US Labor Markets: Update 12/3/16

SHI Update 11/30/16: We’re BACK!
November 30, 2016
SHI Update 12/7/16: Steaks are Heating UP!
December 7, 2016

Yesterday, the BLS released their “Current Employment Statistics.”  Good news:  The US employment situation is definitely improving.


Why You Should Care:   Wage inflation occurs when the “demand” for labor exceeds the “supply.”   For years now, excess supply has been the norm.   That may be changing in the not so distant future.

And when it does, we need to know – BEFORE it impacts both inflation forecasts and short/long term interest rates.


Taking action:  Be informed.   The labor market is firming.   No, it has not fully recovered … but it has improved meaningfully.

I remain convinced the FED will raise rates in December.   This said, I suspect any rate movement will be restricted to the short-end of the curve only.  Adjust your investment strategies accordingly.


The BLOG:    There can be no doubt:   The ranks of the unemployed are finally shrinking.  Even in my “unofficial” view.

Of course, the official US unemployment rate is now 4.6%.   And while I respect the consistent methodology behind the number, I’ve never believed it to be accurate…  This notwithstanding, here are two charts from the official BLS release on December 2nd:

unemployment

Chart 2 shows fairly consistent job growth…Chart 1 shows the downward unemployment rate trend.

But my cynical eyes need to see improvement on the BLS ‘Table A-15,’ also called “Alternative measure of labor underutilization:”

a15

There’s good news here too:   U-6 — the ‘bucket’ that catches all the folks who are unemployed, partially-employed, job losers, marginally-attached, unhappy, etc. — is shrinking too.

Both measures bottomed in May of 2007:  Unemployment rate at 4.4% and the U-6 at 8.00%.    The November 4.6% reading is very close the the 2007 bottom.   But we’re still about 1.3% above the bottom for U-6:

a-comp

Above, you can see a graph for both unemployment and U-6 since 2007.   The black lines show the low point for both.   It’s easy to see we still have labor slack in the U-6 reading…but the improvement is obvious as well.

CG&C has been tracking both ‘job-cut’ and ‘hiring plans’ announcements for decades.  Here’s a summary of their latest findings:

challenger

Once again, it’s easy to see labor market gains.   (Need a new job?   Forget Q-1 … start your search at the beginning of Q-4.)  November 2016 announcement for new job openings was more than 10X 2015!

I’ll delve deeper on this topic in next week’s Steak House Index update.   In that BLOG, we’ll update both the SHI and the SHCI… so, be sure to check back.

But for now, know that labor conditions seem to be firming.  And with President-Elect Trump twisting corporate big-wig arms to keep jobs in America, this trend is likely to continue.

On Wednesday, we’ll talk more about future economic impact and implications.

  • Terry Liebman

4 Comments

  1. Rob says:

    95 million people out of the job market. Know, understandably there are baby boomers retiring however the numbers of those leaving the job market are interesting as well.

    Best, Rob

  2. Fat and Happy says:

    Does the current unemployment rate reflect the millions of non-working that will return to work if the price is right/demand is present? Will be interesting to see how much this balances out the predicted wage increases.

    • TerryLiebman says:

      Laura, thanks for the comment. Essentially, the US labor situation is as complex as a saucy, spicy jambalaya. The ingredients come together and make the system work, but its hard, perhaps even impossible, to separate out a component part and accurately assess how that one part will behave as the recepie changes. It’s entirely possible some of the ‘long term’ unemployed will choose to return to the civilian labor force if the “price is right” so to speak. But I think the problem is more complex: I think technological changes and advancements have rendered many functionally obsolete. Unable to return to the labor force at any price.

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