Friday, June 5, 2015

Another "average" jobs report

May jobs growth beat expectations, but that doesn't change the big picture. The economy is still expanding, albeit at a modest pace, and remains well below its potential. It's a slow-growth world we live in, but conditions are nevertheless improving at a rather steady if unremarkable pace. 


Focusing on the private sector's job creation (because that's the only thing that really counts), we see that jobs have grown on average by about 230K per month for the past six months. That's about the same pace we saw during the best years of the previous business cycle expansion.


On a percentage basis, private sector jobs are up at a 2.3% annualized pace over the past six months. Nothing to get very excited about, but nothing to scorn either. Over the past year, private sector jobs have increased by 2.5%.


It's not widely appreciated, but as the chart above shows, public sector jobs growth has been very weak throughout the current expansion. That's very encouraging, because it means the public sector is giving some extra breathing room to the private sector. 

Nothing in this report compels the Fed to tighten, but nothing prevents it from raising rates modestly it is so chooses. Even a 100 bps point rate hike would leave monetary policy in a relatively accommodative and non-threatening position. Nothing to get worked up about here, time to get back to cruisin'.

7 comments:

Joseph Constable said...

Table A8. Self employment surged. Really, self employment isn't hiring. Government jobs surged which IS hiring but the bad kind. Private jobs declined.

Either the A data is bunk or the B data is bunk. Or both.

Rob said...

Scott, thought you might be particularly interested in this article, which uses early-20th century Argentina as a symbol for disruptive economic change such as the Western world is once again caught up in.

https://woodfordfunds.com/insight/pampas-precedent/

William said...

Import Prices Nosedive

"Import price growth has nosedived – in both advanced and emerging economies – to the lowest readings since 2009....In less than four years since their 2011 peaks, import prices have dropped 18% in emerging economies and over 20% in advanced economies. It is a testament to the intensity of the current deflationary pressures that these price declines – though not as steep – are almost as large as they had been during the Global Financial Crisis (GFC).

As in the GFC, this deflation is not just about an oil price plunge. Rather, the prices of a broad range of commodities, as well as manufactured goods, have fallen substantially. It is telling that this has occurred in the context of some 11 trillion dollars worth of global QE since the GFC."

https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-import-prices-nosedive

China Remains Epicenter of Global Deflation

"Monday’s WSJ included an article titled “Glut of Chinese Goods Pinches Global Economy.” The main point is that “China’s excess manufacturing capacity and slowing growth rate are … putting renewed downward pressure on prices.”....When China’s economy was booming, so did its demand for commodities....

As a result, commodity prices soared again in 2009 through 2010. However, China’s factories turned expensive commodities into lots of cheap manufactured goods thanks to the availability of cheap labor. In other words, the trend in the so-called “China Price” was disinflationary, if not deflationary for the world economy. For the seven countries that report their CPIs by goods and services, durable goods prices have been falling steadily since the start of 2001: Eurozone (-1.7%), US (-12.5), UK (-13.7), Sweden (-21.6), Taiwan (-22.3), Switzerland (-23.9), and Japan (-43.7)....

The "China Price" continues to fall as Chinese factories replace labor with automation. The May 5th South China Morning Post included an article titled, “Work starts on first all-robot manufacturing plant in China’s Dongguan.” A total of 1,000 robots will be installed at the factory, run by Shenzhen Everwin Precision Technology Co, with the aim of reducing the current workforce of 1,800 by 90% to only about 200.....

The WSJ article cited above reports: “Prices of all goods imported to the U.S. directly from China have fallen in 20 of the past 38 months.... For U.S. consumers, that is good news. But for policy makers and corporate executives, declining prices present a real challenge. The declines can sap profitability, deter investment and block wage growth, all of which are needed to help the world break out of its years of underwhelming growth.”....

The article notes....that China’s PPI has declined on a y/y basis for 38 consecutive months.

http://blog.yardeni.com/2015/06/china-remains-epicenter-of-global.html

Benjamin Cole said...

Martin Feldstein (right-winger) recently posited the CPI overstates inflation.
We may in a type of deflation now...meanwhile total hours worked in the private sector are back to ...1999 levels.
1990s were great!

William said...

National Federation of Independent Businesses

The latest NFIB survey noted: “Owners report that the labor market is, from an historical perspective, getting very tight. Owner complaints about ‘finding qualified workers’ are rising, job openings are near 42 year record high levels, and job creation plans remain solid. Over 80 percent of those hiring, or trying to hire, in May reported few or no qualified applicants.”

In an obvious dig, the report added that there’s not much the Fed can do to increase the supply of qualified workers.

http://blog.yardeni.com/2015/06/no-soft-patch-for-small-business-excerpt.html

Benjamin Cole said...

Americans are working scarcely more hours than in 1999. If there are labor shortages now, we have become a nation of disabled and decadent.

William said...

Since Scott Grannis is on vacation, I shall offer this up to provoke thought.

Mohamed A. El-Erian: The Quiet Financial Revolution Begins

"....Steadily and indisputably, the financial services industry – with which we all interact, whether as borrowers, savers, investors, or regulators – has embarked on a multiyear transformation. This process, slow at first, has been driven by the combined impact of two sets of durable forces.
On one hand, top-down factors – regulatory change, unusual pricing, and what Nouriel Roubini has cleverly termed the “liquidity paradox” – are at work. Then there are disruptive influences that percolate up from below: changing customer preferences and, even more important, outside visionaries seeking to transform and modernize the industry.....

"As a result of these two factors, established institutions – particularly the large banks – will be inclined to do fewer things for fewer people, despite being flush with liquidity provided by central banks (the “liquidity paradox”). And banks and broker-dealers can be expected to provide only limited liquidity to their clients if a large number of them suddenly seek to realign their financial positioning at the same time. But this is not just about them. The fact is that providers of all long-term financial products, particularly life insurance and pensions, have no choice these days but to streamline their offerings, including a reduction of those that still provide longer-term guarantees to clients looking for greater financial security. The impact on the financial-services industry of these top-down factors will gradually amplify the importance of the bottom-up forces. Over time, this second set of factors will fuel more direct and efficient provision of services to a broader set of consumers, contributing to a reconfiguration of the industry as a whole."....

"For starters, customer expectations will evolve as the millennial generation increasingly accounts for a larger portion of earning, spending, borrowing, saving, and investing. With many of these newer clients favoring “self-directed” lives, providers of financial services will be pressed to switch from a product-push mindset to offering more holistic solutions that allow for greater individual customization. Market-communication functions will also be forced to modernize as more clients expect more credible and substantive “any place, any time, and any way” interactions.

Then there is the influence of outside disruptors. Jamie Dimon, the CEO of J P Morgan Chase, expressed it well in his 2015 shareholder letter, observing that “Silicon Valley” is coming. These new entrants want to apply more advanced technological solutions and insights from behavioral science to an industry that is profitable but has tended to under-serve its clients.

Read more at http://www.project-syndicate.org/commentary/financial-services-revolution-by-mohamed-a--el-erian-2015-06#md9bFLHb1wIEkZIp.99