Tag Archives: employment

Slow Economic Growth

Three important things to see in today’s jobs report

The monthly jobs report creates a flood of exciting news stories.  Most of these discuss small fluctuations in its many numbers, most of which are just statistical noise. Here are three things you need to know about job and wage growth. They are the key trends seldom mentioned in the news.

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The Important But Hidden News In The Jobs Report

SummarySlow Economic Growth

  • Jobs continued their trend: a long period of slow growth, second weakest since 1961 (2001-07 was worse).
  • Worker’s wages continued their slow growth, weekly wages up 2.1% YoY for private sector hourly workers.
  • Slow growth doesn’t create the imbalances & inflation that cause recession. This could run for another year, and perhaps longer.
  • Such slow non-inflationary growth makes raising rates a risky play for the Fed. I doubt they will be so bold.
  • In this slow growth environment paying big valuations for stocks is risky gamble.

The monthly employment report is the most important economic report. It is central to our consumer-led economy, relatively accurate, and frequent (unlike GDP). The November report frustrates both bulls and bears. Still more slow growth in jobs and wages. No signs of boom, no signs of bust, no signs of inflation. Boring, but rich with implications for investors.

As usual, the chart tells the tale. This is the YoY percent change in jobs from the Establishment Survey, not seasonally adjusted (NSA). The purple line is the 1.6% growth reported today. Growth peaked at 2.3% in February 2015 and has slowed steadily since — but gently. Click to enlarge.

Employment growth through November 2016

Contents

Why look at the NSA YoY percent changes? What about the horrific numbers from… Aren’t most of the new jobs low-paying? What about the recession that was coming? Why are investors paying such high valuations for stocks?

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Why men are avoiding work and marriage

Summary: The previous post described how men are abandoning the rat race and dropping out of the full-time work force. The usual explanations (given without asking them) are that they’re pawns of economic and social forces, or neurotic Peter Pans that refuse to grow up. While satisfying to Left and Right and partially correct, these ignore the core fact — these men have agency, and are rationally responding to changes in our society. We can learn much from them, for this trend has just begun. The effect on society will be immense.

Lifting the veil to see what I won. Oh, it’s toil & trouble.

For what do men work hard and long?

Men work most often to obtain social status and money, to get women, and to support a family. Economically independent women have radically changed every aspect of that game, especially for the men at the back of the pack.

(1)  Women’s added participation in the work force increases competition for good jobs and depresses wages. This makes running the rat race more difficult for men.

(2)  Sex is now more easily available outside marriage, often without expensive dating rituals. This makes running the rat race less necessary for men.

(3)  Partially liberated from the need for male providers, women increasingly select for dark triad traits (i.e., entertaining jerks, often treating them badly). Some of Taylor Swift’s songs clearly describe how this works. Success in the sex games for betas (most of us are betas) largely comes from learning the game (faking dark triad behaviors). Why should men marry these women (when they’re over 28 and ready to “settle”)?

(4)  Men’s (often illusory) patriarchal rule of the family is gone. Now women need men only to get legitimate children and pay child support after the divorce (women file ~80% of divorces, and divorces end roughly half of marriages). Only 18% of fathers get primary custody of the 26% of minor children who live with only one parent. For more information see the 2013 Census report on Custodial Parents. Why should men marry?

(5)  Gin was the cheap power drink of choice for those seeking alternative lifestyles in 18th century London. Technology has given today’s rat race dropouts more and better alternatives: great booze, designer drugs, rock music, a thousand channels on TV, and computer games (which push the same buttons in the brain as addictive drugs). Marriage now has more competition for a role in men’s lives.

The bottom line: many men are “going Galt”, but in a very different way than In Ayn Rand’s Atlas Shrugged— they are abandoning both work and marriage. See the details here.

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Men are abandoning the rat race, & changing American society

Summary:  America is changing in ways not easy to see. One is the exodus of men from the labor force, changing both our economy and society. Today’s post looks at the facts. Tomorrow’s gives a shocking explanation, different than the ideologically pleasing stories given by Left and Right.

“Work is the grand cure of all the maladies and miseries that ever beset mankind — honest work, which you intend getting done.”
— The Inaugural Address of Thomas Carlyle as Lord Rector of the University of Edinburgh (1866). This belief changed the West. It will change again when no longer believed.

 

Nicholas Eberstadt wrote Men Without Work: America’s Invisible Crisis to warn us of a major problem. He gave a summary in the Wall Street Journal: “The Idle Army: America’s Unworking Men” — “Millions of young males have left the workforce and civic life. Full employment? The U.S. isn’t even close.”

