Blue World Employment Situation Report Analysis for January 5, 2018

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, January 05, 2018

 

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

 

 

 

And with that, the 2017 employment data is in the books! How was it? As usual, it depends on which “experts” we’re listening to. If political…which side? If cubical denizen economists…which side? If media…which side? If financial industry…which side? And if Krugman…well, Paul, ahhhhhhhh, Paul!

But if you’re listening to Blue World, who couldn’t care less about spinning the results, and you’re strictly focused on how the labor picture reconciles with what you see from the level of your real business that employs real people every day and want to make strategic decisions based on unbiased data analysis, then “How was it?” doesn’t depend on anything other than “How it was!” So, all that said, how was it? A very solid “mixed”…but leaning forward. Let’s dig into it.

We won’t spend a lot of time on December 2017 because it fits well with the rest of the year. We’ll just call it mixed, like all of 2017, and point out the positives are the Labor Force and total Employed rose, while total Unemployed fell. The Diffusion Indices for the total Private Sector as well as Manufacturing remained comfortably in the expansion range well above 60. On the down side, the Participation Rate remains below 63%, and the Not in Labor Force totals, while showing some sign of flattening earlier in the year, continue to creep upward. That is probably the biggest disappointment of 2017.

To the extent the Employment Situation report is both forward and lagging, there is value in comparison. We always say, “One report unto itself is meaningless. It is the trend that matters.” With that in mind, the table above compares selected key data sets we use to analyze the reports month in and month out. Included are 2015, 2016, 2017, and the first and second six months of 2017. Some of the data is significantly improved and headed the right direction, while some is not as exciting, but we will say if the positives keep moving in their current trajectories they will pull the others along. We were just hoping to see that phenomenon develop during 2017.

We did not get the Blue World Economic Index® posted this month, but we can tell you it advanced further into positive territory, ending at .11. The index continued to climb all year and averaged a -.06 for 2017 vs -.11 and -.37 for 2015 and 2016, respectively so there is NO question the economy is moving. The biggest problem we see for 2018 is a Fed that seems hell-bent on raising rates in the absence of any consistent inflationary pressure. We’ll be watching that closely in the coming year and, of course, let’s keep close eye on the portfolios as the markets continue to ignore past record highs in favor of new ones. If you want some ideas on safety nets, give us a shout.

Have a wonderful and profitable 2018 and we’ll see you back here at the end of January.

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, January 05, 2018

Blue World Economic Index® Report for November 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 11/30/2017

Analysis

The BWEI® extended the winning streak and pushed higher into positive territory closing November 2017 at .1. There is still some hurricane influence in there, as some reports are a full two months lagging, but that doesn’t diminish the strength we see, and where hurricanes were still a factor our discretionary values remained largely unchanged.

We know Consumers are still in a good mood even without benefit of the weekly Bloomberg Consumer Comfort report, which didn’t post the last two weeks. That won’t have a material impact on that category. Not surprisingly the Las Vegas Strip Revenues suffered in October, but are holding on to a slight gain for fiscal YTD. Retail slipped fractionally, but that was expected as the hurricane blips wash through. GDP caused an optimistic stir, posting better than 3%. We are as pleased as anyone to see it, but any time inventories make a material contribution we have to be cautious because it’s a while before we see if the build is paced/justified by sales. At this point, the majority of reports lean in the right direction.

Will there be a rate hike? We’re afraid so. This appears to be a Fed looking for any excuse to move rates. For example, they will likely focus on the PCE and Personal Income headlines in today’s Personal Income and Outlays report showing a move in PCE and a bump to income. The detail, however, shows the PCE move to be tiny, and the income increase coming from interest income, while wages and salaries were on the soft side. We just don’t see enough consistency across the six reports followed in the Inflation category to warrant such hawkish policy.

The Numbers

Of the eight major categories, five are positive, three negative, and no break-evens this month. In spite of the hoopla, Employment and Inflation remain stubbornly negative at -.23 and -.26 respectively, with Services flat to October at -.11 but showing some signs of life. Consumer, General Measures, Manufacturing, Real Estate, and Retail are all comfortably in the black with retail being the only one of the plus group to lose any ground, which was explained above. Manufacturing is beyond belief (almost literally), as that category composite sits at a pack-leading .49, where the Fed sub-group is at 1, and the non-fed group is up to .41 with improvements of .05 and .06 respectively from October readings. We hope to see additional corroboration in the Employment Situation report due out next Friday the 8th.

Is the market overheated? Yes. But that’s been true for five years. Our strategy is to have appropriate safety nets strung and keep riding the wave. If you’d like some thoughts on that, give us a shout. Other than that, see you next week for the Blue World Jobs Report Analysis!

