Blue World Jobs Report Analysis November 3 2017

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: Friday November 3, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

MIXED…and probably still by hurricanes. The headline looked great, but details just couldn’t hold up their end and in some cases make little sense, but the overall leaning of this report has to be positive due to some specific sector data.

At the top of the Establishment Survey we see 261k net new hires. The Private Sector contributed 252k to that total, and we enjoy net upward revisions of 90k to the last two months. The Total Unemployed retreated and the Diffusion Index readings for the Private Sector and Manufacturing are very strong at 59.6 and 62.2 respectively, where 50 is break even. So far, so good.

Now it gets weird. The Labor Force got smaller…by a lot. Total Employed fell, the Not in Labor Force tally spiked and went solidly back over 95M, and the Participation Rate plummeted .4 to tie its 2017 low of 62.7. All we can say is, “That ain’t normal.” We just don’t see single-month moves of that magnitude in the Participation Rate. Much of the volatility is in industries most impacted by the storms like Hospitality/Food Service, etc.

So, where do we pick up on the big positives? An economy with lateral movement demonstrates constantly conflicting economic data. An economy starting to reveal a direction, positive or negative, begins to establish consistency when the reports are analyzed as a body instead of taken one at a time and day-by-day. This is, of course, the whole point of the Blue World Economic Index®. What we see lately is some emerging agreement between reports in key industries.

Hard data lagged anecdotal survey optimism for many months, but now performance metrics from the Manufacturing sector, for example, are beginning to validate that optimism. This morning’s Employment and Factory Orders reports fell right in line by adding a material number of jobs while extending the work week and requiring more overtime hours. Headline and detail readings in the Factory Orders report posted impressive gains in key areas. We see similar dynamics in Services and Construction.

The picture is not yet clear, and there are substantial internal and external risks that can upset this apple cart, but we can perceive some focus creeping in when triangulating all these information sources. For more on that please review the Blue World Economic Index® report which posted yesterday.

The Fed? We feel “prophylactic” hikes in anticipation of inflation is dangerous policy this early in an actual recovery and there is no hint of it yet. We remain opposed to another rate hike this year but the headlines in this report may feed the hawks if they choose to ignore the current lack of evidence, including weak wage pressure in today’s release. Moving rates too fast is one of the internal risks we consider material.

The next Employment Situation Report is scheduled for release on Friday, December 8th and, of course, The BWEI® report will post earlier that same week. Until then, have a great November and a very happy Thanksgiving!

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, November 03, 2017

Blue World Economic Index® for October 2017

Brief Explanation 

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date Thursday November 2, 2017

 

Analysis

Happy Halloween! If you’re looking for a scare, the economy isn’t going to provide it. The Blue World Economic Index® broke into positive territory for the first time since September 2015 and is at the second highest level since the report has been published! We’re not saying were high enough above water for a human to both see and breath, but an alligator could. The analysis section will cover a bit more than usual in terms of individual reports.

Again, we see the move driven by some trends that demanded upgrades and a whole lot of anecdotal optimism measures, but that is not to say the hard data is still missing. The hurricanes had a small but seemingly very temporary effect. The Durable Goods report was strong and added more support to the regional Fed reports which, by the way, are so high they can probably be viewed at eye-level from the International Space Station! Regulations have been quietly rolled back in waves, and the prospect of a tax cut is still in play. The uncertainty surrounding investigations, indictments, nuclear war, etc. are all still serious risks to the optimism-fueled surge, but the momentum has proven quite resilient so far.

The FHFA House Price Index came in high and is what drove the BWEI® into positive territory late in the month (25th) and it never looked back. We’ve seen some intra-month positives on occasion, but they’ve never held.

Manufacturing is still growing and now both by survey and hard data. Empire State and Philly Fed earned very unusual 2’s for the month for blowing both last month and estimates out of the water. The Kansas City Fed and Sub-Fed composite hit new highs and hurricanes were not even a speed bump for the Dallas Fed region still being led by new orders and a Capacity Utilization at 10 year highs. The only downer in manufacturing all month was the Industrial Production Report.

GDP from last Friday was the second 3% reading in a row, but we need to see how artificial the inventories contribution was as a result of hurricanes; however, it was still enough to earn a short-term trend upgrade. Personal Income and Outlays was solid but for the inflation component although vehicle replacement after hurricanes helped so that will have to be monitored. 

