| MARKET ROUNDUP | |
| 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 | -0.05Â 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. Â … . 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.
Remember, you can comment on these or any other items by clicking here.
Best wishes,
Mandeep Rai
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{ 19 comments }
My son began work as a top notch car detailer for a high end car dealership. He started at $14 an hour. One month later they put him on a piece rate. He’s supposed to be detailing cars, but half of the day they have him doing everything but detailing, things for which he doesn’t get paid. Now he works 12-15 hours a day trying to make the same pay he did on hourly. He is looking for a full time job elsewhere, but nothing is showing up.
Previously he worked a couple of jobs that promised full time but in fact gave him 30 hours on a variable schedule that didn’t allow the ability to get a second job. He’s a good hard worker – on time, never sick, mannerly, nice looking, clean, works nonstop.
Your son sounds like a great worker. So sad that some companies are using the bait and switch method. His problem with work is abundant, here in the USA and in Europe.
Great article and charts on the real state of the economy. It was my point exactly in my comments last week. The unemployment figures are a joke at best and a mirage for the market. As I had mentioned last week, the temporary jobs hiring with its low pay and no benefits covers most employment in the workforce hiring today. I have always felt, temporary hiring was exploitation of the American worker by the employer. With the temporary wages, no family can get by with over 2 percent inflation, even with both working. Any savings gets 0.5 percent at best, which certainly decreases the incentive to spend. Many items are over 100 percent increase in the grocery store, of course fuel and food are not counted in government inflation figures. Mike, we are going down for the count in the USA and with the moving and restructuring of companies to downsize, and still produce and compete, perhaps some will still hold their jobs as long time employees, however China is scooping up most of the parts labor work that USA used to do. Read the labels. Crummy leadership in Washington, has intentionally dropped the ball, thus the destruction of America as a sovereign power is underway, from what I can see. I should add, that the lines can be long, yes, even at the temporary services, because, many production companies are NOT hiring. Any hiring is in the service sectors, period. We know what they pay. I am beginning to believe that even Weiss earrings on American companies and banks are too high at the present, as this life raft has a hole in it. Thanks for a good article, as always.
Back in the 1970’s and 80’s when jobs were going overseas, and we were promised they were the bad jobs that no one wanted, I knew we were headed for trouble. And here we are.
WORKING FOR WAGES ON THE FARM
Outfits like ” The Eleventh Hour” Temporary Help Services in the Denver Tech. Center in South Denver Metro Area offer warehouse, telemarketing, and assembly work to anyone for $9.00/hour. Of course, they receive double that or $20.00/hour from their clients for referring employees to them at those labor low labor rates. It happens in every recession.
The cheap labor gets even cheaper and you could say its exploitation. However, this is the basis of capitalism and free markets. This country is run primarily for the benefit of business (owners), NOT employees. In recent years, many of those businesses are foreign owned. They have little interest in their employees beyond what the market and economic necessities of staying in business require of them. This is reality in the chicken koop.
The wage issue was bound to happen and has been going on for at least 2 decades. The USA emerged from WW2 as the only industrial power and therefore had a monopoly on industrial production. As the rest of the world began to catch up with newer plants and equipment and lower labor costs, workers in the USA began competing with the world for the first time in nearly a century. The trend will continue particularly because of competition, but also because of a growing parasitical government strangling its citizens. There is a way out, but having no leadership in DC it will not happen.
ECONOMIC AND JOBS FALLACIES
One popular notion is that higher-paid workers willingly take lower-paying jobs. Think about it. They generally do not. This is just common sense. Sure, if you are really starving, then you will willingly accept ANY kind of employment that “puts food on the table”. Again, common sense born of necessity. However, what if you are not starving and have a good comfortable apartment, you can collect your unemployment benefits each week for 26 weeks, as always. Its legal.
You can be picky, at least in the beginning. Later on, if the “wolf is at your door”, then you may compromise and be forced to take that night shift unarmed contract security officer job for $10.00/hour, if you are lucky. Its pays to hold out as long as possible. That is common sense. Play your hand, even if you have to “bluff”. You might just get lucky in life like me.
As an Integrated Logistics Support (ILS) Engineer with over 30 years of experience I was used to salaries above $45/hr. When the great recession hit many companies downsized including where I was employed and contracted out ILS services and other engineering work to various temp outfits that would then come in and offer us positions doing the same work but at a $30/hr rate. Looking elsewhere yielded the same results. To make ends meet second jobs were taken as a temporary measure. Temporary has become permanent because there are very few well paying ILS jobs left anymore and a single job opening can garner 1,000 to 1,500 applicants when the stated (or implied) rate exceeds $40/hr. With the military and government cutting back on funding, the ILS jobs themselves are becoming scarce and those that exist are going to companies that are bidding ILS engineering positions as technician positions with a pay cap of $29/hr.
