Tag Archives: Unemployment

Good Thing? US Treasury Curve Flattens To Zero As Unemployment Falls To Lowest Level Since 1969

Good thing! US unemployment has fallen to its lowest level since the 1960s.

The US Treasury 10-year – 3-month yield curve has flattened to zero as unemployment hits its 50 year low.

https://confoundedinterestnet.files.wordpress.com/2019/05/yc10u3.png

Is this signaling the end of a business cycle? Or is it signaling the excesses of central banking?

We are seeing turbulence in the US yield curve given the many economic uncertainties around the globe, like Brexit, China trade, etc.

https://confoundedinterestnet.files.wordpress.com/2019/05/usyc.png

At least devaluation of the US dollar Purchasing Power has slowed.

https://confoundedinterestnet.files.wordpress.com/2019/05/fed1913.png

Source: Confounded Interest

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U.S. Jobless Claims Drop To 49 Year Low: Here Is One Reason Why

Another week, another near record low in initial jobless claims, which tumbled by 10,000 to 203K in the last week according to the BLS, below the consensus estimate of 213K, and down from 213K last week.

https://www.zerohedge.com/sites/default/files/inline-images/Initial%20Jobless%20Claims.jpg?itok=WGjp3cTy

As further indication of the vibrancy of the job market, continuing claims fell by 3k to 1.707m, the lowest since mid-June.

The data, which comes before tomorrow’s main jobs report, show employment continued to improve in late August although Jobless-claims figures tend to be more volatile around holidays, such as the U.S. Labor Day. Some doubt about tomorrow’s strong number crept in after today’s ADP Private Payrolls disappointed, sliding from 217K to 163K, far below the 200K expected, and the lowest print since last October.

https://www.zerohedge.com/sites/default/files/inline-images/Change-in-Nonfarm-Private-Employment-August-2018.gif?itok=7nuwBteg

Even so, the figures add to signs businesses are keeping existing staff and adding new workers to help meet demand being boosted by tax cuts in the 10th year of the economic expansion.

Then again, there may be another potential explanation, and as Southbay Research notes, the collapse in initial claims may be tied to Trump’s immigration policy.

According to Southbay, taking the year-over-year change in Initial Jobless Claims (inverse) and comparing it to the GDP y/y growth, the current pattern broadly matches historical patterns. But nominal Initial Jobless Claims are at ~50 year lows.  And that’s with a much larger working population. 

Compare this business cycle with the one in the 1990s:

  • Duration: ~10 years
  • GDP: 1990s GDP much stronger
  • Initial Jobless Claims Year 9 of recovery: 300K (2000) vs 210K (2018)

That is, the current cycle is strong but not as strong as the one in the 1990s.  But Jobless Claims have collapsed even lower. Why?

  • Not tied to duration: While Jobless Claims fall over time, both cycles have lasted roughly the same number of years
  • Not tied to GDP: If GDP were the sole determinant, then the 1990s would have had even lower Claims.

https://www.zerohedge.com/sites/default/files/inline-images/claims%20change.png?itok=9SbDez5h

Trump Economy & Immigration Policy

Sudden drop in welfare applications: From 2015-2017, Initial Claims were dropping at a steady nominal level of ~15K per year. Suddenly, in 2018, the pace has tripled: claims have fallen (-30K). What about 2018 is pushing down claims at the fastest rate in 4 years?

Tighter State Eligibility Requirements: Most entitlement programs are seeing a sharp drop this year.  A key driver has been funding: the Federal government is shifting the cost burden to the States.  In response, States have tightened eligibility; for example, many States are requiring food stamp applicants to show proof that the applicant is trying to find a job.

Immigrant Fear

Last year, the Trump administration surfaced a plan to penalize legal immigrants who use welfare (public housing, food stamps, medicaid, etc).  Under this plan, legal immigrants could have their status revoked.  Fear of that plan is causing many immigrants to shy away from using these entitlements, and from filing Jobless Claims.

In addition, undocumented immigrants are finding themselves under pressure from ICE. Applying for Jobless Claims means visiting government offices. And that has risk.

KEY POINT: A strong and sustained period of economic growth is pushing down Jobless Claims.  But the drop may not be as awesome as it seems.

Source: ZeroHedge


ADP Employment Growth Slows To Weakest In 10 Months

Having beaten expectations in July (and printed notably higher than payrolls), ADP employment growth was expected to slow in August and it did – more than expected. ADP printed +163k against expectations of +200k (down from July’s revised +217k).