The Numbers

Five of the eight major categories are now in positive territory including Consumer, General, Manufacturing, Real Estate and Retail, with Employment, Services, and Inflation still posting in red ink.  All but Employment, however, showed improvement over the course of October 2017. Employment is no surprise considering the abysmal showing last month which we hope to correct on Friday.

We hope to see you Friday morning for the Blue World Jobs Report Analysis. Until then, HAPPY HALLOWEEN and HAPPY THANKSGIVING. See you on or about December 1st as we hit the home stretch of 2017!

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release sites should be cross referenced.  The index assignments represent the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on the index.

 

©Blue World Asset Managers, LTD Thursday, November 02, 2017

Blue World Jobs Report Analysis October 6, 2017

 

 

 

 

 

 

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: October 6, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

Should we panic? Perhaps…but not because of this jobs report. Today was a fascinating exercise in data collection and analysis. There is absolutely no reason to go into most of the actual numbers this month, but we have to go through the positives and negatives because, taken at face value, this report is awesome! In fact, if we were to be given the detail in advance and asked to predict job growth based on them, we’d have projected between 200k and 225k.

The Labor Force, Total Employed, Participation Rate, and Employed-Population Ratio all grew by very healthy margins. The Unemployment Rate, Total Unemployed, and Not in Labor Force totals all fell…by very healthy margins! The bad news was all in the headlines. Is there an explanation? Yup.

The obvious answer is the active hurricane season. But how does that throw this report into chaos? One example, without going too deep into the weeds, the report data is acquired from two different surveys, Household, which surveys individuals, and Establishment, which surveys employers. This is an unusual circumstance in that one who is counted as employed by one survey is counted as unemployed in the other based on whether they got paid. As we might suspect, the hospitality industry took it on the chin, so a lot of folks with “jobs” didn’t end up working and didn’t get “paid.” A major data point we were waiting to see was the response rate. We can get significant revisions to the jobs report over the two months following each release as many send their survey responses late. This month we fully expected the timely response rate to be way down. It wasn’t. According to the BLS, response rates were within normal limits in and out of the hurricane affected regions.

So…pay no attention to the details behind the curtain EXCEPT the revisions. The only meaningful data point to come out of this report is the net -38k revisions to July and August. That brings the three-month headline down to a 91k average for Q3 2017. That is simply not good enough.

At writing, S&P futures are trending down, but there is no indication of a gap-down vertical graph, so it seems the markets will take this in stride understanding the temporary nature of a report that will undoubtedly revise between now and year end.

For more on the overall state of the economy you’re invited to review the Blue World Economic Index® Report for September which posted earlier this week. We’ll have no choice but to downgrade the index value for this report under the Employment category, but it won’t be as severe as the numbers imply for all the anomalous reasons listed above.

Have a great and safe Halloween, and we’ll meet back here for the next Employment Situation release, which is scheduled for Friday, November 3.

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, October 06, 2017

Blue World Economic Index® Report 10/03/2017

 

 

 

 

Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date October 3, 2017

Analysis

The economy’s flirtation with a positive reading is as tantalizing as a butter-seared, blood-rare Porterhouse, wild rice and a snifter of cognac is to me on a Saturday night! TMI? Apologies.

The Blue World Economic Index® made a solid move from -.4 to -.1 for the month of September 2017. It must be noted that looking at a lot of the reports would suggest bigger changes from last month in either direction, but we exercised a bit more restraint due to the awareness of the continued but temporary impact of the active hurricane season. There was also a material impact from short and long-term trend upgrades in GDP from -1 to -.5 because the trends are weighted more heavily than the current month’s report.

That said, we expected worse from the hurricanes, especially in reports that post in the second half of the month, and the consumer appears to have already gotten over it. Below we’ll talk about weakness in Real Estate, but there is a lot of thinking out there that the weakness represents a short-term rebalancing and may be a harbinger of better things to come later next year. The Chicago Fed has been the only contrarian in the Fed sub-group two months in a row, which is a bit perplexing and concerning since that report is uniquely national in scope rather than regional like the others we follow for that group, and the regionals are knocking the cover off the ball.

December Fed meeting, you ask? The late entries of Personal Income and Outlays, Farm Prices, and GDP Inflation coupled with the mid-month reports of Producer Price Index-Final Demand and the Consumer Price Index all suggest inflation still resides in the where-are-they-now-file, but there are, as we’ve said, some other positives. We think there are arguments for the doves and hawks, but we are taking the under this month and saying we’ve seen the last of the hikes for 2017. 

