Displaying items by tag: jobs
Some bad news on the jobs market emerged this week. In the weekly data, another 1.3m Americans applied for unemployment assistance. That number has stayed steady for weeks and shows no signs of abating. But it is other contextual info that makes that number worse. For instance, job openings are now declining, with total numbers in July down versus June. Growth in worker hours is also waning after growing for several weeks. Finally, google searches for “file for unemployment” are growing.
FINSUM: When you take all this together, a comprehensive picture is starting to show. It appears that the rising COVID cases may now be seriously putting a halt on the recovery.
Most of this summer was dominated by the dual fears of a trade war and a recession. A weakening of underlying economic data backed up the view that we may be headed for a recession, and the long yield curve inversion only heightened those fears. However, new economic data is providing a pretty strong rebuttal to those ideas. The last four economic releases, including home sales, jobless claims and beyond, have all come back more strongly than forecast.
FINSUM: The economy never looked that bad, as it was mostly the yield curve and trade war that pushed fears of a downturn. Accordingly, we don’t think these recent data releases will have much of an effect one way or the other.
Despite the seeming progress in the trade war this week, markets took a negative turn today. The reason why? The August jobs report. The US economy only added 130,000 new jobs in August, fewer than expected. Economists thought the economy would add 173,000 jobs. The August figure is also down substantially from July’s 159,000 figure.
FINSUM: The irony of the market falling on this jobs report is that it will likely support Fed rate cuts, which everyone seems to want. We think of this as a sort of goldilocks report—not too weak to make you worry, but weak enough to support loose monetary policy.
New payroll data has just been released and it is not saying anything positive about the underlying economy. According to ADP payroll figures, the US economy created 183,000 jobs in February, under estimates of 190,000 and well below the total of 300,000 in January. According to Moody’s analytics, “The economy has throttled back and so too has job growth”. The slowdown is most acute in the retail and travel industries and at smaller companies.
FINSUM: This is a pretty sharp pullback from January. The total number is still positive, but it will be interesting to see if this becomes a trend.
One of the big mysteries in this recovery has been the fact that wages have not risen much despite the fact that employment has expanded greatly. Investors have gotten used to massive amounts of new jobs being created, but also to quite meager wage gains. Economists have been somewhat stumped as to why, but a new explanation makes a lot of sense—monopsony. Those with an economics background will immediate recognize the term. It refers to when there are many suppliers of something but only one buyer. In this case it is being applied to the labor market—there are tons of available workers, but quite few employers, especially in more isolated locations. This means the employer has sole negotiating power in dictating wages, leading to widespread wage stagnation despite a competitive labor market.
FINSUM: This seems like the outcome of all the corporate consolidation that has occurred over the last few decades. There are less employers, so they collectively have more power to hold down wages.