NFP preview: Between Trump’s 94 million out of the labor market and NFP - BBH
Analysts from Brown Brother Harriman, analyzed the US labor marker, looking into what the US President Trump during his speech to Congress. They see that media tends to ignore important numbers like “hours worked” and “average hourly earnings”.
Key Quotes:
“In a speech to the joint session of Congress that was widely recognized as "presidential," US President Trump said twice that there are 94 mln Americans out of the labor market. It is not a lie or fake news or even an alternative fact, but it is so misleading that it is incredulous.”
“The 94 mln people out of work figure that Trump cited includes every American who is not employed. That means those in school and jail, those that are disabled, and those that are retired. It is such an inclusive measure that it is nearly meaningless.”
“Most countries, even those that are accused of stealing US manufacturing jobs are themselves losing manufacturing jobs, including China, for example. The Center for Business and Economic Research at Ball State estimates that 85% of the loss of manufacturing jobs is due to technological advances and automation not trade.”
“The point is that the new industries and sectors are not nearly as labor intensive as the older industries. The new technological advances are both labor saving and capital saving.”
“This is not to argue that unfair trade practices do not hurt the US. They do. There is a conflict resolution mechanism integrated into most trade agreements, including the World Trade Organization.”
“We often explain what given the size of the US workforce, why hours worked is a key metric that the popular media tends to largely ignore. However, in the current environment, we suggest that average hourly earnings (and other measures of wage pressure) are an important metric that investors will want to track closely.”
“The median forecast on the headline non-farm payrolls is expected to be around 190k. In 2016, non-farm payrolls rose by an average of 187k.”