The numbers were weak, but they didn’t reflect a disaster. The economy managed to eke out its 100th-straight month of positive job gains, albeit the 38,000 print was far worse than the 175,000 gain expected by market participants.
Still there were many extenuating circumstances surrounding the May data. First and foremost was the Verizon strike, which shaved nearly 40,000 workers off the payroll. And seasonality also played a part.
Last, but perhaps most important, the NFP has a margin of error of 100,000 either way, so the data could have been grossly underestimated.
Contrast the NFP report with the ADP number that was released just a day before. Mind you that, unlike the Labor Department, the ADP actually has real payroll data rather than mere surveys and it posted a serviceable number of 173,000.
|There was a silver lining to the recent week jobs report.|
Perhaps the most important counterpoint to the doomsday narrative comes from the analysts at Convergex, who wrote this week:
“The lousy jobs number on Friday is a good reason to review one of our alternative measures of the U.S. labor market: individual tax and withholding data from the U.S. Treasury.
“May 2016 receipts for wage-earning individuals were fine, up 9.9% after two months of essentially flat growth. Gig economy workers, who submit their taxes on a non-withheld basis, are doing even better with payments there up 31%. Year-to-date receipts for each cohort are similarly strong: up 5.0% for wage earners and 9.7% for gig workers, for a combined gain of 5.9%.
“And while the Federal Reserve may not cite this data directly in policymaking, it does filter through in terms of wage gains (up 2.5% in May) and therefore inflation pressures. Bottom line: The weak May jobs report makes the Fed’s job of communicating policy even more difficult. Inflation pressures are quietly mounting even as job growth stalls.”
|“Eventually, all that income will begin to show up in consumer spending figures.”|
Indeed, if there was a silver lining in last week’s report it’s that wages continue to grow at respectable pace. Eventually, all that income will begin to show up in consumer spending figures.
Consumer stocks have been beaten up badly over the past year, with the XRT ETF bottoming out below $40/share in March. The ETF has since rebounded to $43/share. And if you presume that U.S. incomes will continue to climb for the rest of the year, the stock could trade back toward $50 as Christmas season approaches. That’s not the conventional view of the doomsday crowd on Wall Street these days, but that’s what makes this idea so compelling as markets go into their summer stall.
It’s set: Hillary Clinton won the California primary, among others, last night, making history as the first female presumptive presidential nominee from a major U.S. political party (despite rival Bernie Sanders vow to remain in the race). She will square off against Republican candidate Donald Trump, setting up a likely long and bitter campaign until the November vote.
No matter how the vote goes, it will be fascinating to see how the winner claims victory at the end and how the loser concedes. This being like no other race in recent history, will the conclusion be a civilized event or will the bad blood continue right through the inauguration ceremonies?
The head of the U.S. House Financial Services Committee seeks to do away with most of the Wall Street regulations passed by Congress in the wake of the 2008 financial crisis, according to NPR. U.S. Rep. Jeb Hensarling, a Republican from Texas, would allow banks that keep more capital on their books than they currently do to be exempt from most of the new rules. “Simply put, Dodd-Frank has failed. It’s time for a new legislative paradigm in banking and capital markets. It’s time to offer all Americans opportunities to raise their standards of living and achieve financial independence,” Hensarling said in prepared remarks to the Economic Club of New York.
Millionaires control 47% of the world’s wealth, and that figure will rise to 52% by 2020, according to a report by the Boston Consulting Group. People worth more than $20 million in the U.S. will control 29% of the country’s wealth by 2020, up from 24% in 2015 and 20% in 2010, according to the report. Meanwhile, people worth less than $1 million will have their share of wealth shrink to 29% of the total, from 34% in 2015 and 40% in 2010.
Feel free to share your comments on these or any other matters below.
The Money and Markets team