Posts Tagged ‘jobs market’
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
New York City is a colossal urban jungle, but what strikes me is the surging housing market rental prices in not only Manhattan, but also the strong price appreciation in the borough of Brooklyn.
Average home prices peaked around $550,000 in early 2006, prior to a steady decline since then. Yet if you look at regions, especially Manhattan and Brooklyn, the demand for housing and rentals is strong, and this has created a surge in rental prices.
What has been apparent in New York City over the past decade has been the clean-up of the city, along with the rapid development in the surrounding areas close to Manhattan, such as Brooklyn. A look at Brooklyn shows an area that is rapidly growing with multiple new businesses, hotels, and housing market projects reclaimed from former industrial lands.
Whole Foods Market, Inc. (NASDAQ/WFM), for instance, built its largest outlet in Brooklyn that was previously on industrial land. There are now plans for further development in the area. The end result has been a boom in the housing market in Brooklyn for both property buyers and renters. A look at the rental prices in Brooklyn show rental rates as high as $5,000 a month or more for a two-bedroom apartment. The former docklands in Brooklyn have been transformed into a beautiful urban area with paths, expensive condos, and a great view of New York City.
The rise is staggering and clearly indicates a booming housing market there.
The situation in Brooklyn and New York City is indicative of many areas across the country.
Just take a look at the S&P Case-Shiller Home Price … Read More
This past Friday, the Bureau of Labor Statistics reported 175,000 jobs were added to the U.S. economy in the month of February. (Source: Bureau of Labor Statistics, March 7, 2014.)
The way the media reported it…
“Friday’s jobs market report caught the market by surprise,” was what most media outlets were telling us via their untrained reporters. The expectation was an increase of 149,000 jobs in February (after a dismal December and January jobs market report) and so the usual happened—stocks went up and gold went down on a jobs market report that was only slightly better than what was expected.
The consensus, from what I read, is that the jobs market in the U.S. economy is getting better. Of course, I think of this as hogwash. And as I’ll tell you in a moment, this is the kind of misinformation that is characteristic of what happens in a bear market in stocks, not a bull market.
Within February’s jobs market report, we find:
The long-term unemployed (those who have been out of work for six months or more) accounted for 37% of all the unemployed in the U.S. economy. The longer a person is unemployed—likely because that person has not been re-trained for the jobs market—the less likely it is that person will eventually find work.
Today, once a person becomes unemployed in the U.S. economy, that person remains unemployed for an average of 37 weeks! This number remains staggeringly high. Before the financial crisis, this number was below 15 weeks. (Source: Federal Reserve Bank of St. Louis web site, last accessed March 7, 2014.)
When you have a … Read More
Just as the majority of Americans think the U.S. jobs market is improving, there’s a notion in the air that the U.S. housing market has rebounded and is healthy again. I don’t believe this to be true.
Just like the government’s official unemployment number is manipulated because it excludes people who have given up looking for work, when we took a closer look at the stats we hear about home prices, new home sales, and existing home sales, we didn’t like what we found in them.
Home prices increased to unprecedented levels in 2005. At social events back then, everyone talked about how much their home or vacation property had gone up in value and how they were getting deeper into the housing market. Few talked about the reckless lending activities of the banks that were the cause for the rise in home prices.
We now hear new homes are being sold at a new record pace. Buyers are apparently rushing to buy houses again, and the housing market is hot once more. Sadly, underlining the strong sales of homes, the number of cancelled sales orders compared to overall sales (commonly referred to as the cancellation rate) is going through the roof.
In 2013, D.R. Horton, Inc. (NYSE/DHI) had more cancelled orders than it did in 2012—7,751 cancelled contracts to buy homes compared to 6,657 in 2012. The cancellation rate for this homebuilder in 2013 was 24%. (Source: D.R Horton, Inc. web site, last accessed February 18, 2014.)
Other homebuilders are having the very same problem. KB Home (NYSE/KBH) reports its cancellation rate in 2013 reached 32%—that means one out … Read More
As I have been pointing out to my readers, the “official” unemployment numbers issued by the government are misleading because they do not include people who have given up looking for work and those people with part-time jobs who want full-time work.
In January, there were 3.6 million individuals in the U.S. economy who were long-term unemployed—out of work for more than six months. (Source: Bureau of Labor Statistics, February 7, 2014.)
Those who are working part-time in the U.S. economy because they can’t find full-time work stood at 7.3 million people in January.
Add these two numbers into the equation and the real unemployment rate, often called the underemployment rate, is over 12%. Meanwhile, the official unemployment rate from the Bureau of Labor Statistics sits at 6.6%—that’s the number you will hear politicians most often quote.
But if there’s a group of policymakers that looks past the “official” unemployment numbers, it’s the Federal Reserve.
At her speech before the Committee on Financial Services, U.S. House of Representatives in Washington, D.C. last week, Fed Chief Janet Yellen said, “Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high. These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market.” (Source: “Semiannual Monetary Policy Report to the Congress,” Federal Reserve, February 11, 2014.)
Like all economists, Yellen knows that when an individual has a part-time job then their income isn’t as … Read More
Old Man Winter appears to be killing the retail sector and the economic renewal. Extreme cold and nasty weather has engulfed about 70% of the country, reaching as far south as Georgia, North Carolina, and Texas, which don’t traditionally experience winter weather.
All that nasty weather means less driving to the malls and shops, which, judging by the numbers, appears to have been the case over the last two months. And if consumers don’t spend, the retail sector hurts and this translates into softer gross domestic product (GDP) growth.
Retail sales contracted by 0.4% in January, which represented the second straight month of declines following a revised contraction of 0.1% in December, according to the U.S. Department of Commerce. The poor showings were attributed to the weather.
With consumers staying at home, we are hearing whispers that fourth-quarter GDP growth could be revised downward from its initial 3.2%.
And while it’s too early to call for the economy to weaken, continued bad weather could mean just that. Now there are, of course, other reasons for the lackluster retail sector metrics.
There’s still a sense that the jobs market continues to be fragile following the creation of a mere 74,000 jobs in December that was blamed on the weather. Yet January was only marginally better with the creation of 113,000 jobs, which was well below the 185,000 estimate.
The jobs numbers are horrible, and unless they start to improve, I expect consumers to continue to feel hesitant about spending in the retail sector.
As I wrote in a previous commentary, investing in the retail sector will be much more difficult this … Read More
On Friday, we learned that the U.S. economy added a lower-than-expected 113,000 jobs in January and the “official” unemployment rate had dropped to 6.6% from 6.7% in December. (Source: Bureau of Labor Statistics, February 7, 2014.)
How can we create so few jobs and have the unemployment rate improve? It’s because the way the government calculates the unemployment rate is skewed. (It gets me outright mad to listen to politicians tell us the jobs market is getting better, when in fact, it’s not.)
The most obvious problem with the government’s way of calculating the unemployment rate is that it excludes people who have given up looking for work and those who have part-time jobs but want full-time jobs. If we were to include those two groups, the underemployment rate (as it is referred to) sits at 12.7%—and it’s been above 12% for a very, very long time. (This is something you didn’t hear President Obama talk about in his State of the Union speech two weeks ago.)
Now if we look a little deeper, we discover a much bigger problem in America. People who have the ability to work are leaving the jobs market!
What I’m talking about is the catastrophic decline in labor force participation in the U.S. economy.
Take a look at the chart below. It illustrates the labor force participate rate.
You will note that from about 2002, which is the same year gold prices started moving up, the percentage of the U.S. population in the labor force started to collapse.
Labor force participation is simply the number of people who are employed plus those people looking … Read More
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