This is the weakest employment growth since Oct 2017…

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-06_5-18-07.jpg?itok=-4p8Q9bO

Medium-sized firms dominated the job gains in August as did Service-providing roles…

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-06.png?itok=D6ThDkCG

“Although we saw a small slowdown in job growth the market remains incredibly dynamic,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

“Midsized businesses continue to be the engine of growth, adding nearly 70 percent of all jobs this month, and remain resilient in the current economic climate.”

Mark Zandi, chief economist of Moody’s Analytics, said,

“The job market is hot. Employers are aggressively competing to hold onto their existing workers and to find new ones. Small businesses are struggling the most in this competition, as they increasingly can’t fill open positions.”

Full Breakdown:

https://i1.wp.com/www.adpemploymentreport.com/2018/August/NER/images/infographic/main/NERinfographic-August2018.gif

Job growth is very broad – as measured by the BLS Diffusion index, employment breadth is the highest since 1998…

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-06_5-14-36.jpg?itok=oaojqakr

On average during President Trump’s tenure, ADP has – on average – had no bias in its reporting compared to BLS data, this is notably different from the systemic under-reporting that ADP did relative to BLS during Obama’s tenure…

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-06_5-11-18.jpg?itok=gxIegrbz

Of course, with a 96.3% chance of a September rate-hike priced in, today’s ADP (and tomorrow’s payrolls) print likely have little to no impact on monetary policy (Dec odds for another hike is 67.4%).

Source: ZeroHedge

‘Ghosting’ On The Rise As Workers Blow Off Interviews

In a clear but perhaps unwelcome, for companies, sign that the US job market is at its hottest in decades, applicants are increasingly “ghosting” interviews, resulting in employers getting more creative in their hiring and retention efforts after frustration in attracting ideal candidates is on the rise, according to a new report.

“Ghosting” is a term coined by millennials denoting cutting off all communication with friends or a date, with zero warning or notice before hand, including blocking social media communications and avoiding them in public. Job candidates and employees are now “ghosting” their jobs by way of ditching scheduled job interviews, or even not showing up on the first day of work, or disappearing from existing positions without notice or reason.  

https://www.zerohedge.com/sites/default/files/inline-images/Ghosting%20Office%20Space.jpg?itok=sER9fvup“Office Space” (1999) via Hollywood Reporter

That this is taking place at the same time as the quits rate hit an all time high, is probably not a surprise: we detailed the so-called “take this job and shove it” indicator from the latest JOLTS report earlier this month – it shows worker confidence that they can leave their current job and find a better paying job elsewhere. Well, according to the BLS, as of May, this number hit an all time high, rising from 3.349MM in April to 3.561MM in May, an increase of 212K in the month, the biggest monthly increase since December 2015.

https://www.zerohedge.com/sites/default/files/inline-images/quits%20jun%202018_0_0.jpg?itok=XeUZPZBt

Meanwhile, unemployment has reached an 18-year low of nearly 3.8%, with more job openings than unemployed people in May of this year — only the second month in the past two decades this has happened.

https://www.zerohedge.com/sites/default/files/inline-images/openings%20vs%20unemployed.jpg

As a result, employees increasingly find themselves holding all the cards as 2.4% of all those employed quitting their jobs, usually to take another preferred position, the largest share in 17 years.

https://www.zerohedge.com/sites/default/files/inline-images/Ghosting%20chart%201.png?itok=PH2QuxqH

One president of a major staffing firm in the New York City area, Dawn Fay, told USA Today that “up to 20 percent of white-collar workers” are no-shows at scheduled interviews as they find themselves with more options, and explained further:

To some extent, employees are giving employers a taste of their own medicine. During and after the Great Recession of 2007 to 2009, when unemployment reached 10 percent, many firms ignored job applicants and never followed up after interviews. “Candidates were very frustrated because they felt employers were ghosting on them,” Fay says.

Now it’s payback time as other staffing agencies recently profiled report that they see upwards of 60% of candidates with multiple offers in a market that’s now pit companies in a cut-throat race to attract talent. Some companies report experimenting with group interviews of 20 or 30 applicants or more, with the expectation that up to half may never show up. 

USA Today notes that “While no one formally tracks such antics, many businesses report that 20 to 50 percent of job applicants and workers are pulling no-shows in some form, forcing many firms to modify their hiring practices.”

https://www.zerohedge.com/sites/default/files/inline-images/unemployment%20NPR.png?itok=M1YmoktP

In one prominent online journal geared towards HR professionals and employers, company owners and headhunters rant over recent hiring frustrations

“Downright rude and unprofessional,” says Carl Schussler, managing principal of Mitigate Partners. “What happened to handwritten thank you notes and treating people with respect?”

