Wages Get Temporary Bump From Hurricane Matthew

Financial headlines today are dominated by this mornings jobs report. Pundits are highlighting the October uptick in wages. Unfortunately, our analysis of the data shows that most of this increase is related to the clean-up work in the aftermath of Hurricane Matthew by utility companies across the eastern seaboard. 

Besides Logging and Mining no other industry grew wages more than 1.2%. 

source: BLS

Higher wages are part of the answer to our ongoing quest for consumer demand. With wage growth flat across most other industries, we will need to wait a bit longer to find out what's really happening to wages.

Home is where the heart (and your millennial) is

For the first time since Grover Cleveland was President, more young people (18-34 year olds) live at home than with their spouse or partner. Blame it on a washed out job market, or sky high housing prices. Maybe its the mountain of debt that college graduates amass. Regardless, the solution for many young adults is move back home with mom and dad.

The number of young adults living at home has jump 50% since 2000. Here are the details (source Pew Research Center). Census data shows the dramatic shift in the last decade. Less than a third of young adults are married or living on their own. 

The comforts of home may also be contributing to millennials marrying later in life. This is the conclusion proposed by Pew researchers. The other side of the coin may be at play though. Are kids staying home because the job market, wages and student loans force them or to simply to avoid sharing a cramped apartment with sketchy roommates? Now it's up to parents to nudge them from the nest so they can be more productive members of society. If not, we'll need to update their financial plans to account for these "extended stay" guests.

Job’s Friday Update – September Jobs report is 30% weaker than the average for 2015

For wonky asset managers (yours truly) the first Friday of the month is "Jobs Friday". The anticipation for this morning’s report was huge since this is the most meaningful statistic (after Personal Consumption Expenditures - PCE) that Janet Yellen and the Fed will get before they reconsider their interest rate stance. If Yellen follows the bond markets lead, she stay on hold for the foreseeable future. 

September Jobs report

No need to meet this month Janet. Instead of 200,000 jobs the report came in at 142,000 new jobs. Worker participation declined to match the 1977 low. The work week shrank and wages were flat. We are tempted to cheer that part-time positions jumped 53,000. This gain unfortunately came at the expense of full-time positions which declined 185,000 in the month.

The household version of the survey which includes self-employed workers and business owner actually showed a 236,000 job DECLINE in September. Harvard economics professor Greg Mankiw has an excellent description of the survey differences here.

The pundits who called for further positive revisions to previous reports are having humble pie for breakfast too. Last months jobs stinker was met by a chorus of cheerleaders who promised that, “August is usually revised higher!” Instead of an upward revision, August job gains were indeed revised-lower. The BLS cut 37,000 more jobs from the initial report of 173,000.

We expect the jobs report in November to get worse after the long list of announced layoffs are fully reflected. Stock futures are responding with red arrows in equities and green arrows on bonds. Please revisit your stock allocation in your 401K accounts. Stay tuned.

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