Blue World Jobs Report Analysis October 6, 2017

 

 

 

 

 

 

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: October 6, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

Should we panic? Perhaps…but not because of this jobs report. Today was a fascinating exercise in data collection and analysis. There is absolutely no reason to go into most of the actual numbers this month, but we have to go through the positives and negatives because, taken at face value, this report is awesome! In fact, if we were to be given the detail in advance and asked to predict job growth based on them, we’d have projected between 200k and 225k.

The Labor Force, Total Employed, Participation Rate, and Employed-Population Ratio all grew by very healthy margins. The Unemployment Rate, Total Unemployed, and Not in Labor Force totals all fell…by very healthy margins! The bad news was all in the headlines. Is there an explanation? Yup.

The obvious answer is the active hurricane season. But how does that throw this report into chaos? One example, without going too deep into the weeds, the report data is acquired from two different surveys, Household, which surveys individuals, and Establishment, which surveys employers. This is an unusual circumstance in that one who is counted as employed by one survey is counted as unemployed in the other based on whether they got paid. As we might suspect, the hospitality industry took it on the chin, so a lot of folks with “jobs” didn’t end up working and didn’t get “paid.” A major data point we were waiting to see was the response rate. We can get significant revisions to the jobs report over the two months following each release as many send their survey responses late. This month we fully expected the timely response rate to be way down. It wasn’t. According to the BLS, response rates were within normal limits in and out of the hurricane affected regions.

So…pay no attention to the details behind the curtain EXCEPT the revisions. The only meaningful data point to come out of this report is the net -38k revisions to July and August. That brings the three-month headline down to a 91k average for Q3 2017. That is simply not good enough.

At writing, S&P futures are trending down, but there is no indication of a gap-down vertical graph, so it seems the markets will take this in stride understanding the temporary nature of a report that will undoubtedly revise between now and year end.

For more on the overall state of the economy you’re invited to review the Blue World Economic Index® Report for September which posted earlier this week. We’ll have no choice but to downgrade the index value for this report under the Employment category, but it won’t be as severe as the numbers imply for all the anomalous reasons listed above.

Have a great and safe Halloween, and we’ll meet back here for the next Employment Situation release, which is scheduled for Friday, November 3.

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, October 06, 2017

Blue World Economic Index® Report 10/03/2017

 

 

 

 

Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date October 3, 2017

Analysis

The economy’s flirtation with a positive reading is as tantalizing as a butter-seared, blood-rare Porterhouse, wild rice and a snifter of cognac is to me on a Saturday night! TMI? Apologies.

The Blue World Economic Index® made a solid move from -.4 to -.1 for the month of September 2017. It must be noted that looking at a lot of the reports would suggest bigger changes from last month in either direction, but we exercised a bit more restraint due to the awareness of the continued but temporary impact of the active hurricane season. There was also a material impact from short and long-term trend upgrades in GDP from -1 to -.5 because the trends are weighted more heavily than the current month’s report.

That said, we expected worse from the hurricanes, especially in reports that post in the second half of the month, and the consumer appears to have already gotten over it. Below we’ll talk about weakness in Real Estate, but there is a lot of thinking out there that the weakness represents a short-term rebalancing and may be a harbinger of better things to come later next year. The Chicago Fed has been the only contrarian in the Fed sub-group two months in a row, which is a bit perplexing and concerning since that report is uniquely national in scope rather than regional like the others we follow for that group, and the regionals are knocking the cover off the ball.

December Fed meeting, you ask? The late entries of Personal Income and Outlays, Farm Prices, and GDP Inflation coupled with the mid-month reports of Producer Price Index-Final Demand and the Consumer Price Index all suggest inflation still resides in the where-are-they-now-file, but there are, as we’ve said, some other positives. We think there are arguments for the doves and hawks, but we are taking the under this month and saying we’ve seen the last of the hikes for 2017. 

