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Weak Employment Market With This Growing Trend?

CAMS Weekly View from the Corner – Week ending 3/15/2019

March 18, 2019

The most recent employment report from the Bureau of Labor Statistics (BLS) was dramatically weaker than expected prompting some to call into question if the economy is weakening quickly.  As offered in our previous View the two previous BLS reports offered dichotomies within them whereby the reports offered nearly two different types of results.

Quickly revisiting the two reports we offered how the Establishment Survey within the reports differed notably from the Household Survey in its message.  To be clear, these Surveys do not always align but the significantly differing message from each of them, in the previous two months, was notable.

The BLS produces numerous reports and surveys relative to the broad employment market.  One of these is called the Job Openings and Labor Turnover Survey which is known as JOLTS for short.

This past Friday the most recent JOLTS report was released and within it the total Job Openings continued to post historic levels.  These are jobs that are available but are not yet filled.

The chart below goes back to year 2000 which is the inception point of this Survey.  We can see the level of jobs that are available and going unfilled have gone nearly straight up on the chart in the previous year.

Putting actual numbers to this backdrop we see in the data that beginning year 2018 the number of Job Openings was registering 6.5 million.  With Friday’s release this number is now at 7.5 million reflecting an additional one million additional unfilled Job Openings since January 2018.

Job Openings and Labor Turnover Survey

Industry:      Total nonfarm Region:        Total US Data Element:  Job openings Rate/Level:    Level – In Thousands

Weekly View 3.18.19

While the number of Job Openings depicted above have grown rapidly in the previous year it is important to remember the number of new jobs accepted has also been solid and consistent in this timeframe as well.  Taken together we can see that not only are jobs being created and accepted but more jobs are being created than can be filled at levels not seen before.

On a personal note, when talking with people from unrelated industries I consistently hear the same message when speaking on their business or industry which is simply:  “We are unable to find enough people.”

Taking this back to markets we know we have historically high valuation levels.  Solid and consistent economic growth is an absolute must to support said markets.  Per the data above it seems improbable the economy is weakening significantly when there is such tremendous demand for employees.

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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