|Dow||-75.07 to 16,368.27|
|S&P 500||-10.67 to 1,909.57|
|Nasdaq||-20.08 to 4,334.97|
|10-YR Yield||-0.05 to 2.424%
|Gold||+$4.60 to 1,312.80
|Crude Oil||+$0.65 to $97.57|
Mike Larson, Money and Markets columnist and editor of the Safe Money Report, is out today. Mandeep Rai, a senior analyst at Weiss Research, is filling in …
Jobs up! Unemployment down! Great news, right? Weekly numbers, like those published today, are highly touted by market participants as a good indication of the strength of the overall economy. If you have near-full employment, that places more spendable money into the hands of the workers — and consumers comprise the largest segment of GDP.
Recently, employment counts have been creating a bit of a sensation by indicating success on the job front. Today’s numbers showed that jobless claims declined 14,000 to 289,000 in the week ended Aug. 2. The monthly data, published last week, showed that 209,000 jobs were created in July, which marked the sixth-consecutive increase of 200,000 or more (the longest run since 1997).
But don’t let the headline figures mislead you. The numbers are encouraging, but the figures buried within the July monthly report tell a different story, clearly indicating that many of the new jobs are of the lower-paid variety instead of the high-quality, high-paid positions needed to kick-start the economy and getting people to buy clothes, cars, TVs, appliances and other consumer goods. And even those working with decent jobs are having trouble getting ahead of the economy, with real wages not really keeping up with (officially understated) inflation.
What they show are that the average worker is working harder and getting no additional money. According to the July data from the Bureau of Labor Statistics, average hourly earnings did increase 2 percent over the past year — but inflation also increased 2 percent over the same time period, basically negating any real wage improvement.
Take a look at the divergence above and below: Although we aren’t at prerecession highs, workers are continually working longer work weeks, but if you look at the hourly wage chart, on average, our consumer is spinning his wheels, working longer for the same standard of living.
And, quality counts when you look closely at the numbers: The industries with the highest wages, financial services, information, utilities and mining, added a paltry net 68,000 jobs or just 0.6 percent of the 2.8 million created in the past 12 months. Comparatively, 217,000 temporary jobs and 375,000 lower-paying leisure and hospitality jobs were created, contributing more than 20 percent of the new jobs.
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And that can make a big difference in the growth of the economy — because those high-paying jobs pay over $30 an hour, while the lower rungs, which include leisure and retail jobs, only pay about half of that. So the prospect of these newly-employed workers turning into free-spending consumers might only be wishful thinking.
|“Looking closer at these jobs numbers leaves us wanting more to convince us this rally can continue at the same pace.”|
Equity markets have more than doubled since the lows of 2009 as economists and analysts proclaim that we are in full recovery mode. But with wage growth muted and lower-paying jobs taking the forefront, putting pressure on the largest component of GDP, can the recovery continue at this pace?
What’s it all mean for your investing strategy? Today’s jobless claims report does provide some useful information. But we’ve always advocated looking at the data beyond the weekly headline number to see what the internals of the monthly, four-week average reports look like and what is driving the beat or miss. Looking closer at these jobs numbers leaves us wanting more to convince us that this rally can continue at the same pace we’ve seen — especially since over two-thirds of GDP is still facing purchasing power headwinds.
What have you seen in your real-life experiences? Do you have family and friends who previously had high-paying jobs but now are forced to take lower-paying positions? Or have they just dropped out of the labor pool altogether, unable to match previous salary situations? It will be interesting to hear real-life stories from you. To participate in the discussion, click here.
|OUR READERS SPEAK|
A Money and Markets column by Mike Larson highlighting energy issues brought many responses …
Reader Mary wondered out loud about the benefits vs. risks of fracking to the U.S. economy and environment. She said: “While it is wonderful that we are able to produce more oil in the U.S., I have read comments from people attempting to live in fracking areas that the water tables are either destroyed or polluted to the point where it is highly toxic in many cases.” She adds: “Isn’t there a way to get both oil and not destroy the territory getting drilled?”
Others commented on the apparent collapse of 21st Century Fox’s attempt to acquire Time Warner …
Reader Jo expressed relief that Fox’s Rupert Murdoch didn’t get control of another media outlet. “I am glad that Murdoch met resistance. Consolidation in the media industry is already bad and we do need more diversity.”
Meanwhile, the Ebola debate continues to be one of the most heated issues among Americans …
Reader Jerry pointed out that the general public is not at routine risk, although health workers in affected areas might be. He said: “Ebola is not transferred through breathing, but only through close physical contact. … . Healthcare givers, treating the patients, are necessarily very close to the disease. It is not an epidemic, not easily caught.”
|OTHER DEVELOPMENTS OF THE DAY|
Europe’s two leading central banks, the Bank of England and the European Central Bank, held steady on rates today. The BoE’s decision came despite a recovery apparently gaining steam in the U.K., while the ECB’s non-move came despite signs of weakening throughout the Continent, including in Germany and Italy. The ECB held its main interest rate at a record low of 0.15 percent. Its rate for bank deposits held at the ECB remained at a negative 0.1 percent. Factory orders in Germany tumbled in June, while Italy slipped back into recession. In the U.K., the Bank of England kept its main rate at a record low of 0.5 percent, even though the economy there is strengthening. Most observers expect rates to go up in the U.K. later this year or early next year.
Nearly 90 percent of the estimated 30 million uninsured Americans won’t pay a penalty under Obamacare rules in 2016 because of a growing number of exemptions, the Wall Street Journal reports. The paper cited an analysis by the Congressional Budget Office and the Joint Committee on Taxation that said most of the uninsured will qualify for one or more exemptions under the Affordable Care Act. According to the rules, there are 14 ways people can avoid the fine. These included those suffering domestic violence, experiencing substantial property damage from a fire or flood, and having a canceled insurance plan, the WSJ said. Those come on top of exemptions established under the 2010 law for groups including illegal immigrants, members of Native American tribes and certain religious sects.
Outside of the business world, concerns today center on the state of Hawaii, which is bracing for its first direct hurricane hit in 22 years. Iselle appears set to impact late tonight/early Friday Hawaii time, followed by another system, Hurricane Julio, which is on course to hit Sunday night. The forecast is for Iselle to weaken from a hurricane to a tropical storm before hitting Honolulu at about 9 a.m. Friday (3 p.m. Eastern time). Authorities report that bottled water and other supplies were in high demand at stores ahead of the storms, and we can only hope that the hurricanes weaken substantially before reaching the islands.
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