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This is the most promising chart that I have seen in a long time. It's put together by the Bureau of Labor Statistics, and it shows the total number of job openings in the economy (in thousands). Job openings as of July 31st were up an eye-popping 47% since the end of 2013. That works out to a 26% annualized rate of growth, which is simply astounding. We haven't seen anything like this since the stats were first collected in late 2000. It suggests businesses are much more confident about the future. Of course, we have yet to see this increased confidence translate into a meaningful increase in hirings, but it is nevertheless a very encouraging development.
Calculated Risk has more on the subject here.
UPDATE: The very strong JOLTS report is rumored to be the cause of today's stock slump. (i.e., "good news is bad news," because good news makes it easier for the Fed to raise rates). If that's true then I think it's a buying opportunity because a rate hike is very unlikely to hurt the economy's prospects. Higher rates typically occur against a backdrop of a stronger economy. They don't weaken a stronger economy until real short term rates exceed 3-4%, and we are years away from that.
19 comments:
I hope for very, very tight labor markets---"labor shortages"---for the next 20 years in the U.S.
Why?
Imagine how the voting public will feel about free enterprise and capitalism if there are 20 years of chronic "labor shortages."
Now switch that, imagine how voters will react to 20 years of high unemployment rates, high joblessness, and soft labor markets.
In which scenario do social welfare programs gain political support and grow?
BTW, the US is a constitutional democracy, and our constitution does not protect free enterprise.
I say, chronic "labor shortages" are the best remedy for creeping socialism, from the left-wing or the right-wing.
Scott:
I simply wanted to tell you how much I enjoy your blog. You always post thoroughly detailed posts. Thanks for the data rich commentary.
Hale: Thank you!
i think i will believe tepper more than grannis.
"BTW, the US is a constitutional democracy, and our constitution does not protect free enterprise. "
I would argue that the 5th Amendment does provide protection of free enterprise, both in terms of the due process requirement with regard to property, and the "takings clause."
Based on your post, I suspect that you would disagree, but I would distinguish between social welfare programs that merely provide a floor, and the government owning the means of production.
Beyond that, anti-trust laws might be viewed as being against free enterprise by some, but alternatively, I think the historically supported view is that they promote capitalism.
Amendment V
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
The US is a constitutional republic. Sovereignty of the individual vs sovereignty the group. This is one reason individual rights and success is paramount to the success of the US in its entirety. The US is a nation of individuals competing for success, therefore creating large scale success as a nation.
The founders were aware of the slight distinction between a republic and democracy, and sought to protect the nation from majority rule. Hopefully the republic can be retained. The 17th Amendment was a major issue in this regard.
The labor market will be interesting moving forward. Demographics will pose problems. Robotics and computing power will pose problems. Governmental policies will pose problems. Will we see the return of the luddites?
Lawyer in NJ: you wrote a highly intelligent comment.
On the other hand, you are a lawyer practicing in New Jersey, where you must be licensed by the state. you wrote a highly intelligent comment. On the other hand you are a lawyer practicing in new jersey where you must be licensed by the state. I cannot practice law in New Jersey. There is an artificial barrier to entry to your profession. So the state can erect barriers to entry for different trades or crafts or industries. This is a teeny-weeny example of the tremendous latitude of the power of the state.
I stand by my statement: we live in a constitutional democracy that does not effectively protect free enterprise. Sheesh, the federal government can tell a wheat farmer the amount of wheat to grow on his land.
There's more than a slight distinction between a Democracy and a Republic. Our Founders wisely spent quite a bit of effort trying to ensure that we never become a Democracy. One of my main fears in life is that Benjamin Cole is right and our country has already become a Democracy...a government of Men, instead of a government of Laws as it was founded.
I think the number one reason for all the risk aversion that Scott Grannis constantly describes is the lawlessness that's occurring as unConstituional laws are passed, a Brotherhood of government officials rule by fiat instead of due process, and unelected lawyers in Black Robes legislate from the bench. All of these actions exceed permitted powers, and create uncertainty and even a certain level of tyranny, however "soft". Whether policies are "good" or "bad" is starting to be subordinate to the fact that a new surging government size and power operates by declaration or force, rather than by actually persuading others and following due process.
Our Constitution is a LIMITING document on Federal power. Most of the things being done by our Federal Government now are forbidden, as they are not included in the Constitution's list of enumerated powers. The Constitution says that any power NOT specifically presented on that very limited list is reserved for the People and the States. Our officials now have enough of their brethren inserted into all areas of government to where they can issue new edicts unchallenged by any real roadblock from the People. The Constitution, itself, outlines a process for adding to the powers of the Federal government by Amendment. These officials know it is too hard and time-consuming to persuade that many people, so they opt for force and collusion for expediency. They have confederates who will rule the action A-OK, whether it comports with the clear language in the Constitution or not.
