No, faithful reader, I have not yet lost my mind. Nor, have I joined the brigade that wants to see America weakened.

While it may seem counter-intuitive to express joy at a rising unemployment number, remember that that data point is always most popularly expressed in terms of percentage. What is truly important is the number of people working and whether that population is increasing or decreasing. According to the June report from the Bureau of Labor Statistics, the civilian labor force grew by 601,000, which is very good news for sure.

As the labor force increases, the number of people relying on government assistance proportionately decreases. If you extend this trajectory over time you will see a decrease in the cost of government and increases in both personal wealth and tax revenues.

If the amount of people in the labor pool is increasing there is probably a good reason for it. And there is. It’s the gentle sound of opportunity knocking.

The general feeling in our country is that the economy is sound and getting better. Consumer and business confidence indexes continue to report very strong numbers. And the general population senses that jobs are in high demand. In fact, last month there were more jobs available than there were people looking for work.

For the unfortunate few who sit on the big gray line of being able-bodied but under-enthused about working for a living, inertia is perhaps the biggest obstacle to them joining the work force. If there is sufficient third-party assistance (government, parents, etc.) why have a job? I think you know the answer to this: Third party support makes you dependent. A job, on the other hand, gives you freedom — and the very strong likelihood of more money now and in the future.

Brian Wesbury and Robert Stein, Chief Economist and Deputy Chief respectively, at Dorsey Wright Associates point out some highlights in the recent Jobs Report:

“The number of people getting Food Stamps (SNAP benefits, which stands for the Supplemental Nutrition Assistance Program) fell to 39.6 million in April, down 4.7% from a year ago and the lowest level since about 2010. This isn’t because it’s harder to get food stamps, it’s because the rewards for work are rising.

In the second quarter of 2018, applications for Social Security disability benefits (SSDI) were down 2.3% from the same period a year ago. That’s on top of a 6% decline for full-year 2017 from 2016. And last year also saw 1.3% fewer workers collecting disability benefits than in 2016, the biggest annual decline since 1983. This year, that number has continued to decline. In other words, the job market is plenty strong enough to pull workers back into the private sector.

Although average hourly earnings are up a respectable, but not stellar, 2.7% from a year ago, hundreds of companies are paying “one-time” bonuses to their workers, either based on tax reform or as a way for companies to attract workers without raising their long-term costs, particularly in the trucking sector. These bonuses are helping push down both the median duration of unemployment, and already low unemployment rates across education levels, sexes and races.

While unemployment rates by racial/ethnic categories are volatile from month-to-month (and why we prefer to focus on the trend), the black unemployment rate increased from a near record low in June, but the Hispanic jobless rate fell to 4.6%, the lowest for any month since the government started tracking the data in the early 1970s. And for the past 12 months, the average unemployment rate for both blacks and Hispanics fell to the lowest levels ever recorded, dating back to the early 1970s.”

There’s a lot of meat on that bone so, here’s their summary: 

“Extremely low unemployment rates and rising earnings mean that private sector employment is becoming increasingly more attractive than static government programs. And with more workers moving into the private sector, it’s not hard to see better times for workers ahead. The tax cut happened just over six months ago. Deregulation is encouraging more business investment. Corporate earnings continue to exceed expectations. The job market looks set for even more strength.” 

 

Market Minute —  International Stocks – Why Bother?

You know, sometimes that seems like a good question – even to me.  Although international stocks significantly out-performed US stocks last year, this year (so far) they are way behind the US markets.  So let me remind you that long-term, International stocks have been a better place to be invested than the US.  In the meantime, according to Morningstar, International is better half of the time – and especially so when the US markets are weak.

As a matter of disclosure – we currently own no international stocks for our client base. Of note, the June plunge by international stocks was accompanied by a significant repositioning by investors. I will postulate that this is temporary, and has been caused primarily by the media trumpeting (pun intended) the possible horrors of a ‘real’ trade war.

The often-mentioned disaster of the 1930’s caused by (in my opinion) an over-zealous Congress is unlikely to be repeated – ever.   

And I have to admit, the current valuation of International, and especially emerging markets, is becoming rather intriguing. As we say, we’ll see what happens next.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

 

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw(at)denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

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