourly pay was off 0.1%, pulled down by a 0.6% decline in manufacturing. Yearly gains in hourly earnings were 1.8% for all workers, and 2.1% for production workers. Both are down a full point in less than a year. The good news is that not only are there no inflationary pressures coming out of the labor market, but these sorts of numbers raise concerns about purchasing power, and even have a hint of deflation about them.
•The average workweek rose 0.1 hours for all workers, and 0.2 hours for production workers. While these are nice gains, they only take us back to where we were in January.
•The household survey looked stronger than its payroll counterpart in some respects, but the composition of employment doesn't look so great. The employment/population ratio rose 0.1 point, its third consecutive rise, taking it roughly back to where it was last fall.
•The U.S. unemployment rate held steady at 9.7% (though it was 0.0008 percentage points away from being rounded up to 9.8%, meaning it would have represented an increase). In a bit of good news, the number of permanent-job losers declined by 234,000 to its lowest level in almost a year. The broad U-6 rate rose 0.1 point to 16.8%. The number of workers who took part-time jobs for economic reasons was up 295,000. This makes you wonder about the quality of jobs people are finding, a concern that is supported by the slippage in average earnings.
•The probability of a person who was unemployed in February finding a job in March fell to 18.7% from 20.1%, an all-time low for this series, which goes back to 1948. The separation rate also fell, reaching 2.3%, which is close to an all-time low. This means that while it's good that the job-loss rate is ebbing, people don't have enough confidence in the job market to quit voluntarily.
•In summary, Dunne and Henwood observed that the March numbers are consistent with a gradually improving labor market. But it hardly paints a picture of one roaring back to health. The headline gain was at the 42nd percentile of changes since 1950; without the Census workers, it would have been at the 34th. (Higher is better).

The bottom line: It's a bad news/good news scenario. Combined with weakness in hourly earnings, the payrolls report offers comfort to bulls that the economy is getting traction. But it provides no evidence of the sort of strength that would lead the U.S. Federal Reserve to worry about wage inflation. So figure that the Fed will stay with super-low rates all year, which helps the stock market in a huge way.

Source : http://moneymorning.com/2010/04/13/u.s.-stocks-2/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in