Wednesday's 400 point reversal down coincidentally occurred while Jeb Bush was trotting out his "pro growth" economic plan on various talk shows, which he bragged "raises taxes on the wealthy by 10%" and create an unprecedented larger number of lower income residents who will pay ZERO taxes. He plans to limit interest and other deductions for corporations and individuals, claiming to "simplify" the tax code. Jeb declared this would increase taxes on Wall Street and rich people who have not been "paying their fair share," which would stimulate growth. He smiled slyly and hissed, "Don't worry about Wall Street and rich people...they are smart guys. They will figure out a way to make money no matter what we do to them." Disgusting. This "plan" sounds very similar to Hillary and Obama and FDR rhetoric. Self-admitted Far Leftist, Jim Chanos, offered to donate to Jeb's campaign Live on TV, and declared Jeb's plan would get a lot a DEM votes.
Pandering for votes by punishing one group at the expense of another is unConstitutional lawlessness of a Democracy. This is what Thomas Jefferson warned us about.
The financial system isn't coming apart, but it looks like we are driving into 8 more years of malaise. It's like we are getting 3rd and 4th terms of FDR idiocy and heading into war. Risk aversion persists, and growth remains sub-par. Unlike 1980 or 1776, there's nobody on the horizon to save us. We now follow more planks of the Communist Manifesto than we do the U.S. Constitution. Look it up.
FWIW, despite all of that, I'm 90% invested in stocks and 10% in bonds. It's working out extremely well. This year, I'm beating every stock and bond index I know about. My post above (if anyone GAS) is simply my opinion about WHY we have all the risk aversion. That risk aversion creates a very undervalued stock market for making money. Record cash on the sidelines, low interest rates, good earnings growth, and bad fiscal policies that COULD be fixed if anyone smart ever decides to, are a great combination which sets up a great investing environment.
Scott. I have been following your blog for at least a few years now. Great insight. Your commentary is the least (none really) agenda driven I can find anywhere. Just straight talk. I have recommended this blog to several friends. Great job.
Benjamin Cole
Thank you.
You are pointing to an inherent tension between state's rights and federal power.
The 10th Amendment, in effect, defines the concept of federalism, that is, apportioning power between the federal government and the states. State power has come to include the police power, i.e., health, safety, morals, etc.
Given that laws can vary between states, I don't think it is an unreasonable exercise of state power to grant licenses in order to practice therein, just as they do with the trades, haircutters, and so on.
There is an exception that can be granted to this limitation, however, via a motion to practice pro hac vice, in a given proceeding.
There are also pro-free market exercises of individual state power. For example, as I'm sure you know, Delaware is often where companies incorporate to take advantage of friendly tax treatment and what are sometimes perceived as receptive courts.
So my take is that the constitutional scheme (as interpreted by the courts) offers a decent framework to balance competing interests in a way that still leaves ample room for free enterprise to flourish.
Johnny Bee Dawg: Thanks for the excellent comments re Democracy v. Republic. I'm with you 100%, and so is the Cato Institute. I also agree that the statist trend in public policy is an important source of risk aversion. Lots of problems out there, and lots of worries; the combination leaves us with attractive valuations and significant upside potential if Washington can ever figure out how to reverse course.
Johan: thanks. I do try to keep my analysis focused on the facts. My own money is at stake, and I don't want to be blindsided by an agenda. Nevertheless, I do have strong beliefs about which policies work and which don't—I think that is an essential part of analyzing the investment environment. If I were President, I would lay out a very bold agenda.
Perhaps the single greatest achievement in McCulloch is that it set forth and defended a flexible approach to constitutional interpretation, at least with regard to congressional powers. Both with regard to his structural reasoning and textual analysis of the Necessary and Proper Clause, Marshall forcefully argued for a liberal or expansive reading, summed up in his well-known declaration that "we must never forget that it is a constitution we are expounding".
So I think it's apparent that since the founding, our most seminal USSC justice understood that the Constitution is a living document that must be interpreted in the context of the reality of the current time and circumstances, and that those who claim to be able to know the original intent of the founders willfully ignore this important dictum, because their true intent can only be guessed at, despite contrary claims.
I think the larger point is that this country would not have survived and flourished if polemicists imposed their view on others.
Our strength is finding compromises in our diversity of opinion within the boundaries of what is reasonable.
Lawyer in NJ: you write very intelligently. I enjoyed your commentary. On the other hand your commentary cements for me the view that we in fact have a constitutional democracy that does not protect free enterprise or free markets. Lawyers, who control what the law says, believe in being licensed!
For me, it comes back to the fact that it behooves us to make this economy grow as much as possible, so that voters feel they are benefiting. Ergo I still support a policy of pursuing "labor shortages" by the Fed.