Kathleen Downs, senior vice president with staffing and recruiting company Robert Half Finance & Accounting agrees with Bieler that candidates’ having multiple choices in today’s job market feeds into this new trend of professional ghosting. She explains that during the Great Recession, companies would receive 100 applications and choose to interview 15 of them. “Now they receive five or six resumes, and if they are fortunate enough to interview all, each of them would have had three or four previous interviews,” she says.

Leylek agrees. “We are now working with a candidate-driven market,” he says. “Candidates are in a position where they hold all the cards.”

For businesses all of this of course spells lost money, time, and wasted expenses as difficult to fill and skill set specific jobs stay vacant event longer. 

Some staffing firms speculate in recent reports that it could simply be a decline in manners among a younger generation more at home in a social media world of impersonal relations and the ease of “blocking” contact.

Employee Benefit News cites the reasons behind “ghosting” in the work world as that while “social media made reaching out to people easier, it also made it easier for candidates to just not reply back,” and that “the uncomfortable situation of delivering the rejection personally that plays into this.”

But more obviously, it’s not social media induced shyness that’s the culprit, but a natural confidence that comes with a robust and growing job market so perhaps ghosting is but the latest positive phenomenon in a resurgent economy. 

Source: ZeroHedge

California Gained Just 800 Jobs In June; Unemployment Remains At Record Low

http://www.latimes.com/resizer/Memjc0TDX_C-yMi6lC4IgOzjYlk=/1400x0/www.trbimg.com/img-5b520f9e/turbine/la-1532104602-2rb2nwgmwy-snap-image

Employers in California’s trade, transportation and utilities sector cut jobs in June. Above, the Port of Long Beach.

California’s economic engine paused in June, as employers added a meager 800 new jobs. The unemployment rate held steady at a record low of 4.2%, according to data released Friday by the state’s Employment Development Department.

The June numbers represent a pullback from May, when the Golden State added 7,200 jobs. And the gains in May were much smaller than April, when employers boosted payrolls by nearly 26,000.

The slowdown could signal that California is simply reaching full employment. Employers are struggling to find workers. Or it could be a sign of sagging confidence among executives. A growing trade war with China, for example, has unnerved companies in California’s logistics industry and beyond.

Economists, however, cautioned against reading too much into one or two months of data.

Lynn Reaser, chief economist of the Fermanian Business and Economic Institute at Point Loma Nazarene University, said June’s disappointing figures “warrant attention” and could be a sign of uncertainty around trade. But they are not cause for “undue alarm at this point.”

“June’s weak performance could be temporary,” she said in an email.

Others said it was too early to see effects from the tariffs the Trump administration has placed on Chinese goods. An initial levy on $34 billion of Chinese goods, along with countermeasures by China, took effect in July following months of tariff threats and saber-rattling between the world’s two largest economies. More tariffs have been threatened.

Michael Bernick, an attorney with Duane Morris and a former director of the Employment Development Department, said the slowdown was expected after a sustained stretch of job growth, noting that the current economic expansion is now the second longest in the post-World War II period.

“California has a broad and diverse economy, and we’re now in our 99th month of employment expansion,” he said in an email.

Last month, employers in four of California’s 11 industry sectors added jobs.

The education and health services sector gained the most, growing by 8,000 jobs. The information sector, which includes tech companies and Hollywood studios, grew by 4,600 jobs.

http://www.latimes.com/resizer/EljcnTk6n2YBPJ9M-ux3pw3OZJ0=/1400x0/www.trbimg.com/img-5b5217e4/turbine/la-1532106721-1amvs38pm0-snap-image

Employers in the government sector and the professional and business services sector also added jobs.

The other seven sectors saw job losses. Leisure and hospitality cut 4,000 jobs. The construction sector shrank by 2,900. Trade, transportation and utilities lost 2,600 jobs. Employers in manufacturing, finance, mining and logging and “other services” also trimmed payrolls.

Wages, meanwhile, rose 2.6% in California from the previous year, to $30.42 an hour, according to the federal Bureau of Labor Statistics, barely keeping up with the national increase in consumer prices. (The agency does not publish consumer inflation data for individual states.)

The number of jobs in Los Angeles County rose by 8,800. Employers in San Bernardino and Riverside counties added 3,400 jobs, while San Diego County employers cut 5,400. The number of jobs in Ventura County fell by 300. Orange County lost 100 jobs.

