Morning Report: The paradox of the millennials 8/5/15

Stocks are higher this morning as overseas markets rallied overnight. Bonds and MBS are down small.

 

Stocks got a boost when the ADP  Employment  Number came in weaker than expected. The ADP Employment number is often a decent forecast for the big payroll number on Friday. According to ADP, (the big payroll processing firm) the economy added 185k jobs last month, which was lower than the 215k forecast.  We  might be entering a “bad news is good news” cycle where weak economic news is considered bullish because it keeps the Fed on hold.

 

FRB Atlanta President Dennis Lockhart said yesterday the economic data would have to deteriorate a lot to get him not to vote for a Sep hike. Lockhart’s voice is important because he is considered more of a centrist.

 

Mortgage Applications rose  4.7% last week, according to the MBA. Purchases rose 3.3% while refis rose 5.9%.

 

Interesting take on the Millennial generation and the paradox of the labor market. How come, this far into the recovery, are Millennials still living at home with their parents? How is this possible with an unemployment rate of 5.3%? Historically, a 5.3% unemployment rate was associated with booming economies. This speaks to the disconnect between the data and what people actually perceive (and why, despite the data, people think we are still in a recession). According to the data, the labor market is strong, and those that put a lot of stock in that data believe that wage inflation is right around the corner, and therefore the Fed should start hiking rates. On the other hand, some point to the situation with the Millennial generation and say the data is, if not misleading, just not capturing the whole picture. They believe the underemployment rate (which is around 10.5% and represents people who have part-time jobs and want full-time jobs) is a better representation.

 

 
 

I would add, the quality off the full-time job matters. If a recent grad is working as a barista full time, they count as employed according to the Bureau of Labor Statistics. However, that grad should be working at an entry-level white collar job, which pays more than Starbucks. They aren’t and that is why they are still living at home.

 

Just for fun, I subtracted the unemployment rate from the underemployment rate to get a different picture on the economy. We are still at near recessionary levels, at least compared to past recoveries. Note the data only goes back to 1994. Still, an interesting chart:

 

 

IMO, that tells a different story. We are still at levels associated with the 91-92 recession, where recent grads were working in retail and unable to get jobs, This job market seems similar. It also speaks to the just-in-time labor management style companies use nowadays. Where does this leave the Fed? Well, the last time the spread was this high, the Fed waited another two years to start hiking rates.

35 Responses

  1. Too good not to share

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  2. That is awesome

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  3. I like David Simon, but he’s the one being juvenile here:

    “The reason we did “Treme” was: A lot of people saw “The Wire” and thought it was an argument against the city. There was a libertarian notion that by showing bad governance, we were arguing against government. It’s a juvenile notion, to think that the solution for bad governance is no governance.”

    http://www.salon.com/2015/08/04/you_tell_me_that_the_riots_are_a_good_thing_fck_you_come_to_baltimore_and_say_that_david_simon_on_police_brutality_the_legacy_of_the_wire_and_the_future_of_american_cities/

    It’s a juvenile notion to think that Libertarians are advocating for no governance, aka the Somalia argument. They just happen to be the only ones who agree 100% with the premise that the entire War on Drugs is bad and has to go.

    Also to the point, Simon has made the argument before that certain institutions can’t be reformed from within. If that’s the case, then the only thing left to do is to tear them down and start over.

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  4. I was briefly chatting politics with my bandmates last night, (all young, blue-collar, no college), and they all like Donald Trump. The subtext seems to be that it takes a real businessman to create jobs.

    They aren’t buying the democrat’s argument that they can create jobs.

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  5. You see this Brent?

    “HEILEMANN: Tell me when you think a Trump presidency would look like?

    FOCUS GROUP MEMBER: Classy.

    FOCUS GROUP MEMBER: It would be nice to see that debt clock start going the other way.

    FOCUS GROUP MEMBER: I think we could be a proud America again.

    FOCUS GROUP MEMBER: To the American people it would be a presidency of hope.

    MIKA BRZEZINSKI: That is incredible.

    JOE SCARBOROUGH: Wowww. Wow.

    MIKA: So let’s see, aspirational, successful, one of us.

    HALPERIN: Just like me but a billionaire. ”

    http://newsbusters.org/blogs/nb/mark-finkelstein/2015/07/30/howard-dean-we-need-be-more-humble-stop-making-fun-trump

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  6. No, I didn’t, but it is interesting… If Trump doesn’t end up being the nominee, his endorsement will be interesting…

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  7. Those responses have to have the MSM shitting bricks…

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  8. I wonder how many of the low-information voters who went with obama will now go with Trump..

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  9. trumps problem is those aren’t primary voters. but a celebrity in the general election?

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  10. You can’t buy this sentiment with all the political ad spending in the world:

    “HALPERIN: Just like me but a billionaire.”

    I bet he’ll poll way higher than Romney did on “cares about people like me” and possibly even higher than HRC.

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  11. did anyone watch obama speech? i can’t stomach watching him any more…

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  12. @JNC: “but we all bring to the table what we have to contribute”

    beautiful.

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  13. it was on, but muted. b/c racist.

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  14. my Twitter feed was blowing up with ridiculous things he said..

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  15. David Burge ‏@iowahawkblog 40m40 minutes ago
    This speech probably sounded better in the original Farsi.

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  16. Ken Gardner ‏@kesgardner 28m28 minutes ago
    I’m old enough to remember when our presidents stood up for America against Iran, not make excuses for Iran against America.

