Category: Jobs and Employment (Page 1 of 3)

WCM Chart of the Week for November 10, 2021

There were several positive aspects of last week’s BLS report on labor market conditions. Unemployment fell to 4.6% showing steady progress towards the multi-decade lows experienced prior to the pandemic. However, the overall labor market participation rate, at 61.6%, may be stagnating. Segmenting key age group participation rates (shown in this chart) unmasks a troubling trend — younger workers in the 18-24 year age bracket and prime aged workers in the 25-54 year old demographic are steadily returning to the workforce while older workers are not. Furthermore, participation in this older segment of the labor pool has receded to pandemic lows. There are several reasons for this, ranging from the natural consequence of an aging population to credible fears of viral and variant infections compounded by a booming stock market that has inflated retirement accounts potentially advancing planned retirement dates. Fewer people working, whether by choice or not, leads to lower tax receipts at a time when the US has persistent fiscal deficits. [chart courtesy of BLS, Bloomberg LP © 2021]

Charting COP-26 and the Path to Zero, November 5, 2021

Yesterday a consortium of mostly Anglo and European countries signed a statement affirming a commitment to “deliver sustainable, green and inclusive economic growth to meet the challenge of decarbonising our economies, in line with limiting the global average temperature increase to 1.5°C above the preindustrial levels.” The statement covers six categories of targets — Support for workers in the transition to new jobs, social dialogue and stakeholder engagement, economic strategies, local, inclusive, and decent work, supply chains, and Paris Agreement reporting. The important thing we note in this statement is the recognition of the necessity of public/private partnership. The path to zero requires industry and market-wide activation of capital and corporate infrastructure in the private sector and regulatory and reporting frameworks from the public sector that facilitate the private sector’s work. This chart from a May 2021 International Energy Agency (IEA) report “Net Zero by 2050: A Roadmap for Global Energy Sector” provides an excellent overview of the business and industry targets that must be met with the facilitation and support of both governments and NGOs over the next 30 years. The signatories to the statement make sense in that these are many of the wealthiest industrialized nations that have both the capital to pursue this agenda and a high degree of responsibility for having brought us to the climate precipice. However, the lack of presence from Australia, China and Japan is concerning as they must help lead among the community of nations as the most developed and prosperous (polluting) countries of the Asia-Pacific region.

WCM Bonus Chart for July 23, 2021

Because we took a hiatus for the holidays, we have extra thoughts to share. The US Bureau of Labor reported that consumer and producer prices came in higher than the consensus last week and that may have been part of the reason why stocks retreated. We view the consolidation in US stocks as healthy at this point, especially considering strong corporate earnings momentum and analysts increasing their earnings forecasts rather than the opposite, which oftentimes occurs at this point in the year. Forecasters usually have a difficult job but given the condition of the world during the pandemic and the incongruent economic recovery so far, it makes now even more challenging. Global bond markets are suggesting a different read on inflation and the near-term outlook for monetary policy, both benign for risk assets. The benchmark 10-year US Treasury bond yield continues its decent after the near-term peak of 1.74% on March 31st and now at 1.28%. Interestingly, government bond yields in the developed world have also fallen with equivalent US interest rates suggesting that current inflation readings are more of a temporary condition rather than a long-term concern. Disinflationary trends are starting to emerge including declining commodity prices, benign capacity utilization rates and strong productivity levels. If bond yields were trending higher along with stronger inflation readings we would be more concerned about risk assets. [chart courtesy Bloomberg LP © 2021]

WCM Chart of the Week for July 20, 2021

And we’re back. Everyone here is hoping everyone out there has taken some time to breathe a little of the relatively COVID-free air and begin to think about what a return to (the new) normal looks like. In that spirit, this week’s chart is from data provided by Redfin, a national real estate brokerage, on Q1 2021 relocation searches. One of the consequential impacts of COVID and the shutdown was an acceleration of outward migration from major urban centers. We are at a point in the generational cycle where it was to be expected with Millennials anyway, but the urgency was ramped up considerably. With companies reimagining what a workforce and a workplace look like, many people with knowledge economy jobs are able to quite literally work from anywhere. Residential real estate in less urban, less expensive and more desirable areas like Denver, CO (this week’s chart) have seen a crush of interest from urban economic centers and a rapid rise in prices as a result. We envision some of this will reverse, but much of the population movement is likely permanent, changing the economics of numerous communities across the country.

WCM Chart of the Week for June 28, 2021

Since 2013, the NY Federal Reserve has been conducting a consumer survey focused on expectations for rental housing costs in the year ahead. The survey participants expect housing rental costs to soar a record 9.7% in the next 12 months, which is a major increase from the average of about 5.6% since the survey began nearly eight years ago. Survey data and other “soft” indicators, while useful, tend to lag hard data. Granted, there are also widespread reports of labor shortages and lack of transportation, but that is most likely a temporary condition. Taking this and other signals into account, we would be more concerned about inflation becoming a more permanent problem if the bond market was behaving as if the economy was moving towards that. But, the benchmark 10-year US Treasury bond yield, now standing at 1.47%, has descended from its peak of 1.74% on March 31st. Also, some key commodity prices are declining — the lumber crack spread (cited by WCM on June 14th) has fallen over 30% in two weeks. For now, we view these pockets of inflation as more of an adjustment from pandemic-created economic readings rather than a permanent progression towards higher consumer price levels. [chart courtesy NY Fed and Bloomberg LP © 2021]

