The August Jobs Report that came out yesterday fell Bounty 30 thousand short of expectations. Key economists expected an additional 180,000 jobs, but only 151,000 were reportedly added. This disappointing number led to an initially jump in the Dow of 100 points, and all major indices ended higher.
The reason for the positive move is that traders know that the resulsi mean that the potential for a rate increase in September just dropped. This means more of the same, in particular, low interest rates.
There tends to be a lot of initial responses to reports like this both positive as well as negative. I prefer to reflect a little on the report and read a little about what some others think before I fully form an opinion. In this weeks’ Barron’s there was an interesting op-ed by Kopin Tan (you’ll need a password).
The last paragraph in Kopin’s piece is:
“Think about it: The stock market considers Google’s parent Alphabet (ticker: GOOGL) a very important company, and while it has twice the market value of, say, a former heavyweight like General Electric (GE), it has just a fifth of GE’s 333,000-strong workforce. Netflix (NFLX), with 3,700 employees, has supplanted Blockbuster, which once employed 60,000. Amazon.com (AMZN) is everywhere these days, but its 268,900-strong workforce is just about half that of Kroger (KR). It’s all awesome if you work for Google. But sustainable, real economic growth occurs when more Americans work, and work productively. Technology makes our lives deluxe, delicious, and delectable, but it’s also a force of deflation.”
A couple if seemingly unrelated ‘things’ jumped out at me while I was pondering thus. First, there’s an anti-Trump campaign ad showing Trump on the Letterman show, where he was pointing out that the Trump clothing line was all manufactured in places like Vietnam and Indonesia. The second is and was all of the attacks by the Democratic party candidates against people like Mitt Romney. The purpose of the criticism was to put a negative perspective on things that are positive for the business. Mitt’s job at Bain Capitol was to increase profit, typically by cutting costs. Manufacturing in cheap labor countries plus shipping turns out is cheaper than US manufacturing with no ocean shipping. What the Republicans have never done is illustrate that both men described above were doing the exact right thing for their company. Here’s a Google search result page on the topic.
These points are really important when thinking about the economic ramifications of changes in the job market. What is really good for the investor and the stock market overall as well as the American consumer, have the potential to have an adverse affect on jobs. In the long term this will make things better for some and worse for others, likely increasing the economic divide between the classes.
A third set of events, layoffs and consolidation in the tech sector. Companies like Microsoft and Cisco have announced jobs cuts in recent months. The tech sector is well know as one of the sectors that pays well and provides great benefits in order to attract the best talent. With the aforementioned cuts announced as well as a cooling in the media world, at least partially due to online ad blocking, these sectors may hold fewer opportunities for the well paying jobs that used to grace our automobile and steel industries, which have been largely shipped overseas.
There was a piece this week on cnbc.com that did highlight the economic challenges faced by the lower economic classes in the US. This article highlights the fact that the growing divide is alive and well. More months of continued increases in service sector employment with decreases or flatness in manufacturing and tech jobs will have long term negative implications to those that have no alternative but to work in these jobs.
I think that we’re entering a time in our economic history where there will be fewer people in the US ‘doing’ things in industries where we have a lot of consumption but these jobs are going to have a lot of ups and down. In the Tan article (in Barron’s) he indicates that there’s 3700 people that work at Netflix — for the LIFE of me I really can’t fathom what they all do. I’m sure that a high number of them are analysts trying to figure out what will make more people subscribe to their service or analyzing and understanding user preferences, but in my experience with this type of business, the job situation is constantly in flux. It’s going to be an interesting job future here in the US and it’ll be a bit of an academic study to watch it unfold.