    Like

  17. Ken Delbridge

    Let me get this straight? Give them the bomb & money to arm terrorists- or they will get the bomb & arm terrorists? @FoxNews @POTUS

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  18. @Brent:

    Thanks for that analysis on the Millenials. Makes sense to me.

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  19. This is why only Nixon could go to China, because McGovern wouldn’t have had the credibility to sell the deal.

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  20. “novahockey, on August 5, 2015 at 12:05 pm said:
    @JNC: “but we all bring to the table what we have to contribute”

    beautiful.”

    Cons does have a point. My own commentary has degraded as of late because I just don’t see the value of bothering with the effort anymore.

    That and they always confuse when I argue that Republicans have no political incentive to do X or Y that means that I agree with the policy position itself.

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  21. @Brent: “Those responses have to have the MSM shitting bricks…”

    The MSM and the RNC.

    And the DNC. Don’t let ’em fool you. “I’m going to vote in the Republican primary for Trump! That will show them!”

    Bravado.

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  22. @novahockey: “it was on, but muted. b/c racist.”

    Another white man trying to silence a person of color.

    The racism in this country runs bone deep.

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  23. @jnc4p: “That and they always confuse when I argue that Republicans have no political incentive to do X or Y that means that I agree with the policy position itself.”

    They are their to enjoy the feeling of their righteous rhetoric being righteously directed at trolls and “rethuglicans” who they feel confirm every negative concept they have of people who aren’t them. They aren’t there to engage in conversation unless you agree with them already. Or disagree on whether or not socialism is the best answer or merely one of the best answers. Or, perhaps you are allowed to disagree on whether or not Dubya was the worst president we’ve ever had or only the 2nd worst president we’ve ever had. Anything else has to be offered on whether or not you want to feel yourself typing the words, because it ain’t gonna penetrate.

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  24. Heh. Kevin said “penetrate”.

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  25. I find myself going there less and less. The behavior of the typical PL poster reminds me of the MSM or the “in crowd” in high school.

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  26. “I find myself going there less and less. The behavior of the typical PL poster reminds me of the MSM or the “in crowd” in high school.”

    Such groups tend to be very cliquish. With new folks showing up, trying to show how good they hate the nerds so they can get in the clique.

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  27. “Heh. Kevin said “penetrate”.”

    Sorry. I meant to say “copulate”.

    Also, flatulence.

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  28. “Good critique of Jon Stewart.”

    Crediting that to Jon Stewart is a stretch. Also, I think blaming this on Jon Stewart is a stretch: ” In a recent survey, self-identifying liberals said they trusted “The Daily Show” more than Fox News and CNN. Among moderates, he’s more trusted than MSNBC.”

    Liberals are going to trust everything more than Fox News. CNN is to blame for people taking Jon Stewart more seriously than CNN, and MSNBC is to blame for moderates taking Jon Stewart more seriously than MSNBC.

    “What Paglia doesn’t say outright is that Stewart’s comedy has no element of personal risk because it’s mostly a mass exercise in confirmation bias”

    This seems to me to be exactly what the show was, but he clearly did it very well. Funny confirmation bias! If you were generally aligned with Stewart, he was hilarious.

    Although I’m finding I’m enjoying the depth of (if anything more liberal) John Oliver’s Last Week Tonight. And the snark is funny, because that’s the art/entertainment form.

    However, it’s ultimately emblematic of what people want to watch. Confirmation bias with added snark is how millenials (and many others) want to ingest their politics.

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    • Kevin:

      CNN is to blame for people taking Jon Stewart more seriously than CNN, and MSNBC is to blame for moderates taking Jon Stewart more seriously than MSNBC.

      I disagree. I think plain stupidity is to blame for anyone who trusts a self-identified “fake news show” on a comedy channel more than CNN or MSNBC. That is not to say that either of those should be trusted to any significant degree, either. But anyone who relied on Stewart to get the “real” news (and I know more than one person who openly admitted to doing so) is a f’n moron. As is Rolling Stone which proclaimed The Daily Show “the crucial news show” and Stewart himself “the last honest newsman”. That kind of worship would be embarrassing even if Stewart actually was a newsman of any kind, much less an honest one. That he is neither makes it all the more so.

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  29. @ScottC: “I think plain stupidity is to blame for anyone who trusts a self-identified “fake news show” on a comedy channel more than CNN or MSNBC.”

    I still blame CNN and/or MSNBC. It’s the job on the news organs to earn trust and be trustworthy. Neither of them are particularly trustworthy, or particularly devoted to news reportage, so a comedian who bonds with his millenial/gen-y/gen-x audience gets more trusted. I don’t know if that’s stupidity of the individual viewers so much as it is a black mark against our cable news networks. I don’t know that the quality of Jon Stewart’s news (which, if we’re comparing it to news, is more “news magazine” than straight news show) is significantly worse than similar programs in terms of editorializing and accuracy.

    That being said, I grant you that The Daily Show is not in any sense “crucial”, and that Stewart is not the last honest newsman, as he is a commentator, not a newsman, and likely no more honest than most people in the entertainment industry. Also, there are no honest newsmen, period. 😉

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    • KW:

      It’s the job on the news organs to earn trust and be trustworthy.

      I disagree that it is a news organs job to earn trust, but even if it is the premise is that the audience is intelligent enough to be capable of discerning what should and should not be trusted, such that any trust is indeed “earned”. I don’t think anyone who thinks that a satirical, self-described “fake news program” on a comedy station could conceivably be a reasonable source of news can be credited with such intelligence.

      Like

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