After being laid off a year ago i’ve only found one month work. Luckily i’ve saved enough money to live on. Calling it early retirement, at a very healthy 62. If the stock market crashes I will be in real trouble. Lost half my gains in the last 2 weeks. My kids are struggling and I’m not in a position to help out greatly. Only small amounts. One day at a time now. Helping at the local food bank has shown me how bad it really is. More people show up every day.
I wish that you would report specifics, instead of vague accusations, like; I heard, I read, I was told, etc. the “watertable” was ruined, etc. Where and when?
One important point which has been overlooked in this analysis is inflation Vs wage change. From 2007 to now inflation has dropped well below 2% and wage rises are well above inflation. I would be worried if this was to change. There is no sign for that, Oil prices, commodity prices, housing, fuel, transport and interest rates are all so low that the wage rise looks more expensive to business than in 2007/2008. To add to this equation US$ is still the preferred currency and index is keeping pace with inflation but increasing its purchasing power in spite of FOMC opening the flood gates.
Get used to low paying jobs on the laborer level and not the high paying, high educated level jobs. That’s the future of America thanks to the immigration policies of the American government, U.S. Chamber of Commerce and a variety of American corporations. But most of the thanks go to the American people who elect politicians who do not care about the future of this country.
“When tough work doesn’t pay off” When dealing with the
current socialistic administrations in DC and Ma
What did we do with all our “extra” money back when gas was less than $1.00 per gallon and $75.00 would buy all the groceries the family needed for a whole week? Our income level now is not that much different than it was then…???
Another thing not mentioned much is the “Obama-care” effect. Under Obama-care, I understand that 30 hours or more of work per week is considered full-time, and the company being worked for must provide health insurance. Businesses that hire numerous part-time workers have capped the allowable work time per worker per week at 28 hours, even though thay’re having to hire more part-timers to fill in the gaps…but they are NOT paying for health insurance for their workers under any circumstances! …hence, extra job creation…
Hi!, Patrons Of Money & Markets Et Al:
As economist John Exeter evaluated the economic scenery for US decades ago:” gold money is scarce; while paper money made from wood is abundant! ” How scarce is gold money today? A look inside Fort Knox, Kentucky might give US a better estimate but, like Germany found out too, that seems to be confidential information; even though the gold belongs to the citizens of the now dead United States in my opinion. Some are advocating the newest fade the crypto currencies but can they cover the huge US debt and deficits over 17 trillion $’s? I think not! This Country, for whatever its’ reasons, keeps looking for ways to circumvent the discipline to be found but not utilized in Article 1; Section 10 of the US Constitution which calls for gold and silver (specie) coins only. How big would the US deficits be, if they were denominated in US Mint minted silver $’s? Therefore, it’s a wonder that prices for OUR daily bread isn’t far higher; when we consider the Chart Book’s purchasing power of the US $, as provided US by The American Institute For Economic Research in Great Barrington, Mass, (888)528-1216, showing how the dollar has fallen from a peak of around 140 pennies when the $ was backed by gold to today’s present around 2 cents. Their Chart Book sells for around $10. This means if your job pays you $15 an hr. that’s equivalent to 30 cents per hr. which sounds strange to our ears doesn’t it but that’s the reality with which we live like it or not folks isn’t it? The question remains then as to which political party can rescue the US $ and restore its’ purchasing power back to where it once was at 140 cents per US $? It’s all politics and voting isn’t it folks>
RUSS SMITH, CA. (One Of Our Broke, Fiat Money States)
resmith1962@gmail.com
I took “early retirement” at 62. Worked as a volunteer for several years, then went part time doing the same job for 8 years. Now I’m 77 and I live in South America on my SS and annuities. Now my concern is what is going to happen to SS. Maybe it will hold out until I’m in heaven.
Ed
I’m a CPA in CT…some of my clients were from two earner families…one of the two “lost” their job, diminishing spendable income…CT politicians and national politicians are perpetuating the MYTH that things are getting better (of course, November elections are coming)
Seems corporations have found many ways to function leaner than before the recession. Plus more tech improvement for efficiency. Doubt they will ever return to the employment stats of prior. Also keep hearing many companies large and small want the ‘perfect’ employee and seem unwilling to hire someone close in abilities and train them. They have had so many to choose from for years and will not hire unless a candidate is already totally equipped to go into positions that perhaps didn’t exist before. Over supply and demand now has evolved to no one being quite right on the higher end. So fewer hires. Even on mid level, missing one MSN Office program on expert level can exclude a candidate in reality whom is overqualified in other aspects of the position.