Blue World Jobs Report Analysis March 9, 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, March 09, 2018

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

 

BRACE YOUSELVES…

WE CAN’T FIND ANYTHING “WRONG” WITH IT!!!

And you know we try! So often is the case that the headlines are contradicted by the detail the deeper we push into the weeds. This works in both directions and for any report, not just jobs. This report has a couple of “weaker” spots but no “weak” ones. We’ll start with those.

Overall, Weekly Hours Worked and Wages were essentially up-less-than-expected to flat as was the number of Unemployed. That’s it.

The Participation Rate bridges the gap between “weak” and “strong” by straddling the line, in as much as 63% is still unacceptably low, but it moved .3% to the North in a single month. You may recall we were horrified the last time it moved that much from one report to the next. We called it virtually unprecedented, and it moved the wrong way. Not this time!

The headlines screamed 313k of which 287k came from the Private Sector. That, plus upward revisions to December 2017 and January 2018 of +54k, brings the 2018 monthly average to the mid-200’s.  The Labor Force grew by an impressive and refreshing 806k. Total Employed grew by 785k, and the Not in Labor Force tally fell by a fabulous 653k. That’s huge. The Diffusion indexes for the Total Private Sector and Manufacturing are massive and flirting with 70. For reference, we saw 30s not so long ago.

Now, let’s get back to hours and wages. There is concern from the “experts” out there this morning that there is still no sign of wage pressure. Au contraire! I guess they just don’t know their way around the deep weeds like we do… Review Table B-3 of the Report. Average Hourly Earnings for All Employees M/M and Y/Y were up .1% and 2.5%, respectively. Both were below most consensus estimates. BUT, Average Weekly Earnings were up 3.1% Y/Y so salaried employees seem to be on the move so Hourly will follow if this holds. Even more important, compensation in the Construction industry came in at Y/Y increases of 3.5% and 4% for Hourly and Weekly, respectively. In our relative world of the past ten years, those are pretty good numbers. The work week for all employees remained range-bound but Weekly Hours in Manufacturing jumped from 41.2 hours to 41.5 hours. That is the highest reading since before 2011 (Chart) and Overtime in Manufacturing hit 3.6 hours. That is only the second time since 2011.

Risks? First and foremost is still the Fed. We don’t want to see rate hikes in anticipation of inflation. We need to see some consistent evidence and inter-report confirmation lest we risk locking up the economic brakes. Second, this report may set unrealistic expectations. A reading of say, 230k in the Private Sector next month may not look so good compared to today’s outsized numbers. Also, beware of revisions. We see them be material time and time again. Today is a great example. Optimism, when supported by trending data, is OK when making strategic business decisions. Euphoria is just plain dangerous!

Matt will be on WBBM’s Noon Business Hour in Chicago at 12:09 CST to break it all down live. That’s AM780 and 105.9FM and the Podcast will post later in the day.

If you missed it, you can review the Blue World Economic Index® for February 2018. We’ll see you back here around the first of April for the next BWEI® Report and the jobs report for March is schedule for release on Friday, April 6th.

Have a great March and may your brackets prove un-bustable!!

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, March 09, 2018

Blue World Economic Index® for February 2018

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, March 01, 2018

 

 

 

 

 

Analysis

Confirming our regular observation that stock market performance is not a good proxy for economic health, the U.S. economy remained firmly on solid ground in February 2018 pulling back .04 from its record high .18 for December to its prior record high of .14, but there were some hints at trouble. The first half of the month looked to continue an uninterrupted northerly trend, but then mid-month started getting weird with a huge downgrade to December retail, soft January readings and a sudden build to inventories at the manufacturer and wholesale levels. Retailer inventories remained low, but the obvious concern now is that the motivation to aggressively re-stock may be muted.

The Inflation composite was unchanged at a continued weak -.23. The PPI had been showing signs for months, but the CPI just never followed suit. This month it was the CPI showing a material pop and the PPI showing weakness. The Fed is signaling more rate hikes, and that has spawned “Correction Part Deux” this week. We remain of the opinion that inflation is not a material risk at present based on the inconsistent and non-confirmatory nature of the six reports that comprise the BWEI® Inflation component.

While we still consider the Fed to be the biggest risk to the economy right now, there are several other things we could talk about but only two of real note. First is that the Consumer component is still stratospheric, regularly setting new records, and showing no sign of slowing. Second is the seemingly emergent turbulence in Real Estate as (you guessed it) rates rise. We are starting to see corroboration in other subtle corners of the economy such as the wobbly performance of furniture sales in the last couple of months. 

We’ve already fielded a couple of questions regarding the downward revision to GDP. Fuggetaboudit. The downgrade was largely based on the inventory phenomenon and a blip widening of the trade gap as exports took a hit. That masked what was an otherwise 4%+ report.