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, November 30, 2017

Blue World Jobs Report Analysis November 3 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 November 3, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

MIXED…and probably still by hurricanes. The headline looked great, but details just couldn’t hold up their end and in some cases make little sense, but the overall leaning of this report has to be positive due to some specific sector data.

At the top of the Establishment Survey we see 261k net new hires. The Private Sector contributed 252k to that total, and we enjoy net upward revisions of 90k to the last two months. The Total Unemployed retreated and the Diffusion Index readings for the Private Sector and Manufacturing are very strong at 59.6 and 62.2 respectively, where 50 is break even. So far, so good.

Now it gets weird. The Labor Force got smaller…by a lot. Total Employed fell, the Not in Labor Force tally spiked and went solidly back over 95M, and the Participation Rate plummeted .4 to tie its 2017 low of 62.7. All we can say is, “That ain’t normal.” We just don’t see single-month moves of that magnitude in the Participation Rate. Much of the volatility is in industries most impacted by the storms like Hospitality/Food Service, etc.

So, where do we pick up on the big positives? An economy with lateral movement demonstrates constantly conflicting economic data. An economy starting to reveal a direction, positive or negative, begins to establish consistency when the reports are analyzed as a body instead of taken one at a time and day-by-day. This is, of course, the whole point of the Blue World Economic Index®. What we see lately is some emerging agreement between reports in key industries.

Hard data lagged anecdotal survey optimism for many months, but now performance metrics from the Manufacturing sector, for example, are beginning to validate that optimism. This morning’s Employment and Factory Orders reports fell right in line by adding a material number of jobs while extending the work week and requiring more overtime hours. Headline and detail readings in the Factory Orders report posted impressive gains in key areas. We see similar dynamics in Services and Construction.

The picture is not yet clear, and there are substantial internal and external risks that can upset this apple cart, but we can perceive some focus creeping in when triangulating all these information sources. For more on that please review the Blue World Economic Index® report which posted yesterday.

The Fed? We feel “prophylactic” hikes in anticipation of inflation is dangerous policy this early in an actual recovery and there is no hint of it yet. We remain opposed to another rate hike this year but the headlines in this report may feed the hawks if they choose to ignore the current lack of evidence, including weak wage pressure in today’s release. Moving rates too fast is one of the internal risks we consider material.

The next Employment Situation Report is scheduled for release on Friday, December 8th and, of course, The BWEI® report will post earlier that same week. Until then, have a great November and a very happy Thanksgiving!

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, November 03, 2017

Blue World Economic Index® for October 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 Thursday November 2, 2017

 

Analysis

Happy Halloween! If you’re looking for a scare, the economy isn’t going to provide it. The Blue World Economic Index® broke into positive territory for the first time since September 2015 and is at the second highest level since the report has been published! We’re not saying were high enough above water for a human to both see and breath, but an alligator could. The analysis section will cover a bit more than usual in terms of individual reports.

Again, we see the move driven by some trends that demanded upgrades and a whole lot of anecdotal optimism measures, but that is not to say the hard data is still missing. The hurricanes had a small but seemingly very temporary effect. The Durable Goods report was strong and added more support to the regional Fed reports which, by the way, are so high they can probably be viewed at eye-level from the International Space Station! Regulations have been quietly rolled back in waves, and the prospect of a tax cut is still in play. The uncertainty surrounding investigations, indictments, nuclear war, etc. are all still serious risks to the optimism-fueled surge, but the momentum has proven quite resilient so far.

The FHFA House Price Index came in high and is what drove the BWEI® into positive territory late in the month (25th) and it never looked back. We’ve seen some intra-month positives on occasion, but they’ve never held.

Manufacturing is still growing and now both by survey and hard data. Empire State and Philly Fed earned very unusual 2’s for the month for blowing both last month and estimates out of the water. The Kansas City Fed and Sub-Fed composite hit new highs and hurricanes were not even a speed bump for the Dallas Fed region still being led by new orders and a Capacity Utilization at 10 year highs. The only downer in manufacturing all month was the Industrial Production Report.

GDP from last Friday was the second 3% reading in a row, but we need to see how artificial the inventories contribution was as a result of hurricanes; however, it was still enough to earn a short-term trend upgrade. Personal Income and Outlays was solid but for the inflation component although vehicle replacement after hurricanes helped so that will have to be monitored. 

The Numbers

Five of the eight major categories are now in positive territory including Consumer, General, Manufacturing, Real Estate and Retail, with Employment, Services, and Inflation still posting in red ink.  All but Employment, however, showed improvement over the course of October 2017. Employment is no surprise considering the abysmal showing last month which we hope to correct on Friday.

We hope to see you Friday morning for the Blue World Jobs Report Analysis. Until then, HAPPY HALLOWEEN and HAPPY THANKSGIVING. See you on or about December 1st as we hit the home stretch of 2017!

 

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, November 02, 2017

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