Dear PGM Capital Blog readers,
In this weekend's blog edition, we want to discuss with you the USA September jobs report, which came out on Friday, January 9, 2015.
On Friday January 9 at 8:30 am EST, the USA Bureau of statistics (BLS) reported that USA Economy had created 252,000 non-farm jobs in September 2014, which beats analysts' expectations of 236,000, and that the unemployment rate fell to 5.6 percent, from 5.8 percent in November.
More than 2.95 million jobs were created 2014, according to the latest figures from the Department of Labor. See below charts for details.
While job growth continues to pick up steam, wages have not. The government said average hourly earnings fell slightly in December from the previous month. Wages were up 1.7% over the past year, but that's barely ahead of the pace of inflation -- meaning workers really aren't better off.
Also, the number of long-term unemployed, those jobless for 27 weeks or longer, was unchanged at 2.8 million. That figure has declined by 1.1 million over the past year, but is still much higher than normal.
As can be seen from below 10-year chart of the USA BLS of January 9, 2015, the labor force participation rate declined to a new 10-year low of 62.7 percent.
Regarding the US labor force participation rate, another even more important shift is taking place; young (those workers in their prime age, under 54) versus older workers (those 55 and over). It is a shift which is critical as it confirms that the labor participation rate collapse is not due to demographics but due to secular economic reasons.
Below chart shows the sliding participation rate for workers 25-54 vs the steady participation rate for older workers.
Another interesting point is, that December marks the fourth straight month during which a majority of the newly created jobs were low-quality positions, existing below the median wage level.
The lowest wage category alone accounted for over 30% of the new additions listed in the latest jobs report.
As can be seen from below chart, the lowest wage category alone accounted for over 30% of the new jobs in December and that 51% of the jobs added in December fell below the median wage level of US$ 23.85 per hour.
PGM CAPITAL COMMENTS:
The above breakdown shows that the USA December employment numbers are nothing to call home about, the opposite is true.
The fact that the US-Dollar and subsequent USD-Index are near 12-year high will hurt USA export, which will be a head wind for the USA, the US-Dollar and the USA capital markets.
The surge of people in their golden years, who should be enjoying their retirement, are now searching for a job and are taking away jobs of the younger generation.
It is a warning sign when the number of people in the age group of 55 years and over that are currently back in the labor force hit an all-time record of 32.9 million jobs in December, up 1.3 million from a year ago, as can be seen from below chart.
Below Chart shows a breakdown of job gains by all age groups since the start of the depression in December 2007: 5.8 million jobs "gained" in the 55-69 age group, while on the other hand the core, of 25-54 demographics has experienced a decrease of approx. 2 million people.
By no means can we call it a healthy recovery when the labor participation rate of US-citizens in their golden years, - who should be enjoying their retirement - currently is at an all-time high, while that of the people in the 25-54 age bracket - the core demography - are struggling to find a job, as can be seen from below chart.
The above mentioned demographic development in the USA labor market can be seen as deflationary and shows that we cannot speak at all of an improvement of the job data in the USA, and that any rate increase will worsen the situation and send the country straight back into an even harder recession than the one of 2007-2009.
Raising rates will have an upwards pressure on the US-Dollar, which will make USA goods abroad more expensive and will also make the USA less competitive as a tourist destination, which will lead to decreasing economic activities and loss of jobs in the country.
We therefore believe that due to the real state of the USA Economy it will be very difficult for the USA FED to raise rates in the near future and that the FED will most probably continue to stimulate the Economy directly or indirectly.
Investors were also discouraged by the January 9, jobs report.
- The Standard & Poor's 500 index shed 17.33 points, or 0.8 percent, to 2,044.81. The index is now down 0.7 percent for the year.
- The Dow Jones industrial average slid 170.50 points, or about 1 percent, to 17,737.37. The Dow has fallen 0.5 percent this year.
- The Nasdaq composite lost 32.12 points, or 0.7 percent, to 4,704.07. It's down 0.7 percent this year.
- The US-Dollar index fell 0.40 points or 0.43 percent.
On the other hand, Gold futures rebounded Friday following the monthly jobs report as a sell-off in both equities and the Greenback propelled Gold to a significant gain on Friday to post a sizable gain for the first full trading week of 2015.
Simply put, gold has traded in the exact opposite directions of the stock market this week remaining resilient in recent weeks forming a rounded bottom on the charts.
Also aiding Gold’s cause is a dovish Fed, where recent comments from Fed Governors Fisher and Rosengren have all but eschewed any hawkish stances towards any near term interest rate increases.
With global economies namely the European Union, Japan, and China executing or anticipating the execution of dovish monetary policies, smart money will continue to be used to buy Gold and other precious metals on any dip.
Until next week.