Across Los Angeles and Orange counties, wages rose 4.8%, to $29.39 an hour, though inflation took out a chunk of those gains.

So-called core inflation — consumer prices minus volatile food and energy costs — rose 3.5% in Los Angeles and Orange counties.

Sung Won Sohn, chief economist with Los Angeles consulting firm SS Economics, blamed June’s poor jobs figures partly on sky-high housing costs that make it difficult for employers to recruit and retain workers.

He noted that the number of people in the labor force — either those employed or looking for work — has been falling in recent months.

Dave Smith, an economist at the Pepperdine University Graziadio Business School, said that absent an increase in immigration, “we are just not at a capacity to add a lot more jobs.”

Bernick and others said that the economy appears mostly healthy despite the poor June numbers. But Bernick said federal trade policy could hamper further job growth.

“A widening trade war is the main threat to California’s continued employment expansion,” he said.

Source: by Andrew Khouri | Los Angeles Times

Mid-November Chart Check

Still no sign of a rebound:

https://i0.wp.com/moslereconomics.com/wp-content/uploads/2017/11/111001.png

Home prices rising about 6% annually and loans now growing at under 4% annually looks in line with at best flat housing sales:

https://i2.wp.com/moslereconomics.com/wp-content/uploads/2017/11/111002.png

https://i0.wp.com/moslereconomics.com/wp-content/uploads/2017/11/111003.png

Looks like the blip up as hurricane destroyed vehicles were replaced has run its course:

https://i1.wp.com/moslereconomics.com/wp-content/uploads/2017/11/111004.png

https://i2.wp.com/moslereconomics.com/wp-content/uploads/2017/11/111005.png

https://i2.wp.com/moslereconomics.com/wp-content/uploads/2017/11/111006.png

This had looked like it peaked a couple of years ago, but since went back up to new highs:

https://i0.wp.com/moslereconomics.com/wp-content/uploads/2017/11/111007.png

By Warren Mosler | Investment Watch Blog

 

LinkedIn Job Postings Plunge, “by far the Worst Month since January 2009”

Is the job market for professionals unraveling?

https://s17-us2.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fastro.ft.uam.es%2Fgustavo%2Flinkedin.png&sp=ec2e69c6e0522b28de1375a381a417d9

The jobs data in the US has recently taken a nasty spill. Last week it was an ugly jobs report from the Bureau of Labor Statistics. It could bounce off next month, and the current data could be revised higher, but we’re not seeing the signs of this sort of hiring momentum.

Instead, we’re confronted with a sharp and ongoing deterioration of a leading indicator of the labor market: temporary jobs. They rise and fall months ahead of the overall number of jobs. The sector peaked in December 2015 at 2.94 million. It shed 21,000 jobs in May, and 63,800 since December. This is also what happened in 2007 and 2000, at the eve of recessions.

This week, it was the Fed’s very own Labor Market Conditions Index which dropped to the worst level since the Financial Crisis, a level to which it typically drops shortly before the onset of a recession – and shortly before employment gives way altogether. It still could bounce off as it had done in early 2003, but it better do so in a hurry

So now comes LinkedIn, or rather MKM Partners, an equity and economics research firm, with a report in Barron’s about LinkedIn – “While we like LinkedIn’s long-term prospects and believe that sentiment on the company’s opportunity is overly negative, we remain at Neutral on the stock,” it says. Rather than disputing the deterioration in the labor market or throwing some uplifting tidbits into the mix, the report highlights yet another 2009-type super-ugly data point.

LinkedIn has some, let’s say, issues. Its stock has gotten hammered, including a dizzying plunge in February. It’s now down over 50% from its high in February 2015. The company lost money in 2014, 2015, and in the first quarter 2016 despite soaring revenues. And that revenue growth may now be at risk.

But we aren’t concerned about the stock or the company. We’re concerned about that 2009-type super-ugly employment data point.

MKM Partners discussed that data point because it’s worried that investors might misconstrue it as weakness at LinkedIn, rather than what’s happening in the labor market and the overall economy:

We believe that LinkedIn is a unique network, the de facto in Recruiting with promising opportunities in Sales and Learning. We are concerned that the jobs tailwind over the past six-years is becoming a headwind and that any further softness in Hiring revenue would incorrectly be perceived as a TAM (total addressable market) issue vs. a macro issue.

The online jobs data is getting “incrementally worse,” the report explained (emphasis added):

After 73 consecutive months of year-over-year growth, online jobs postings have been in decline since February. May was by far the worst month since January 2009, down 285k from April and down 552k from a year ago.

