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Employment Market Strength

CAMS Weekly View from the Corner – Week ending 6/8/2018

June 11, 2018

On Thursday of this past week (June 7th) the Department of Labor (DOL) released their weekly figures for the Weekly Unemployment Insurance Claims.  This is the weekly number of new claimants for unemployment insurance and also acts as one of several barometers for our employment market backdrop.

The lower the number, on a consistent basis, speaks to relatively minimal new claimants and simultaneously tells us the employment market is solid.  When these figures begin to increase, in particular in trend fashion, we then begin to get increased concerns for the overall state of employment.

On Thursday the DOL informed us the most recent tally was 222,000 new initial claims reflecting the lowest level dating back to the early 1970’s.   This very low level of initial claims along with the already established trend of mid-to-lower 200,000 levels tells us the overall employment backdrop is healthy and vibrant.


Click For Larger View:   https://fred.stlouisfed.org/graph/?g=k7JK

Speaking to consistency, the above chart depicts the 4 week average of Continued Claims dating back to the 1960’s for perspective.  These claims reflect the number of people who remain on unemployment insurance after the initial claim is made and also informs us of the strength of the employment market by the number of people who remain unemployed.

Like the Initial Claims data above, the Continued Claims are at multi-decade low levels hereby chiming in on the inherent strength of the employment backdrop.

The employment market has been and continues to be tightening enough to where we can continue to expect a pickup in wage growth rates.  The question we continue to monitor is whether they will be able to grow notably faster than inflation to leave the citizenry increased levels of real disposable income – that is income after inflation takes its bite.

With this we should certainly see another Federal Reserve interest rate hike in their upcoming meeting later this week.   All told the employment market and the economy generally remains strong.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio

Footnote:

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.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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