{"id":32884,"date":"2023-07-07T23:33:52","date_gmt":"2023-07-08T03:33:52","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/job-growth-cooled-in-june-reported-data-might-still-be-too-high\/"},"modified":"2023-07-07T23:33:54","modified_gmt":"2023-07-08T03:33:54","slug":"job-growth-cooled-in-june-reported-data-might-still-be-too-high","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=32884","title":{"rendered":"Job Growth Cooled in June. Reported Data Might Still Be Too High."},"content":{"rendered":"
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This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.<\/em><\/p>\n

Deep Dive Into Jobs Data<\/h2>\n

Economic Update<\/p>\n

Regions Financial
July 7: <\/strong>Total nonfarm employment rose by 209,000 jobs in June, a bit closer to our forecast (214,000) than to the consensus forecast (230,000), with private-sector payrolls up by 149,000 jobs and public-sector payrolls up by 60,000 jobs. Prior estimates of job growth in April and May were revised down by a net 110,000 jobs for the two-month period…<\/p>\n

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Although the pace of job growth slowed sharply in June, the average length of the private-sector workweek ticked up by one-tenth of an hour, providing a powerful boost to growth in aggregate private-sector labor earnings. Job growth was less broadly based across private-sector industry groups in June, continuing a concerning trend we\u2019ve been highlighting in recent months.<\/p>\n

While the unemployment rate fell to 3.6% in June, the broader U6 measure, which also accounts for underemployment, rose to 6.9% from 6.7% in May on a jump in the number of those working part time for economic reasons. <\/p>\n

It is also worth noting that on Aug. 23 the Bureau of Labor Statistics will release a preliminary estimate of the annual benchmark revision to the establishment survey data, in which the monthly estimates of employment, hours, and earnings are benchmarked to the universe of payroll tax returns. Based on our take of the Quarterly Census on Employment and Wages, drawn from the payroll tax-return data, BLS has been significantly overestimating job growth over the past few quarters. <\/p>\n

Whether or not the June employment report changed anyone\u2019s view of labor market conditions, if we\u2019re correct on this point, the annual benchmark revisions certainly will.<\/p>\n

Richard F. Moody<\/p>\n

Recession Indicators Flash<\/h2>\n

Economic and Financial Markets Review<\/p>\n

Cumberland Advisors
July 6: <\/strong>Leading indicators of recession continue to point strongly toward a downturn, even if it hasn\u2019t started yet. The Conference Board\u2019s Index of Leading Economic Indicators (LEI) has now declined for 14 consecutive months, and May\u2019s 12-month change of -7.9% is at a level that has always preceded recessions. <\/p>\n

Additionally, the Treasury yield curve continues to be significantly inverted, with short-term rates above long-term rates. This inversion is slightly less steep than at the beginning of May, but it is still close to the steepest it has been since at least 1981. <\/p>\n

The lags involved with monetary policy changes are long and variable, suggesting it is difficult to determine when a recession will begin after these indicators turn negative. But they have been reliable guides in the past, and are likely to be correct in their signaling this time, too.<\/p>\n

David Berson<\/p>\n

Rx for Japanese Companies<\/h2>\n

Macro Strategy<\/p>\n

TS Lombard
July 6: <\/strong>A longstanding issue with Japanese companies is the historically low return on equity. Over the past seven-and-a-half years, Japanese ROE has averaged 8.5%. Over the same period, the corresponding figure for the U.S. was 16.1%, the EA 10.2%, and the U.K., Canada, and Australia, around 12%. Until the low ROE issue is resolved, through-the-cycle returns for Japanese equities are likely to remain subpar. <\/p>\n

The good news is that there does finally seem to be an effort under way to improve this state of affairs. In May, Hiromi Yamaji, the new Tokyo Stock Exchange CEO, issued a \u201cname and shame\u201d statement about TSE-listed companies with price\/book ratios below one. The aim is to remedy this undervaluation. In order for that to happen, capital efficiency needs to be improved (asset turnover, return on capital employed, etc.), all of which would also boost ROE.<\/p>\n

Andrea Cicione, Skylar Montgomery Koning<\/p>\n

The Long-term Case for Tech <\/h2>\n

Market Navigator<\/p>\n

Truist Advisory Services
July 5: <\/strong>The S&P 500 achieved its gains this year in an unusual way.<\/p>\n