Tomorrow is the release of the BLS labor report.  The report can offer considerable insight into the strength of the economy. The market and the narrative is suggesting the economy has gone over the proverbial cliff, a view that I do not share.

The unemployment is around 3.7%, the lowest level since 1969.  As written many times I have discounted this low level because of the anemic labor participation rate of 63.0%. The LPR is nominally higher than the 62.4% nadir of 2015 but is still considerably lower than the 67.2% rate achieved in 2001 and the twenty year average of 64.7%.

However in 1969, the last time there was a 3.7% unemployment rate, the LPR was 60.1%.

I do not think it is sensational to write the 2020 election has the potential to radically change American capitalism.  However I ask are the conditions as dire as some of the candidates [and media] suggest?

According to BLS data, the unemployment rate for workers without a high school degree has averaged 5.6%, the black unemployment rate has averaged 6.4% and the Hispanic jobless rate has averaged 4.5%, all record lows.

According to the BLS, workers in the lowest part of the income stream have had year over year wage gains of 6.2%.  Those with less than a high school degree have had wage gains of 6.1% in the past year versus a 3.2% gain for those with advanced degrees beyond college according to the BLS.

It is widely accepted jobs and then wage growth are the greatest determinate of economic growth.  I will continue to maintain my optimistic view about the economy until job creation falls below 100,000 per month, the level most economists would suggest is needed to maintain a steady unemployment rate.

Yesterday the Beige Book, or the statistical compilation utilized at the upcoming FOMC meeting, indicated the economy is growing at a modest pace with companies remaining upbeat despite disruption caused by trade.  Consumer spending is regarded as “mixed,” and job growth remained on pace with the previous reporting period.  There was little reaction to the report.

What will happen today?

Last night the foreign markets were mixed.  London was down 0.63%, Paris up 0.97%  and Frankfurt up 0.81%.  China was up 0.96%, Japan up 2.12% and Hang Sang down 0.03%.

The Dow should open moderately higher on possible trade talks to be held in October. The 10-year is off 13/32 to yield 1.52%.

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