The Numbers

Of the eight major categories, five are still above water. They are Consumer, General, Manufacturing, Real Estate, and Retail. Of those, all but one, Real Estate, posted gains since last month, but recall some of the conflicting signals in Retail where negative scores for Motor Vehicle Sales and Retail Sales were cancelled out by equal and opposite scores in Business Inventories and E-Retail, leaving the notoriously contrarian Red Book report to carry the ball. Manufacturing continues to excite with the Fed AND non-Fed groups advancing .03. Employment and Inflation are still underwater, where Employment slipped fractionally, but Inflation, while improved .11, is still solidly negative at -.37. Services remained unchanged at -.16.

We’ll see what else the hurricanes have to offer the fourth quarter, and with high stakes policy issues like tax reform coming up we see volatility and excitement from street level to Wall Street on tap!

The Blue World Jobs Report Analysis will post on Friday. Have a great October, a wonderful Halloween and we’ll see you back here at the opening of November.

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release sites should be cross referenced.  The index assignments represent the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on the index.
©Blue World Asset Managers, LTD Tuesday, October 03, 2017

Blue World Jobs Report Analysis 09-01-2017

Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date Friday, September 01, 2017 

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

 

 

 

 

 

 

 

We’ll open today with prayers for all the victims of Harvey. You’re in our thoughts!

Fed Caution                    Fed Caution                      Fed Caution

The more aggressive Fed members were very quick to talk rate hike after the GDP report on Wednesday. We hope this jobs report will ground the hawks, because while this economy is showing real signs of life, it is nowhere near needing a break pumping! A continued belief seems to be that it is inevitable that inflation will show up so these hikes are “prophylactic.” It doesn’t work that way folks, and this jobs report DOES NOT signal inflation is on the way. We’ll explain.

The economy is still fragile and erratic in its growth. There are too many domestic policy  and international uncertainties, reaching levels of downright fear in some cases, like North Korea. Any efforts to keep the economy from “overheating” at this stage are very premature, and the worst thing that could happen for the global economy would be for the U.S. to have to take rates back down. So, Fed, are you listening? Please watch and wait!!

The details are decidedly mixed, and if we had to say lean toward weak, but there are some notable bright spots, too.

On the down side:

The headline of 156k was a miss on an expectation that just wasn’t very high to begin with (180k). We are being told that wages for the Private Sector only grew .1% month-over-month, but it’s worse than that. The .1% is hourly. Weekly, in other words, salaried workers actually lost ground at -.2%. Weekly Construction lost .1% and Manufacturing lost .6% and a whopping 1% for hourly and weekly employees, respectively so “FED ARE YOU LISTENING? – – NO INFLATION!” The work week remains stubbornly short. Today’s chart is the work week length going back to 2012. The Labor Force grew by 77k, but the Not in Labor Force and Unemployed columns posted triple digit adds. The Participation Rate remains under 63%, and nobody (should care) cares about the Unemployment Rate. To put this into some more perspective, Andre Boucher from Pavilion (www.pavilioncorp.com) sent me a sobering statistic published by Eddy Elfenbein at Crossing Wall Street (www.crossingwallstreet.com). He calculates “In order to have the same jobs-to-population ratio as 17 years ago, we’d need 10.5 million more jobs, or 16.3 million fewer people.” That certainly tells us 156k, 165k, and even 180k per month just won’t get us there.

On the up side:

Today’s headline of 156k factored a -9k for Government payrolls leaving the Private Sector tally higher than the headline at 165k. Even though the June and July totals netted out to -41k in revisions, the Private Sector netted +4k, so that is not at all insignificant to the good. The wage disappointment (this is hopeful optimism) may be due, in part, to a temporary dilution effect in Manufacturing and Construction as both sectors made solid gains in payrolls with hefty upward revisions to the previous two months. In fact, the Diffusion Index is at 63.8 for the entire Private Sector and a massive 73.1 for the 78 Manufacturing industries. For comparison, those numbers were 55.7 and 42.3 respectively just one year ago. This validates the Regional Fed surveys regarding strength in Manufacturing hiring and more evidence that anecdotal optimism is starting to enjoy the support of hard data. We talk about that a little more in the Blue World Economic Index® which came out yesterday.

In an unfortunate note, the Fed has abandoned their Labor Market Conditions Index, which followed many of the same key indicators we do and, therefore, tracked very well with our analysis and forecasts. It was one of our favorite internal and external metrics for this analysis as well as a component of the Employment category in the BWEI®. Not to worry, however! We’ll keep doing it for them!!

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, September 01, 2017