Morning Report – Lots of labor data 9/4/14

Posted on September 4, 2014 by Brent Nyitray

Markets are higher this morning after the ECB cut rates to 5 basis points and committed to start buying securitized debt and covered bonds in October. Bonds are flat as this decision had been priced in already.

Just something to think about – the “buy the rumor, sell the fact” effect. In other words, the big move for ECB QE was over the past six months, and it wouldn’t be surprising to see a sell-off in sovereigns as the announcement is out of the way and speculative players unwind their positions. Euro sovereigns are driving the US bond market at the moment.

Fun fact, 45% of global sovereign bonds yield under 1% according to Bank of America.

Denmark just cut its deposit rate to negative 5 basis points. They are in the throes of a burst real estate bubble.

The ISM Non-Manufacturing index rose to 59.6, the highest since August 2005. The manufacturing index rose to 59, and would correspond to a GDP growth rate of 5.2%. Of course manufacturing doesn’t have the impact on the US economy it used to, but still….

ADP is forecasting the economy will add 204,000 jobs in August. ADP has been spot-on the last couple months. The Street is forecasting 215k tomorrow.

 ADP employment

In other labor market data, announced job cuts fell 21% according to outplacement firm Challenger, Gray and Christmas. Unit Labor Costs fell .1% in the second quarter as productivity rose 2.3%. Finally, initial jobless claims ticked up slightly to 302,000. Initial Jobless Claims levels are back to boom-time levels, and as a percent of the population are back to levels not seen since the late 1960s.

 Initial Jobless Claims long term

What is holding back wage inflation? Pent-up deflation. As Keynes pointed out, during recessions wages should fall as the demand for labor falls. However, employers are loath to cut pay (a phenomenon called sticky wages) which means that by not cutting wages, employers are overpaying during a recession. As the recovery builds steam, therefore they are not feeling pressure to raise them either. Interesting theory, and one thing the researchers say is that once this runs its course, wages could rise more quickly than economic models suggest as businesses that kept wages low for too long are forced to play catch up. This may in fact be what was behind the language in the FOMC minutes about there being less slack in the labor market than people think. We will see tomorrow with the jobs report. Separately, the average weekly hours worked by a full time employee inched up to 46.7 hours.

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21 Responses

  1. jnc4p's avatar
    jnc4p, on September 4, 2014 at 9:56 am said:

    You can never trust the government when it says it’s doing something for “safety”.

    “In 2000, the St. Louis Post-Dispatch reported in a series of articles that motorists passing through the tiny town of Bel-Ridge (also on Natural Bridge Road) were getting pulled over for running a red light at an intersection where the light had previously always flashed yellow. The complaining motorists reported seeing the light suddenly change to red while they were in the middle of the intersection. After several complaints, an engineer with the Missouri Department of transportation went out to observe what was going on.

    As it turns out, in 1998 Bel-Ridge police had received permission from the DOT to install switch at the light that allowed an officer to manually convert it to red. The switch was installed so an officer could allow children from a nearby school to safely cross the road. But the engineer witnessed police switching the light to red when there were no children present at the intersection at all, just as groups of cars were passing through. Another officer would then pull one or more cars over and issue them tickets. Bel-Ridge police denied the allegation, and insisted that officers only switched the light to red when children needed to cross. But the engineer found that most of the morning tickets were issued between 9 and 10:30am, when school was already in session. The Post-Dispatch noted that in 1996, two years before the switch was installed, Bel-Ridge derived 29 percent of its annual revenue from traffic fines. In 1999, the first full year after the switch was installed, that figure jumped to 44.8 percent.”

    http://www.washingtonpost.com/news/the-watch/wp/2014/09/03/how-st-louis-county-missouri-profits-from-poverty/

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  2. markinaustin's avatar
    markinaustin, on September 4, 2014 at 10:12 am said:

    More evidence of spoliation? At this point, the USA for DC should be licking his chops.

    http://www.washingtonpost.com/blogs/federal-eye/wp/2014/09/04/why-did-the-irs-clean-out-lois-lerners-blackberry-after-probes-began/?wpisrc=nl_fed&wpmm=1

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  3. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 4, 2014 at 10:19 am said:

    Never happen Mark, I’ll bet money on it.

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    • markinaustin's avatar
      markinaustin, on September 4, 2014 at 10:30 am said:

      It would if I were USA for DC.

      For all I know she had naked selfies on her phone. Doesn’t matter. Destruction of evidence when a party knows she is part of an ongoing investigation? I would pursue the obstruction of justice charge for the spoliation and let the shit fall where it may. My investigators would be FBI and they would all be looking to make their names on a high profile case.

