The jobs market consists of employees and employers searching for and trying to attain a match for employment within a firm. The jobs market is not static, but is constantly changing as the needs of companies change over time. New technology means a different skill level in the workforce, demanding people within the jobs market upgrade their skills to remain employable. Conversely, if there is a shortage of workers in a specific area, then wages will rise for that sector. As with any market, the price (wages) is set by supply and demand.
The housing market picked up steam in July after some stalling in the first half of the year, which was negatively affected by bad winter conditions in the first quarter. Housing starts surged 15.7% to a seasonally adjusted 1.09 million units in July, the market’s highest production in eight months. This break of one million units is key. Plus, the lagging building permits number was equally strong at an annualized 1.05 million units, up 7.7% year-over-year and 8.1% sequentially versus June.
The metrics clearly indicate a housing market that is strong and growing. Low interest rates continue to be the catalyst that is driving the housing market with the help of an improving jobs market.
An area that I continue to favor going forward in the housing market is the home construction and renovation supplies sector, as homeowners move to renovate their homes.
In this segment, the “Best of Breed” is The Home Depot, Inc. (NYSE/HD), which beat earnings-per-share (EPS) estimates and revenues in its second-quarter earnings season. The company also reported an increase of 5.8% on company-wide same-store sales in the quarter, including a 6.4% year-over-year rise in the U.S. housing market. The Home Depot can be a great stock for buy-and-hold investors, but with a market cap of more than $120 billion, there are alternative growth plays investors may want to consider that aren’t so expensive.
In the small-cap construction and renovation housing market, you may want to take a look at a stock like Builders FirstSource, Inc. (NASDAQ/BLDR), which has a market cap of $669 million.
Chart courtesy of www.StockCharts.com
Builders FirstSource focuses on the residential new … Read More
Yesterday, the Dow Jones Industrial Average fell 317 points, while the NASDAQ Composite Index fell 93 points—respective losses of about two percent per index. This morning, stock market futures are down again.
As a reader of Profit Confidential, this “rout” we are now in should come as no surprise. I have been writing for months how overpriced the stock market has become, how the stock market has become one big bubble thanks to the easy money policies of the Federal Reserve, and how the bubble would burst.
Yesterday, those who have been riding the stock market’s coattails higher and higher got the first taste of what is being called a “correction” by the mainstream media. But like I just said, to me, this is a stock market bubble that is bursting—very different than a correction. For months, historically proven stock market indicators (many of which I have written about in these pages) have been flashing red…but very few investors paid any attention to them.
The Dow Jones is now down for 2014. Yes, seven months into the year and big-cap stocks have gone nowhere. So far in 2014, investors would have done better owning gold and silver or U.S. Treasuries.
I have been predicting this will be a down year for the stock market and I’m keeping with that forecast. After five consecutive positive years for the stock market, the bounce from the 2008 market low of 6,440 on the Dow Jones could finally be over.
Dear reader, as elementary as it sounds, interest rates are the catalyst for all this.
After falling for 30 years, a time in … Read More
One week ago today, the Bureau of Labor Statistics reported 288,000 jobs were added to the U.S. jobs market in April. The unemployment rate fell to 6.3% from 6.7 % in March. (Source: Bureau of Labor Statistics, May 2, 2014.) Even the most optimistic of economists weren’t expecting a jobs creation number this big.
But it’s just the same old story…
When you look closer at the details of the jobs market, the employment picture actually looks terrible.
First and most important, the number of long-term unemployed in the U.S. economy remains very high. As of April, individuals who were out of work for more than six months made up 35% of all unemployed in the jobs market. The longer they are out of work, the harder it will become for them to find another job.
The number of part-time workers in the U.S. jobs market continues to increase. More part-time employees essentially means less personal earnings and, eventually, less consumption.
In April, there were 7.46 million Americans who were working part-time—up from 7.18 million in February and 7.41 million in March. These workers are working part-time because they can’t find full-time work.
Back in early 2008, the number of part-time workers in the U.S. economy was below five million. (Source: Federal Reserve Bank of St. Louis web site, last accessed May 2, 2014.) Yes, we’ve created close to 2.5 million part-time jobs since the Great Recession—that’s the majority of all jobs created since 2008.
Adding to the misery, low-wage employment in the U.S. jobs market continues to soar. In April, more than 30% of the jobs to be had … Read More
Boy…did investors ever get excited about Friday’s jobs market report. In case you haven’t heard, in March, 192,000 jobs were added to the U.S. economy.
The chart below shows stock market investor reaction after March’s jobs market report was released Friday morning; and investors bought more stocks!
Sure, the March jobs market report showed some improvement. But investors overreacted, as usual. In fact, for me, it’s just more of the same old thing: investors are taking any type of good news as an excuse to push stock prices higher, which is a classic sign of a market top.
Deep in March’s jobs market report, we just see more of the same structural problems that have been plaguing the U.S. economy for years now.
- 15% of all the jobs created in March were in the low-paying food services and drinking sector. That’s 30,000 jobs.
- The number of part-time workers in the economy continues to rise at an alarming rate. In March, there were 225,000 more part-time workers than in February—there are a total of 7.4 million part-time workers in the U.S. economy!
- The long-term unemployed in the U.S. jobs market continues to rise. In March, they accounted for 35.8% of all unemployed. Right now, the average duration of unemployment for an American worker is 35.6 weeks. At the end of 2007, it was 17 weeks. (Source: Federal Reserve Bank of St. Louis web site, last accessed April 4, 2014.)
Finally, the underemployment rate—which includes people who have given up looking for work and people who have part-time jobs, but who want full-time work—remains very high. … Read More
This is an odd stock market. On one hand, you don’t want to miss out on any of the upward moves, which is why you should continue to ride the gains; on the other hand, you also want to make sure you have an exit plan in place. (See “Time for Investors to Create an Exit Strategy?”)
As we move toward the end of the first quarter, the one thing that is clear is the difference in the market behavior this year versus the same time in 2013, when everything was moving rapidly higher with minimal regard for the underlying market fundamentals.
As I wrote in these pages in January, this will be a more difficult market in which to make money compared to the previous few years.
The move by the Federal Reserve under Janet Yellen to continue to dismantle the quantitative easing that was put into place by former Fed Chair Ben Bernanke a few years ago has continued into 2014 with the third straight month of cuts to the central bank’s monthly bond buying.
The gradual $10.0-billion-per-month reduction in the Fed’s monthly bond buying will likely continue until the program reaches zero early in the fourth quarter, unless, of course, the economic renewal stalls.
What this means for the stock market is that the drying up of easy money from the Fed will continue to put a damper on the money available for speculating on stocks, especially those in the emerging markets. And as bond yields rise, there will be more of a shift to bonds.
We are already seeing the impact on the … Read More
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