The Numbers

Of the eight major categories, five are still above water. They are Consumer, General, Manufacturing, Real Estate, and Retail. Of those, all but one, Real Estate, posted gains since last month, but recall some of the conflicting signals in Retail where negative scores for Motor Vehicle Sales and Retail Sales were cancelled out by equal and opposite scores in Business Inventories and E-Retail, leaving the notoriously contrarian Red Book report to carry the ball. Manufacturing continues to excite with the Fed AND non-Fed groups advancing .03. Employment and Inflation are still underwater, where Employment slipped fractionally, but Inflation, while improved .11, is still solidly negative at -.37. Services remained unchanged at -.16.

We’ll see what else the hurricanes have to offer the fourth quarter, and with high stakes policy issues like tax reform coming up we see volatility and excitement from street level to Wall Street on tap!

The Blue World Jobs Report Analysis will post on Friday. Have a great October, a wonderful Halloween and we’ll see you back here at the opening of November.

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release sites should be cross referenced.  The index assignments represent the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on the index.
©Blue World Asset Managers, LTD Tuesday, October 03, 2017

Blue World Jobs Report Analysis 09-01-2017

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date Friday, September 01, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

 

 

 

 

 

 

 

We’ll open today with prayers for all the victims of Harvey. You’re in our thoughts!

Fed Caution                    Fed Caution                      Fed Caution

The more aggressive Fed members were very quick to talk rate hike after the GDP report on Wednesday. We hope this jobs report will ground the hawks, because while this economy is showing real signs of life, it is nowhere near needing a break pumping! A continued belief seems to be that it is inevitable that inflation will show up so these hikes are “prophylactic.” It doesn’t work that way folks, and this jobs report DOES NOT signal inflation is on the way. We’ll explain.

The economy is still fragile and erratic in its growth. There are too many domestic policy  and international uncertainties, reaching levels of downright fear in some cases, like North Korea. Any efforts to keep the economy from “overheating” at this stage are very premature, and the worst thing that could happen for the global economy would be for the U.S. to have to take rates back down. So, Fed, are you listening? Please watch and wait!!

The details are decidedly mixed, and if we had to say lean toward weak, but there are some notable bright spots, too.

On the down side:

The headline of 156k was a miss on an expectation that just wasn’t very high to begin with (180k). We are being told that wages for the Private Sector only grew .1% month-over-month, but it’s worse than that. The .1% is hourly. Weekly, in other words, salaried workers actually lost ground at -.2%. Weekly Construction lost .1% and Manufacturing lost .6% and a whopping 1% for hourly and weekly employees, respectively so “FED ARE YOU LISTENING? – – NO INFLATION!” The work week remains stubbornly short. Today’s chart is the work week length going back to 2012. The Labor Force grew by 77k, but the Not in Labor Force and Unemployed columns posted triple digit adds. The Participation Rate remains under 63%, and nobody (should care) cares about the Unemployment Rate. To put this into some more perspective, Andre Boucher from Pavilion (www.pavilioncorp.com) sent me a sobering statistic published by Eddy Elfenbein at Crossing Wall Street (www.crossingwallstreet.com). He calculates “In order to have the same jobs-to-population ratio as 17 years ago, we’d need 10.5 million more jobs, or 16.3 million fewer people.” That certainly tells us 156k, 165k, and even 180k per month just won’t get us there.

On the up side:

Today’s headline of 156k factored a -9k for Government payrolls leaving the Private Sector tally higher than the headline at 165k. Even though the June and July totals netted out to -41k in revisions, the Private Sector netted +4k, so that is not at all insignificant to the good. The wage disappointment (this is hopeful optimism) may be due, in part, to a temporary dilution effect in Manufacturing and Construction as both sectors made solid gains in payrolls with hefty upward revisions to the previous two months. In fact, the Diffusion Index is at 63.8 for the entire Private Sector and a massive 73.1 for the 78 Manufacturing industries. For comparison, those numbers were 55.7 and 42.3 respectively just one year ago. This validates the Regional Fed surveys regarding strength in Manufacturing hiring and more evidence that anecdotal optimism is starting to enjoy the support of hard data. We talk about that a little more in the Blue World Economic Index® which came out yesterday.

