April’s a cruel month for job market

Where have all the workers gone?

On Friday the Labor Department said that the unemployment rate fell to 3.9% in April, which is the lowest rate since Bill Clinton was in the white House.

Now if this number had any relevance to the workforce, I would have written about it when it was released. But it doesn’t mean anything really.

To say there were only 3.9% of the potential workers still looking for a job is preposterous.

The people who are not counted in that number are in the millions.

  • College graduates
  • Those who are jobless, but no longer collecting unemployment benefits
  • Part-time workers
  • Retirees looking for part-time work

The U6 jobless rate, which includes people who can only find part-time work and those who’ve gotten so discouraged they recently stopped looking, fell to 7.8.% in April — the first time it has been below 8% since 2006.

A better barometer of the workforce is wages. If you can’t find workers, then you need to raise the wage to entice job seekers to apply. Or if you wish to keep good employees you give them a raise or bonus, or so goes the narrative.

Now we saw companies as a result of Trumps new tax law give one-time bonuses to employees, but that is not reflected in this data also released Friday by the Bureau of Labor Statistics.

The average wage growth for April was a startling 4 cents to $26.84 an hour with average work week at 34.5 hours.

So what do these two numbers say about the job market?

There is little premium being offered by employers broadly to find or retain workers and two, there are many, many jobs not offering any additional benefits since they are not working full-time.

This is not a new phenomenon, the hourly pay rate has increased 67 cents over the last year. So in simplest of economic theory there is plenty of supply and little demand in the job market.

Now, the Street takes all this information into account, and we see why The Fed did not raise rates recently.  As I wrote in January, we will get one rate increase in 2018.

You cannot have inflation, without wage increases and a 67 cent rise over the last year is far more important than 3.9% jobless rate.


GDP a little soft as consumers pullback

First quarter GDP came in at the high-end of the range at 2.3%, according to a report by the Commerce Department released Friday morning.

the consensus according to the Atlanta Federal Reserve’s GDPNow projected that Q1 growth would be 2.0%. Continue reading

Fed can’t find inflation, but let’s raise rates to help the banks

The Federal Reserve — headed now by Jay Powell — released the minutes from the last meeting in March. The Fed is feeling that inflation, which has been under 2% annually for many years, is about to grow.

There is little evidence of inflation, but the Fed says that since Trump’s tax cuts gave thousands of workers a bonus and the raising of minimum wage, inflation will come and the Fed should continue raising rates. Continue reading

Both Powell and Q-Anon on hot seats

New Fed chief Jay Powell ends his first two-day meeting with a press conference Wednesday.

The market has a 90% expectation for a 0.25% rise in Fed Funds Rate to 1.5%-1.25% range. More importantly is Powell’s comments on the economy. Since the Fed is the 800-lbs gorilla in the government bond market, I don’t expect anything sensational coming from his comments.

Any policy changes will be on the edges as traders parse the statement for future moves.

The key to the statement is whether there would be 3 or 4 hikes this year. Powell in Congressional testimony has been perhaps overly optimistic on the economy.

I am on the record saying there will only be this hike for 2018, as Corporate America is addicted to cheap money to pump up share prices by borrowing cash to fund stock buybacks.

The steeping of yield curve — while very good for bank profits if they ramp up lending — increases current borrowing costs at a time of greater issuance to fund corporate tax breaks.

The Austin, Texas bomber killed himself in an explosion this Wednesday morning after a shootout with the police and FBI.

Interesting Q-Anon posted last night that the FBI opened a file on the entity because of the use of BOOMs in his posts and a possible connection to the bomber.

Q-Anon says it’s a ruse to cut off communications, but it will fail.

Phantom inflation will see a Fed do one and done in ’18

Since Jan. 26th more than 2,100 points have come off the Dow using Thurs. closing price. Dow futures suggest another 200 points at the open, but it’s early.

Across that same time frame, bitcoin has remained flat, down roughly $150, with much churn along the way. Continue reading