Online job postings are not a direct revenue driver for LinkedIn. We do however believe it is a reflection of overall hiring activity and should be considered a check on demand vibrancy.

And the report frets that “further deterioration” could trigger a “revenue shortfall” in the second half.

LinkedIn caters to professionals, people with well-paid jobs, or people looking for well-paid jobs. They’re software developers, program managers, petroleum engineers, executives of all kinds, marketing professionals, sales gurus…. They span the entire gamut. And companies use LinkedIn to recruit those folks.

So with online job postings on LinkedIn plunging since February, and with May clocking in as “by far the worst month since January 2009,” then by the looks of it, businesses are slashing their recruiting efforts in those professional categories.

https://i0.wp.com/www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/05/31/20160301_obama_0.jpg

If that bears out, it would be another sign that not only the labor market but the overall US economy have taken a major hit recently, that businesses have started to respond to sales which have been falling since mid-2014 and to profits which have been falling since early 2015, and to productivity which declined in Q1 and has been weak for years – and that they’ve begun to look at their workforce for savings. And if this bears out, they will confront the possibility of a looming recession with even steeper cuts.

by Wolf Richter | Wolf Street

Why The US 10 Year Treasury Is Headed Below 1%

US GDP Output Gap Update – Q1 2016

Among our favorite indicators to write about is the GDP output gap. Today we update it with the latest Q1 2016 GDP data. We’ve written about it many times in the past (some recent examples: 09/30/201512/27/2014, and 06/06/2014). It is the standard for representing economic slack in most other developed countries but is usually overlooked in the United States in favor of the gap between the unemployment rate and full employment (also called NAIRU (link is external). This is partially because the US Federal Reserve’s FOMC has one half of its main goal to promote ‘full employment’ (along with price stability) but it is also partially because the unemployment rate makes the economy look better, which is always popular to promote. In past US business cycles, these two gaps had a close linear relationship (Okun’s law (link is external) and so normally they were interchangeable, yet, in this recovery, the unemployment rate suggests much more progression than the GDP output gap.

The unemployment gap now, looked at on its face, would imply that the US is at full employment; i.e., the unemployment rate is 5% and full employment is considered to be 5%. Thus, this implies that the US economy is right on the verge of generating inflation pressure. Yet, the unemployment rate almost certainly overstates the health of the economy because of a sharp increase over the last many years of unemployed surveys claiming they are not involved in the workforce (i.e. not looking for a job). From the beginning of the last recession, November 2007, the share of adults claiming to be in the workforce has fallen by 3.0% of the adult population, or 7.6 million people of today’s population! Those 7.6 million simply claiming to be looking for a job would send the unemployment rate up to 9.4%!. In other words, this metric’s strength is heavily reliant on whether people say they are looking for a job or not, and many could switch if the economy was better. Thinking about this in a very simplistic way; a diminishing share of the population working still has to support the entire population and without offsetting higher real wages, this pattern is regressive to the economy. The unemployment rate’s strength misses this.

Adding to the evidence that the unemployment rate is overstating the health of the economy is the mismatch between the Bureau of Labor Statistics’ (BLS) household survey (unemployment rate) and the establishment survey (non-farm payroll number). Analyzing the growth in non-farm payrolls over the period of recovery (and adjusting for aging demographics) suggests that the US economy still has a gap to full employment of about 1.5 million jobs; this is the Hamilton Project’s Jobs Gap (link is external).

But, the labor market is a subset of the economy, and while its indicators are much more accessible and frequent than measurements on the entire economy, the comprehensive GDP output gap merits being part of the discussion on the economy. Even with the Congressional Budget Office (CBO) revising potential GDP lower each year, the GDP output gap (chart) continues to suggest a dis-inflationary economy, let alone a far away date when the Federal Reserve needs to raise rates to restrict growth. This analysis suggests a completely different path for the Fed funds rate than the day-to-day hysterics over which and how many meetings the Fed will raise rates this year. This analysis is the one that has worked, not the “aspirational” economics that most practice.

In an asset management context, US Treasury interest rates tend to trend lower when there is an output gap and trend higher when there is an output surplus. This simple, yet overlooked rule has helped to guide us to stay correctly long US Treasuries over the last several years while the Wall Street community came up with any reason why they were a losing asset class. We continue to think that US Treasury interest rates have significant appreciation ahead of them. As we have stated before, we think the 10yr US Treasury yield will fall to 1.00% or below.

by Kessler | ZeroHedge