In an unfortunate note, the Fed has abandoned their Labor Market Conditions Index, which followed many of the same key indicators we do and, therefore, tracked very well with our analysis and forecasts. It was one of our favorite internal and external metrics for this analysis as well as a component of the Employment category in the BWEI®. Not to worry, however! We’ll keep doing it for them!!

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, September 01, 2017

 

 

 

Blue World Economic Index® for August 2017

Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date 8/31/2017

Analysis

“Objective Signs of Life” is the theme for August 2017, according to the Blue World Economic Index® as we moved a full .05 from -.09 to -.04! After a rather slow start to the month things really started to heat up fast. Inflation and Real Estate were the only real drags on the index for August, especially Housing Starts and Permits, which suffered an oversized and uncomfortable swing from 1 to -.5 on the 16th. That kind of move is rare. Industrial Production ended a streak of positive hard data in Manufacturing, but at least it was the exception not the rule and maybe a blip, as the Philly Fed report is still in high orbit. That brings us the Chicago Fed National Activity Index, which took an unexpected drop considering the strength of every other regional Fed report in the month. Ultimately, four out of six hard data reports in Manufacturing were positive for August so the unbridled optimism of the last nine months may finally be translating to objective improvement. We’ll have to see if it holds.

The Numbers

Five out of the Eight Major Categories remained flat or gained ground including Consumer, Employment, General Measures, Manufacturing and Retail. Employment was the big winner in this group gaining an eye-popping .31. The Retail bump (.29) has to be viewed with some caution as conflicting reports are pulled up by reports that are often contrarian and/or volatile. Inflation and Services lost fractionally, and Real Estate led the decliners by losing a full .2.

Tomorrow is jobs report Friday, and our report is expected out before Noon Eastern. We’ll see you back here at the close of September and hope to report another move to the North.

Have a safe and wonderful Labor Day!

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release sites should be cross referenced.  The index assignments represent the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on the index.

 

©Blue World Asset Managers, LTD Thursday, August 31, 2017

Blue World Jobs Report Analysis 8/4/2017

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Friday, August 04, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

GREAT…if it holds…but some WONDERFUL news was hiding in the weeds!

Today’s release provides plenty of reason for OPTIMISM. Are you paying attention, Fed? That is the only downside we can see to this report, the potential overzealousness of the Fed in pursuing another rate hike. Yes, this is a fine report, but it is still in the overwhelming minority of hard data reports hinting at any strength or momentum. Additionally, one report does not a movement make. We need to see this kind of strength sustained and built upon before declaring “improvement.” We can’t just keep sprinkling a good report in here and there with other mediocre to poor reports and be gung ho about raising rates. So, that’s our cautionary note. Now, let’s go enjoy the numbers!

The headline is net 209k, and of those 205k are Private Sector gains. That’s the first time since February that the private sector topped 200k. The Labor Force, Total Employed, and Participation rate were all up. Please continue to be mindful, however, that participation is still below 63%, but let’s not let that be rain on today’s parade. Up is up. The Not in Labor Force tally is down two months in a row and tantalizing us with a suggestion of flattening. That’s the graph this month. Total Unemployed is essentially flat to June. Wages were good for the month, still rather muted for the year, and the work week stayed level.

Revisions essentially netted out, but the big news deeper in hiding was that we just saw our first reliable hint that reality is catching up to sentiment in Manufacturing as we’ve had two big months of gains in a row to coincide with and validate the anecdotal Regional Fed reports in the Blue World Economic Index®. Services were also squarely in the win column for July.

All in all, two decent months in a row where July is a little better than June and this will provide a much needed lift to the Employment category of the Blue World Economic Index® for August, which will post at the end of the month. See you then!

 

Thanks for reading, and please stay tuned…

 

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, August 04, 2017