      We know that USA is a political appointment – one of the remaining spoils, so to speak. But if the appointee is not a hack, s/he will not turn down an obvious investigation. Most USA appointees are not hacks, but some are.

      Brent – there is also the possibility that the FBI will open an investigation independently. Those guys are not political appointees.

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  4. Brent Nyitray's avatar
    Brent Nyitray, on September 4, 2014 at 10:24 am said:

    Is the USA for DC a dem? Cause they don’t investigate their own.

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  5. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 4, 2014 at 10:26 am said:

    They’re also taxpayers who have, I gaurantee, broken tax laws. We all have.

    Who needs the hassle? They’re Baggers after all. Their views are way out of the mainstream, they’re all racists and booger eating incest lovers.

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  6. Brent Nyitray's avatar
    Brent Nyitray, on September 4, 2014 at 10:32 am said:

    I have no faith in democrats to go after their own. And the media will of course characterize this as just another tin-foil hat conspiracy out of the right.

    unfortunately the democrats get away with this.

    Edit: You think Holder lets the FBI look at this? I cannot fathom that happening.

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  7. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 4, 2014 at 11:14 am said:

    What do we think?

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  8. jnc4p's avatar
    jnc4p, on September 4, 2014 at 11:34 am said:

    During a debate (using the most generous interpretation, more like dueling talking points and personal insults) on PL regarding poverty as a driver of the crime rate, I came across this in Freakonomics which I found amusing. Apparently the break between the bad economy and increasing crime rates is one of the under-appreciated benefits of electing Barack Obama as President.

    “When I first learned about the crime declines of 2009, I was surprised. It followed a period of impressive flatness in violent crime trends since 2000, with year-to-year shifts on the order of 1 or 2%. That flat trend followed a dramatic decline of over 40% in homicide and robbery between 1993 and 2000. During the flat period, individual cities fluctuated, but the national rates were impressively constant. That made the large drop in 2009 particularly impressive, both for its magnitude and its direction.

    That obviously got us all thinking about what happened in 2009 aside from the recession. The one striking event that comes to mind is the inauguration of our first African-American president, a particularly salient event in this context because blacks are disproportionately involved in arrests for robbery and homicide. Could it be possible that an “Obama Effect” is influencing some portion of this high-risk group characterized by joblessness, lack of education, and involvement in inner-city gangs?”

    http://freakonomics.com/2011/06/08/freakonomics-quorum-why-during-a-bad-economy-does-crime-continue-to-fall/

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  9. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 4, 2014 at 1:04 pm said:

    Heh.

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  10. lmsinca's avatar
    lmsinca, on September 4, 2014 at 1:15 pm said:

    That photo is priceless McWing. Bet their house is pretty noisy all day.

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  12. lmsinca's avatar
    lmsinca, on September 4, 2014 at 3:10 pm said:

    Interesting ProPublica piece on Louisiana and how fast the land is being swamped by or simply falling into the Gulf.

    http://projects.propublica.org/louisiana/

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  13. lmsinca's avatar
    lmsinca, on September 4, 2014 at 3:24 pm said:

    There’s something seriously wrong……………..I just received my medical insurance renewal packet from Blue Shield and my premium is going down $94 per month to $806. Same coverage.

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  14. lmsinca's avatar
    lmsinca, on September 4, 2014 at 3:37 pm said:

    And it’s not even Obamacare! It’s the same insurance I’ve had for the last 5 years which went up 15% -22% most years prior to this one.

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  15. Brent Nyitray's avatar
    Brent Nyitray, on September 4, 2014 at 6:30 pm said:

    My insurance was fine last year. It sucks balls this year. You have to fight with them for everything.

    I am sure they are covering their obamacare losses by denying everyone else.

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  16. jnc4p's avatar
    jnc4p, on September 4, 2014 at 6:34 pm said:

    lmsinca, wasn’t your husband on that insurance too and now he’s on Medicare?

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  17. lmsinca's avatar
    lmsinca, on September 4, 2014 at 6:49 pm said:

    jnc, yes he’s been on Medicare since April of 2013. Our last bill together in the small group was $1650/mo for 2012 into 2013. My bill since Nov of 2013 was $900/mo. I decided not to apply for Obamacare since I begin Medicare in April of next year.

    It was interesting because when I opened the packet they were letting me know that my premium might go up because of rising medical costs, but it went down.

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  18. lmsinca's avatar
    lmsinca, on September 4, 2014 at 6:54 pm said:

    Brent, I’m not trying to make light of your situation and I know from previous comments that you’re unhappy with your coverage now, but maybe your employer picked a dud company? I know from previous experience that there is a large discrepancy in customer service between companies.

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