The Labor Market Working Nine To Five

The Labor Market Working Nine To Five

Few scenes elicit laughter more than a hog-tied, dog-collared Dabney Coleman swinging from the ceiling struts of his own bedroom.

You already know I’m referring to that perfect moment in Nine to Five. Franklin Hart, Jr., the 1980 film’s dredge of humanity boss, laboriously labeled a “sexist, egotistical, lying, hypocritical bigot,” had just been caught attempting to make a break from his exasperated employees’ bondage. Seeing that he was about to spring an attack in a mirror image, a fleet-footed Dolly Parton, who shines as the harassed Doralee, hits the contrived garage door clicker, hoisting her grab-happy boss into the rafters.

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Job Openings

The movie provides a great case study in the power of productivity. Multitudes of Millennials would be hard pressed to even identify the clickety typewriters in the opening scene to say nothing of the grid layout of miles of cubicles. Long since displaced by the ubiquitous PC and virtual workplace, today we find ourselves in a completely different world. But then, productivity gains have also died off in this new era leaving economists in a constant funk trying to conceive a way out of the conceptual conundrum.

Without question, job creation has not been an issue of late. Hopes headed into November’s job market report were particularly high with the positives outweighing the negatives by a wide margin. The flip side of Hurricane Matthew was expected to tack on an extra 20,000 jobs, give or take. The ADP report topped predictions while announced layoffs validated uber-low jobless claims, coming in at their lowest pace of the year. For good measure, the Conference Board’s gauge of job availability improved, reversing October’s weakness.

Meanwhile, the economists over at Goldman Sachs sweetened expectations with a friendly reminder that November is a seasonal sweetheart, tending to deliver an upside surprise two-thirds of the time to the tune of 27,000 extra jobs. Tack on last month’s warm weather and the groundwork was laid for a blowout report.

Hence the inducement of carpal tunnel among the instant reaction folks as they furiously revised what they’d prewritten to conform to the confusion in the actual data.

Rather than the whispered 200,000-plus handle, CNBC’s Hampton Pearson revealed a mere 178,000 jobs had been created. While close to the forecasted 180,000, private payroll growth of 156,000 was shy of the predicted mark by 20,000.

And what about that unemployment rate? The 4.6 percent reported wasn’t even in the same zip code as consensus projections of a 4.9-percent rate. As has been the case so often in the current recovery, the decline cannot be categorized as unequivocally good news. While the lowest since August 2007 makes for a great sound bite for the current administration, the fine print exposed the weightier factor dragging the rate down was shrinkage in the size of the workforce: at 62.7 percent, the labor force participation rate slumped back to a six-month low.

Broadening out to the entire pool of possible participants, those absent from the labor force increased by almost half a million to 95.05 million, a fresh record high. Bookmark Advisors’ Peter Boockvar incredulously asked, “WTF are so many of them doing?” Great question.

One thing they’re not doing is adding to the ranks of those gainfully employed on our nation’s factory floors.

According to the Liscio Report, the best days of the current cycle for manufacturing employment are in the rearview mirror. “Since the depths of the recession, overall manufacturing employment has been on the upswing, although currently teetering. As the culmination of a multi-decade decline, manufacturing employment fell from over 14 million workers in 2007, to 11.3 million in 2010, and then rose to 12.3 million in 2016.”

Before it slips off your tongue, yes, yes, we’re a services economy. While that’s all good and well, a recent visit with Dr. Gates, yours truly’s business cycle sleuth extraordinaire, whose identity must remain in the realm of the unknown, added some much-needed historic perspective. (Does no one read history anymore?)

“Durable manufacturing is the single most important employment engine,” explained Gates. “Why? It has lost the most jobs in all 12 recessions since and including World War II.”

Granted, you’d best not set your clock by this indicator. Sometimes manufacturing peaks on the early side, up to 24 months before the onset of a recession; at others, the peak lags, though not by any longer than 12 months. In case you’re wondering, in the current cycle, the peak occurred 19 months ago, in May 2015. Since then, durable manufacturing jobs have fallen by 113,000.

Does that mean the patient we know as the U.S. economy is already dead on arrival? Well, not exactly.

“Not every business cycle falls on its face; some erode over time. That erosion creates vulnerabilities which surface in the late stage of the cycle,” said Gates. “That’s where durable manufacturing steps in, giving an early warning signal that the business cycle is coming to a close.”

Another signpost that signals the end is nigh is a rolling over in re-postings of job openings. Some discount online help wanted ads as false indicators given the rise in the cost to post them. Fair enough. If a company really needs to fill a position to grow their top and bottom lines, though, it’s going to pony up the expense to land that laborer. That is, unless and until prospects for revenue and profit growth are ratcheted downwards, at which point they’re compelled to delist that opening. That’s exactly what’s been happening since November 2015, when re-postings peaked.

Will you read about any of this in your weekend newspaper? Probably not. The mass media will focus on that 4.6-percent unemployment rate and the stellar news it conveys at the surface. The job market will be pronounced to be as healthy as a horse, working 9 to 5, and maybe even a bit of overtime.

The truth is probably closer to what Dolly belted out in the Academy Award winning song that shares the movie’s title, that serious job seekers should pour themselves a “cup of ambition” given the late stage of the current cycle. On second thought, if the end really is near, they might need to make it a double espresso.

Article by Danielle DiMartino Booth, Fed Up: An Insider’s Take on the Willful Ignorance and Elitism At the Federal Reserve

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Called "The Dallas Fed's Resident Soothsayer" by D Magazine, Danielle DiMartino Booth is sought after for her depth of knowledge on the economy and financial markets. She is a well-known speaker who can tailor her message to a myriad of audiences, once spending a week crossing the ocean to present to groups as diverse as the Portfolio Management Institute in Newport Beach, the Global Interdependence Center in London and the Four States Forestry Association in Texarkana. Danielle spent nine years as a Senior Financial Analyst with the Federal Reserve of Dallas and served as an Advisor on monetary policy to Dallas Federal Reserve President Richard W. Fisher until his retirement in March 2015. She researches, writes and speaks on the financial markets, focusing recently on the ramifications of credit issuance and how it has driven equity and real estate market valuations. Sounding an early warning about the housing bubble in the 2000s, Danielle makes bold predictions based on meticulous research and her unique perspective honed from years in central banking and on Wall Street. Danielle began her career in New York at Credit Suisse and Donaldson, Lufkin & Jenrette where she worked in the fixed income, public equity and private equity markets. Danielle earned her BBA as a College of Business Scholar at the University of Texas at San Antonio. She holds an MBA in Finance and International Business from the University of Texas at Austin and an MS in Journalism from Columbia University. Danielle resides in University Park, Texas, with her husband John and their four children. In addition to many volunteer hours spent at her children's schools, she serves on the Board of Management of the Park Cities YMCA.

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