The Numbers

We got a little long-winded in the analysis section, so instead of listing out the numbers we decided to just post the composite table for the month. If there are any specific questions, give us a call or ping us through the Blue World contact form.

The jobs report has been scheduled for Friday, March 9th. Our analysis will be up that morning and then Matt will go on the air in Chicago with the Noon Business Hour crew at WBBM AM780 and 105.9FM at 12:09 central time to break it down live. The podcast will post later in the day.

 

Have a great March and may your brackets be un-bustable!!

 

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, March 01, 2018

Blue World Jobs Report Analysis – February 02, 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: February 2, 2018

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

 

 

The ugly, the bad, and the good sums up the employment picture for January 2018. The headline looks good, but there is some real stinky stuff under the surface so here we go…

November and December were revised down a net 24k. The Not in Labor Force total and, consequently, the Participation Rate are ridiculously stubborn, having added 153k and remaining at 62.7% respectively. Weekly pay for the Private Sector, Construction, and Manufacturing all receded, and the workweek got shorter in total and for Manufacturing and Construction. That all seems reasonably confirmatory of the Productivity and Costs report released Thursday that showed productivity down but unit labor costs up in Q4 2017, as hourly pay did increase. Sounds pretty bad, right? Not so fast!

The headline boasts 200k net new hires which easily beats the consensus averages and of those a whopping 196k were added in the Private Sector. The Labor Force grew by 500k, and the Total Employed was up 400k. That’s today’s graph and we can see the lines are moving the right direction and showing some convergence. That’s good. Other anecdotal data points out there suggest some of the stinky stuff above will experience some positive revisions over the next 3 months, and we will begin to see the impact of the tax reform trickling in next month.

All in all, we are in good keeping with last month’s report describing 2017 as “mixed.” It still is. But keep in mind what an improvement that is from where we’ve been in the not-too-distant past.

To answer the three most frequent questions we field of late, ride the stock market wave, but DO NOT pull down the safety nets. Stop orders, inverse ETFs, index Put options, alone or in combination, are all good hedge vehicles depending on the structure of the portfolio. Give us a call if you’d like more detailed thoughts. In small and mid-size firms, be leaning in the direction of growth vs. cash stockpiling for rainy days, but make sure you move on quantifiable demand as opposed to getting out over the skis on speculation alone. Bitcoin? No.

 

That’s it for this month. See you at the month’s end for the next Blue World Economic Index® report, which posted a record high for January and got off to a great start for February, and the next Jobs Report is scheduled for…wait for it…Friday, March 9th. Doesn’t that sound wonderful?!?

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, February 02, 2018

Blue World Economic Index® for January 2018

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: January 31, 2018

 

Analysis

What else can be said? The economy is on the move. The BWEI® made a material move to the North this month, and much of that was based on quarterly reviews of the twelve and twenty-four month trends which are more heavily weighted when calculating the index value. An upgrade of the ADP 1-year trend from -.5 to .5 was particularly impactful.  Within the Consumer Major Category, the TD Ameritrade IMX demanded trend upgrades as did Investor Confidence, while the Bloomberg Consumer Comfort Index set a monthly average record high.

We continue to feel the momentum is real but fragile and subject to political, economic, and policy risk, not the least of which is an apparent bias toward prophylactic rate increases in anticipation of inflation. The Hawks need to stand down for a while and let this thing develop. Uncertainty about the outcome of investigations is causing hesitancy as the world frets about whether the guy whose policies sparked the move will make it through a full term.

There was a great deal of anticipation regarding the Employment Cost Index report that came out Wednesday morning, but we don’t know why. This is a quarterly report which won’t take the effects of the post-tax reform wage increases into effect until Q2 of 2018. In spite of that, one can hallucinate a slightly positive trend developing already. Matt talked about the impact of tax reform on WBBM’s Noon Business Hour in Chicago on January 11th. You can follow the link, scroll down to the 11th and Matt starts at 2:20 into the podcast. 

The Numbers

The index advanced .06 to .18 (rounded) from .11. That ties the all-time record high set in September of 2014.

Employment, Inflation and Services remain painted in red ink where Employment showed material improvement, Inflation retreated fractionally, and Services were still stubbornly unchanged. Consumer, General Measures, Manufacturing, Retail, and Real Estate are positive where all padded their leads except Manufacturing and Retail, which showed fractional slips. The Manufacturing pullback was actually welcome as the Fed sub-group surveys came back down to solid yet sustainable levels of strength.

ADP was huge Wednesday morning. Let’s see if it translates to the BLS out this Friday the 2nd of February. The Blue World Jobs Report Analysis will be out before noon Friday. See you there and have a great month!

 

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 Wednesday, January 31, 2018

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