Monday, February 5, 2018

January US jobs, wages good. Which sent Wall Street over the edge

Since I've been tied up witb other things, I haven't had much chance to go into the January 2018 US jobs report, and the fallout that's hit in its aftermath.

To start, the numbers released on Friday morning indicated that the US job market was still in good shape.
Nonfarm payrolls grew by 200,000 in January and the unemployment rate was 4.1 percent, while wages saw their biggest jump since the end of the Great Recession, the Bureau of Labor Statistics said in a closely watched report Friday.

Economists surveyed by Reuters had been expecting jobs growth of 180,000 and an unemployment rate of 4.1 percent. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons edged higher to 8.2 percent, the highest level since September.
That’s still pretty good, especially on the wage side, as average hourly wages were up by 0.3% in January, and 2.9% for the last 12 months. The average work week was shrunken a bit (0.2 hours), so that tempers a bit of the gains, but it at least is a step in the right direction, and worthy to see if it continues.

However, the higher wage gains also spooked Wall Street, as it indicated inflation may be spreading to workers (the horror!). Interest rates have been on the march partially as a result of this continued job growth and added needs for borrowing due to the GOP's corporate tax cuts, with the 10-year note yield jumping from 2.40% at the start of the 2018 to 2.85% on Friday.

With these numbers in mind, the Dow Jones Industrial Average has tanked after the jobs report came out, dropping by 666 points on Friday, and plummeting 1,175 points today. Maybe some of this is just a correction from the Bubbly 7.4% increase in the S&P that we saw between Jan. 1 and Jan. 26, but it sure doesn’t make that Wall Street runup look related to any kind of actual economic growth, does it? It led to this picture today.

Also important is that the January jobs report features the refining and revising of previous years’ data, and the Bureau of Labor Statistics says that the job totals for both the Obama and Trump Administrations were better than originally reported.
The normal benchmark process revises not seasonally adjusted data from April 2016 forward and seasonally adjusted data from January 2013 forward. However, some data were also revised further back in their history than normal due to the implementation of 2017 NAICS and other minor technical changes related to rounding and re-aggregation of some series.

The total nonfarm employment level for March 2017 was revised upward by 146,000 (+138,000 on a not seasonally adjusted basis, or +0.1 percent). On a not seasonally adjusted basis, the average absolute benchmark revision over the past 10 years is 0.2 percent.

The effect of these revisions on the underlying trend in nonfarm payroll employment was minor. For example, the over-the-year change in total nonfarm employment for 2017 was revised from +2,055,000 to +2,173,000 (seasonally adjusted).
That "minior" improvement nevertheless means that 2017 wasn't the slowest year for job growth since 2010, but instead was the slowest since 2011. So...YAY?

The state totals don’t get benchmarked for another month, but given that the benchmarks are based on the “gold standard” Quarterly Census on Employment and Wages (QCEW), it seems unlikely that Wisconsin’s overall numbers will change much. So if we plug in the slightly improved US figures, it shows that the Walker jobs gap in Wisconsin is even bigger than we thought, at over 120,000 private sector jobs and nearly 116,000 overall.

In all, the January jobs report still showed the US economy to be expanding, with job growth staying at a decent (albeit slightly slower) level. But with the rise in interest rates and the recent wipeout in the stock market, I have to wonder if those decent economic fundamentals will deteriorate as companies decide to use the Piece of Shit tax bill as a reason to choose profit over paying wages to employees.

Particularly given that high-spending consumers were a big reason behind the good GDP growth of 2017, what'll happen when you take away jobs and the wealth effect from a not-so Bubbly stock market, and people realize they don't have money coming in to spend in the future?

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