JOBS REPORT TOMORROW

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%.

kent
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.