Tight money is the sure road to socialism.
Add on:
There is also the problem that while the US Constitution limits (in writing, if not in fact) what the federal government does, we still still have state and local governments.
Consider property zoning--there was no property zoning in the United States until 1916, when NYC started zoning! Isn't that amazing? I guess zoning of property has withstood Supreme Court scrutiny.
So now, say, the City of San Clemente zones property to be "single-family detached." You cannot buy up a few lots in San Clemente, and put down a 50-story condo tower, even if the free markets are begging for it and you could make piles of money for investors, and many, many more people could live near the water.
Some people are aghast when a city regulates wages, but mute when a city regulates property.
Another one: Push-cart vending. My guess is that push-cart vending is routinely criminalized in every city in the U.S. I sure see little of it anywhere, but in other countries it is common, and allows ordinary people to start up their own businesses and fights inflation by creating cheap alternatives.
Again, imagine San Clemente, with push-cart vendors outside of condo towers. That ain't going to happen jack.
The threat to free enterprise in the U.S. is not only federal, it is state and local, and it comes from both sides of the aisle.
Johnny - Great comment! I remain optimistic that technology and open internet can save us. Decentralization of power is found in hands of most individuals in developed countries in the form of internet connected cell phones with 4g service. This is the one area to keep an eye on in terms of freedom. As long as the internet remains open and free, there is still hope that decentralization of power can be accomplished.
"...heading into war." Expound on that if you don't mind.
Lawyer, I would say that your interpretation of the Constitution is exactly what is wrong with the country. I am not an educated man but I have read through the document and self studied the founding of our country. IMO, the Constitution is not a malleable document. It is an amendable document. There is a huge difference. The former idea renders the Constitution useless. With your view the courts then become legislators, which is exactly what is happening and with it the subsequent unbalancing of the government the Founders tried to create. And then the Legislative body becomes moot, which, again, is happening. The slack is then taken up in the Executive branch that uses executive fiat to push it's agenda. Marshal might have had a great legal mind, but he, like so many become delusional with power and the need to reinterpret for their own view. The end result is not a republic, but an autocratic oligarchy, which is what we are becoming.
Johnny Bee Dawg, you you got it my friend. Beautiful summation.
Bob
Lawyer in NJ - Bob is exactly right. I agree with every word he said. This topic is a very big deal. It is the underpinning of our future, and the main reason for risk aversion throughout the world. There is real fear that the criminals and idiots are gaining the upper hand, as lawlessness expands.
Nobody has to try to decipher the Founders' original intent, as you say. It's not required, and misses the point of a Republic, entirely. Our Republic is a government of laws and checks on power. Limiting Federal power and limiting the power of people like Justice Marshall is inherent in our system's very design. One only has to read the plain text of the Constitution to see what the rules are for the Federal government. Legitimate government exists only to protect the natural, self-evident rights of the People.
One can't get around the limited list of enumerated powers without being dishonest or unlawful. It's very explicit and plain language that's easy for anyone to understand even 200+ years later. Declaring that the Constitution is a "living document" to be "interpreted" by political whim of whatever lawyer happens to occupy the Justice's seat is lawlessness. An "expansive reading" which differs from the limits imposed in olain language on our government simply means expanding government power without due process.
Power is a zero sum game. When government increases power, it must come at the expense of the individual. The Founders made this expansion hard to do on purpose. It must be done carefully, slowly, deliberately...but most importantly it must be done lawfully, thru due process. Not by fiat, nor by the whim of tyrants, nor the collusion of a small band of confederates who have wormed their way into power through each other's favor.
The Constitution itself sets up the only lawful way to expand the enumerated powers of the Federal government....through the consent of the governed, by Amendment. If some kind of new "reality of the current times and circumstances" , as you call it, develops requiring that the People give up more of their Liberty to the Federal government, then do-gooders like Justice Marshall and Barack Obama have a LAWFUL remedy at their disposal: they are required by law to PERSUADE, not dictate. This requirement protects me from them. Once they convince enough people of this need for new power, they will earn the vote of 2/3 of Congress and 3/4 of the State Legislatures. Only then may they lawfully expand Federal power at the expense of the governed. The Amendment process is purposely difficult, but has worked many times in our history. Any attempt to short circuit this due process is tyranny.
Expediency will always come back to bite you. We are still paying for enslaving human beings for expediency's sake, just we are still paying for Lincoln's lawless methods and the ugly precedents they created. Two wrongs don't make a right.
The burning embers of our economy and our markets are going to one day be smothered too much by the lawlessness of this "living document" nonsense if it is allowed to continue. This is the longest stretch of risk aversion our nation has seen since FDR. And for good reason. Time for the pendulum to swing back toward Rule of Law and to Liberty. Give those embers some oxygen!
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