Supply Side Stagnation: A Few Quick Charts

Takeaway: Decline in NFIB Hiring agrees w/ the sequential deceleration in the NFP and ADP data in Aug. Measures of labor slack continue to tighten.

We discussed the burgeoning divergence between actual consumption and capacity for consumption yesterday  >> FIVE-FECTA: CONSUMER CREDIT GROWTH ACCELERATES (AGAIN) IN JULY

 

Today’s small business confidence and labor turnover data reflected sequential deceleration in employment, agreeing with the sequential declines reported in the ADP and NFP releases for August.  

 

Meanwhile, measures of labor slack continue to point toward ongoing, albeit slow, tightening in labor market conditions – lending some incremental support to the emergent view of supply-side barriers to hurdling secular stagnation.      

 

NFIB/EmploymentHeadline Small Business Confidence increased for a second consecutive month, rising +0.4pts in August.  Job Openings and Outlook for General Business Conditions led the upside but Hiring Plans and Sales Expectations dropped -3 and -4 pts, respectively. 

 

Private payroll growth continues to run ~2%+, which matches peak growth in the last cycle and may be as good as it gets given the demographic and labor supply headwinds and the secular slowdown in employment growth over the last 30 years.

 

Supply Side Stagnation: A Few Quick Charts - NFIB Hiring plans Aug

 

Supply Side Stagnation: A Few Quick Charts - NFP Private YoY 090914

 

Supply Side Stagnation: A Few Quick Charts - NFIB Table

 

 

(Declining) SLACK:  Both the Jobs Hard to Fill and the Compensation Indices rose to new cycle highs in August (NFIB data) while Total Job Openings, Total Hires, and Quits moderated sequentially but held at 13 year highs in July (JOLTS data). 

 

Further, the share of short-term unemployed continued to rise in August while labor supply (total available workers per job opening) remains just north of pre-recession averages. 

 

In short, while signs of moderate sectoral shift and employment hysteresis remain, the labor market remains moderately tighter than the FED officialdom gives lip service to. 

 

Whether the acceleration in hourly earnings for nonsupervisory and production employees to a 4-year high of  +2.5% in August is evidence of that tightening being passed through in the form of accelerating wage inflation remains TBD.   

 

Supply Side Stagnation: A Few Quick Charts - NFIB compensation Aug

 

Supply Side Stagnation: A Few Quick Charts - NFIB Hard to Fill Aug

 

Supply Side Stagnation: A Few Quick Charts - Short term unemployment    of Total

 

Supply Side Stagnation: A Few Quick Charts - Jobs per available worker

 

 

Cycle Accounting:  Historically, over the last half century, initial claims and peak monthly NFP gains have led the peak in equities and the peak in the economic cycle by 3 months and 7 months, respectively.   

 

Whether the recent trough in claims in early August or the Apr-June NFP gains represented peak improvement in those measures remains to be seen, but it’s worth monitoring given the fairly consistent temporal sequence in the labor --> equity market --> economy over the last half century.  

 

Supply Side Stagnation: A Few Quick Charts - Initial Claims Months from Trough

 

Supply Side Stagnation: A Few Quick Charts - Laobr cycle half table

 

 

Christian B. Drake

@HedgeyeUSA

 


Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more