The following economic awareness entry is based on short-term events and therefore should not be taken as information towards making investment decisions, which are of a long-term nature. It is only meant to provide clarity regarding current economic events, as there is often a large degree of incorrect information dispersed through the media or other sources.
The January Jobs Report
Depending on which survey you look at, economic experts predicted the economy would add an average of between 175,000 and 180,000 jobs in January. Instead, on Friday, the Bureau of Labor Statistics' report showed the economy added 227,000 jobs last month - far higher than predicted. This increase means job growth has continued for 76 months in a row.
You gain a much clearer picture, however, when you look beyond the big headlines and see what other data tells us. Here's a quick rundown of what we found:
Hourly Earnings Increased, but by a Very Small Margin
Average hourly earnings grew by only 3 cents in January - and showed a 2.5% increase over last year. This monthly growth is less than a third of what we saw in December 2016. However, one industry in particular may have caused these slower gains, as a 1% decrease in financial industry earnings depressed overall wage growth.
Unemployment Increased, but for a Potentially Positive Reason
When you hear that unemployment increased from 4.7% in December to 4.8% in January, this may sound like bad news. However, a major reason for this increase is that labor force participation grew by 0.2% in January, the first increase in months. In other words, after sitting on the sidelines, more people are now rejoining the labor force and creating additional opportunities for economic growth.
Jobs Are Available, but Workers May Need Training or Relocation
While labor force participation increased last month, its 62.9% rate is still near the lowest level in decades. According to Glassdoor Chief Economist Andrew Chamberlain, approximately 5.5 million jobs remain open in the U.S. - close to a record number. Some of these jobs, such as retail and food service, don't require much training, but they aren't always located near where unemployed workers live. Other jobs in the hot fields of healthcare and technology require training and skills that many workers simply do not have right now. As a result, closing the gap between open jobs and willing workers is a complex challenge for employers and job-searchers alike.
The Bottom Line
The labor market is continuing to improve, but the pace remains slower than what most people would prefer. Nonetheless, the Bureau of Labor Statistics' latest revisions show that private-sector payrolls have increased for 83 straight months, the longest growth streak since the 1920s.
How any potential new pro-growth policies affect the labor market remains to be seen, as does how to fill the millions of open jobs available right now. In the meantime, people are working more hours for higher pay than they were this time last year, and job participation is growing.
Monday: Labor Market Conditions Index
Tuesday: International Trade
Wednesday: EIA Petroleum Status Report
Friday: Import and Export Prices, Consumer Sentiment
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.
The S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
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