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About Friday’s Strange Employment Report

CAMS Weekly View from the Corner – Week ending 3/8/2019

March 11, 2019

This past Friday the Bureau of Labor Statistics (BLS) released the employment report for the month of February.  The headline number of 20,000 jobs created left many confused in light of how low the result was compared to recent trends throughout the labor market.

This paltry employment growth level is not corroborated through other employment measures such as ADP Research Institute’s release on Wednesday whereby 183,000 new private sector jobs were created.  Furthermore, revisiting the two previous BLS releases, we’ve seen some notable quirkiness when looking at them together.

The BLS employment report consists of two separate surveys – the Establishment Survey and the Household Survey.  The Establishment Survey is the headline number reported each month, including the 20,000 figure released on Friday.

The previous release (for month of January) reflected 311,000 new jobs created as a headline (think Establishment Survey) at the same time the Household Survey for the same month reflected a decrease of 251,000 jobs.

The current release on Friday reflects the aforementioned 20,000 headline number of the Establishment Survey while the Household Survey for the month of February reflects a strong 255,000 new jobs created.  Taken together, the Surveys depict completely different type of results that essentially reflect one up the other down within the same employment report for two consecutive months.

To be certain there are times when these two Surveys do not line up but the two previous releases are nearly diametrically opposed in terms of their message about the health of the employment landscape.

Broadening out our general review of the employment landscape, the BLS “JOLTS” report measures the level of unfilled job openings nationally.  Currently this reflects an all-time record high (since inception year 2000) of 7.3 million unfilled job openings.

Adding to this astounding figure and for context – beginning year 2018 this number was posting a then record high level of 6.2 million unfilled job openings.  This equates to over a million new unfilled job openings to date in just over a year.

Average Hourly Earnings - 3.11.19

Click For Larger View:

The above chart depicts the percent change of wage growth rates for Hourly Earnings of Production and Nonsupervisory Employees in the private sector.  These are not skilled tradesmen or company leadership.  If we want a clear view of the health of the employment landscape, via economics, this is one of those measures.

Increasing wage growth rates – especially the strongest seen in a decade via the chart – do not appear out of the kindness of strangers if you will.  They occur through the economic lens of supply and demand.  When the demand for Labor far exceeds the available supply of labor (think the aforementioned JOLTS data) prices rise to attract and/or keep employees.

The “prices” component in this mix is the annual wage growth rates depicted in the chart which reflects a solid uptrend since late 2017.  At 3.5% wage growth rates and trending, we have to continue to conclude this employment landscape remains vibrant and healthy.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio


H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

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