WCM Chart of the Week for May 11, 2021

The US Census Bureau’s latest survey of retail sales will be reported on May 14th. The Bloomberg survey of economists’ average forecast is for a 1.0% monthly gain, adding to March’s torrid 27.9% annual pace. March’s level of over $614 billion in purchases is nearly 17% higher than the pre-pandemic level of $525.8 billion of February 2020. Consumption, the most dominant portion of the US economy, is clearly rebounding and could further stoke inflationary concerns. This is occurring as hundreds of billions of US fiscal stimulus dollars have yet to be fully deployed with potentially more on the way on top of elevated commodity prices, shortages in building materials and the labor force far from full employment levels. The Fed remains committed to QE, in effect managing the entire yield curve, and has publicly stated that it will tolerate higher inflation. But for how long? Market pressures may force the Fed to act sooner than they currently plan and that could be a major shock to the system. [chart courtesy Bloomberg LP © 2021]

WCM Chart of the Week for March 15, 2021

UN SDG 5 – “Achieve Gender Equality and Empower All Women and Girls”. During Women’s History Month we again turn our attention to equal access to economic opportunity for women in the American workforce. COVID has further exposed one of the ongoing issues with fair and equal compensation, which is the wage gap between women (and particularly women of color) who are mothers and men who are fathers in the same roles. The National Women’s Law Center gathered data pre-pandemic (2018) assessing the compensation picture for frontline occupations which turned out to be the exact roles hurt worst through the last year of COVID, including housekeepers, retail, wait staff, childcare, home health and nursing. Between 15 and 35% are working mothers, and of those as much as 74% of color. The gap between working mothers and fathers ranged from 36 cents down to 13 cents per hour. That is a bit of an abstraction. This week’s chart, taken from the NWLC and the 2018 American Community Survey, illustrates that gap much more starkly in real dollars on an annual basis, and points to the downstream economic drag on food, housing, education, job training and other expenditures and investments families make for healthy living and vibrant communities and economies.

WCM Chart of the Week for January 25, 2021

While conditions in the US labor market remain dire with initial and continuing jobless claim registering persistently high levels, other surveys are showing early reasons for optimism. The US ISM (Institute of Supply Management) produces several influential surveys of their members, and they have released key reports on the impact of COVID-19 on US business trends. The December surveys on US Manufacturing New Orders and Business Production suggest that purchasing managers are optimistic. In fact, the New Orders reading stands at a level not seen since 2004. This is a critical development because, if business optimism remains elevated, eventually staffing will have to expand bringing job seekers back to work. A lot needs to occur for the economy to fully recover — vaccines need to be distributed in mass and be effective, people need to feel comfortable re-engaging in economic activity, and states need to allow businesses and schools to reopen. We believe supply managers are seeing beyond these significant near-term challenges to an economic recovery in the quarters ahead. [chart courtesy US ISM, Bloomberg LP © 2021]

WCM Chart of the Week for November 9, 2020

US equity markets have rallied strongly in the days following the national elections. According to Bloomberg, the S&P 500 delivered its largest day-after-election gain in history — 2.2%. This may seem perplexing because the outcome of the presidential election and even some congressional seats are yet to be finalized and markets generally fear uncertainty. It appears that Democrats will maintain control of the House of Representatives and the Senate will remain under Republican leadership while both majorities will likely be less dominant. The Electoral College does not cast its 538 votes until the first Monday following the second Wednesday in December (Dec. 14, 2020), and a lot of work is yet to be done and lawsuits to be filed in battle ground states between now and then. In light of the political uncertainty the positive tone in US equity markets can be explained by several factors. 

First, the balance in Congress is likely to lead to no drastic change in US tax rates as any proposed increase would stall in the Senate. The same would likely result from any major proposed change to US energy policy. Markets generally respond favorably to policy certainty, or at least stability. Second, another round of stimulus will likely be delivered at some point before the end of the year. This tranche of spending or relief will likely be more targeted to the areas of the economy most impacted by the deadly effects of COVID-19. Meanwhile the Fed will remain accommodative.  Markets thrive with generous stimulus. Third, the US economy is rapidly recovering.  As many expected, the US economy rebounded strongly in the third quarter, exceeding economists’ forecasts. The BEA reported GDP grew at a 33.1% annualized rate while the consensus estimates stood at 32.0% prior to the announcement. Finally, the labor market continues to improve with October employment posted as a +638,000 change in payrolls and unemployment falling to 6.9%, both better than consensus expectations.

WCM Chart of the Week for September 11, 2020

August’s labor market statistics were encouraging and suggest that the US economic recovery is far from normal. According to the BLS, Nonfarm Payrolls expanded 1.37 million in August, slightly above expectations, and the unemployment rate dropped by more than expected to 8.4% versus consensus expectations of 9.8%. While the number of unemployed dropped by 2.8 million, there are still 13.6 million Americans out of a job, which is 7.8 million more than in February.  The nature of the recession, which appears to be largely behind us, is like none ever experienced because it was government induced nearly worldwide. Governments across the globe intentionally suppressed economic activity rather than act in their normal supportive role. Recessions are often caused by structural imbalances such as excess leverage in the financial sector, over-accommodative monetary policy causing hyper-extended stock market valuations, overvalued currencies and commodity price shocks.  These types of imbalances did not exist in the US for the most part prior to the pandemic and that may have set the conditions for a faster recovery. One dramatic example — over 10 million jobs have been recovered since April. By comparison, it took 54 months, from October 2010 to March 2015, for an equivalent number of jobs to be recreated in the aftermath of the Financial Crisis. [data from the US Bureau of Labor Statistics]

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