“Labor Day is an appropriate moment to reflect on a quiet catastrophe: the collapse, over two generations, of work for American men. During the past half-century, work rates for U.S. males spiraled relentlessly downward. America is now home to a vast army of jobless men who are no longer even looking for work — roughly seven million of them age 25 to 54, the traditional prime of working life.

“…There are also the barriers to work for America’s huge pool of male ex-prisoners and felons not behind bars — a poorly tracked cohort that accounts for one adult male in eight in the civilian population, excluding those in jail now.

“…What do unworking men do with their free time? Sadly, not much that’s constructive. About a tenth are students trying to improve their circumstances. But the overwhelming majority are what the British call NEET: ‘neither employed nor in education or training.’ Time-use surveys suggest they are almost entirely idle — helping out around the house less than unemployed men; caring for others less than employed women; volunteering and engaging in religious activities less than working men and women or unemployed men. For the NEETs, ‘socializing, relaxing and leisure’ is a full-time occupation, accounting for 3,000 hours a year, much of this time in front of television or computer screens.

“…Imagine how different America would be today if another roughly 10 million men held paying jobs. It is imperative for the future health of the country to make a determined and sustained effort to bring these detached men back—into the workplace, into their families, into civil society. “

His book got a lot of attention, such as — “Men not at work: America’s hidden unemployment” by Larry Summers in the Financial Times. “America’s Lost Workers” by Jeff Madrick in the New York Review of Books. Also see the follow-up discussion between the author and Madrick. “Enduring mystery of US recovery: men without work” by Simon Montlake in the Christian Science Monitor. The right-wing hack view: “Why Are Millions of Men Choosing Not to Work?” by George Will in the National Review — “American men who choose not to work are choosing lives of quiet self-emasculation.”

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The Fed Will Not Raise Rates In The Foreseeable Future

Summary: Since 2010 I have said that the economy is locked in slow-mo and the Fed will not start a new rate cycle. It’s even more true today than in 2010.

  • Many investors and economists are convinced that the Fed will soon end its near-zero interest rate policy and begin raising rates – “normalizing them”.
  • As I and others have said since the crash, these times are not normal (i.e., the post-WWII era has ended).
  • Most economic indicators show flat or slowing economic growth.
  • The developed world has fallen into secular stagnation.
  • The next event is not a boom requiring higher rates, but a recession.

Slow Economic Growth

Short-term riskless US rates are set in the world’s largest market:
when will rates return to normal?

Market yields on 3-month T-bills

We have been told for six years that soon interest rates will rise. During that time, the right-wing’s inflationistas have predicted rising inflation, or even hyperinflation (remember the 2010 “Obama will turn America into Zimbabwe” scare?). Incredibly, many experts still believe this despite…

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Ignore The Bulls And Bears. See The Key Trend In The Jobs Numbers.

Summary: Ignore the Bulls & Bears. Their need for clickbait stories turns noise into news. See the key trends in the jobs numbers, revealing the forces shaping the US economy.

Slow Economic Growth

  • The jobs report confirms that the US economy grows slowly, and is slowing.
  • It gives no evidence that the US is accelerating, or that the Fed will raise rates.
  • If it continues slowing at this rate, we will have a recession in 2019.
  • High equity valuations make no sense in this slow motion economy.
  • Beware of analysts who sell stories about exciting noise, hiding the boring but important trends.

See my article at Seeking Alpha for the full story.

The jobs report shows why so many don’t understand the US economy

Summary: Today’s job report show one reason we see our world so poorly — we read the news. Journalists and the experts who make headlines give us exciting stories of constant change. But the world usually changes slowly. Sometimes, as in this economic cycle, slow stable boring growth is the story. That generates no clickbait, so we get statistical noise magnified into thrilling news. People of bearish views (temperamentally, or because the “other” political party rules) read the stories of imminent collapse — and vice versa. And vice versa for the bulls. Both become entertained and ignorant.

What’s happening? Slow growth, with small fluctuations around the trend.

Change in Employment - MoM - August 2016

Excerpts, slightly paraphrased, from the Employment Situation Report for August tell the tale, as this slow expansion continues — frustrating both the bulls (boom soon!) and bears (recession now!).

  • Total nonfarm payroll employment rose by 151,000 in August, compared with an average monthly gain of 232,000 over the prior three months and 204,000 over the prior 12 months.
  • “Little movement over the year” in the unemployment rate, and the labor force participation rate, and in the number of unemployed and discouraged workers.
  • No change in the past year in the average weekly hours of production and non-supervisory employees in the private sector. Their average weekly earnings were almost unchanged during August, and rose 2.2% YoY.

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