Home About Archives RSS Feed

@theMarket: Labor on Their Mind

By Bill Schmick
iBerkshires Columnist

It is that time of the year again when the world's central bankers gather together in Wyoming to sort out the economic conditions of the global economy. This year most bankers will be looking at labor growth, or lack thereof, and what to do about it.

In this country we have seen some surprising gains in the employment picture this year despite a less than stellar economic growth rate. Unemployment has dropped from above 7 percent to 6.2 percent in less than a year. Fed officials are somewhat pleasantly puzzled by that performance. FOMC members are watching things like how many part-time jobs are being filled versus full-time positions. They are also looking for hints of wage growth and under what circumstances it is rising. Some members have their fingers on the interest rate trigger advocating a raise sooner than later, while others urge a wait-and-see attitude.

Janet Yellen, our Federal Reserve chairwoman, kicked off the Jackson Hole, Wyo., event, with an address to the central bankers and the press. She urged a pragmatic approach to policy when dealing with the labor markets. Using the unemployment rate alone to guide monetary policy is too simplistic, she argued. Although the jobless rate has declined, there are still millions of Americans who can't find jobs or have only been able to land part-time work with no benefits. Even more have given up looking for work, discouraged after years of trying to find a job.    

Then there is the trend toward retirement by this nation's Baby Boomers. Two hundred and twenty-five thousand Americans turn 65 every month. In 2010, for example, only 10 percent of that demographic age group was retired. Today, that number has reached 17 percent and is climbing. Nearly 25 percent of all Americans born between 1946-1964 are planning on retiring in the years ahead. How does that impact our idea of full employment when calculating what are structural unemployment (essentially permanent) issues versus cyclical issues?

Yellen presents a good argument. It is a fact that the unemployment rate does not account for part-time workers, discouraged workers, retiring workers and shifts in the nature of the economy. If we have jobs that are going unfilled because the nation lacks workers with sufficient skills and education to do the job, then that is a structural issue. The same is true when dealing with the growing number of Baby Boomer retirees.

No amount of interest rate declines and stimulus money is going to dent a structural issue. In which case, it would be time to raise interest rates early and sooner than the markets expect. Anything the Fed says that implies that we are approaching an unemployment rate that is bumping up against "structural" problems then (as far as the markets are concerned), look out below.

On the other hand, if keeping rates lower for longer would generate more economic growth and therefore more jobs (cyclical employment) then investors would like that. It would mean the markets still have a green light to make new highs and continue the rally based on a zero interest rate policy. Therefore investors were content to hear that the Fed will be taking a "pragmatic" approach to the labor markets.

As long as easy money is on the table, the markets will continue to go up. It also means that the cottage industry of Fed watchers that have sprung up over the past five years will continue to try and out guess what the Fed will do next. Of course the Fed has no idea what they will do next (the pragmatic approach) but we will continue to read and listen to the pundits anyway.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

0 Comments
     
News Headlines
Bay State Winter Games Return to Berkshires This Weekend
Pittsfield Looking at Repairs on Unaccepted Streets
North Adams Council OKs Long-Term Lease With Child Care of the Berkshires
Big Dance Turns Mass MoCA Tour Into Multisensual Peformance
USDA Conservation Stewardship Program Accepting Applications
Grant Opens Workforce Training Opportunities in North Adams, Pittsfield
North Adams Librarian to Retire After 30 Years
Lanesborough Neighbors Negotiating Compromise in Fowl Complaint
Williams Outlines Solution to Parking Issue During Construction
BRPC Trying To Get Ahead On OPEB Liabilities

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (192)
Independent Investor (263)
Archives:
February 2016 (2)
February 2015 (5)
January 2016 (5)
December 2015 (6)
November 2015 (6)
October 2015 (9)
September 2015 (7)
August 2015 (7)
July 2015 (6)
June 2015 (8)
May 2015 (6)
April 2015 (8)
March 2015 (6)
Tags:
Japan Stimulus Debt Crisis Pullback Rally Greece Taxes Currency Interest Rates Election Energy Stocks Commodities Europe Bailout Fiscal Cliff Congress Markets Euro Banks Jobs Housing Fed Europe Metals Deficit Stock Market Oil Economy Selloff Federal Reserve Recession Debt Ceiling Retirement
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Stocks at Bottom of Trading Range
The Independent Investor: Is a Recession Looming?
The Independent Investor: The High Price of Cash
@theMarket: Stocks Rebound
The Independent Investor: This Too Shall Pass
The Independent Investor: A Tale of Two Chinas
@theMarket: Nowhere Land
@theMarket: Santa Comes to Town
The Independent Investor: Christmas in the New Age
The Independent Investor: How Rising Interest Rates Will Change Your Life