What’s Behind the Walmart Wage Boost?

What’s Behind the Walmart Wage Boost?

Mega-retailer Wal-Mart made news last week when it announced that it will raise
starting wages to $11 per hour, will offer bonuses up to $1,000 to many of its workers
and expand maternity/paternity policies. Should the million or so employees who will be
affected by the moves thank the GOP tax cut? The company indicated that changes in
the law were at least partially responsible and certainly the billions that the company
stands to reap from the corporate tax rate dropping from 35 to 21 percent will more
than offset the $700 million cost for the new policies.

Should I Sell My Stocks?

Should I Sell My Stocks?

If during a two week summer vacation, you heard that there was an escalation of tensions between the US and Korea; two international terrorist attacks; a US domestic terrorist attack; a looming debt ceiling crisis; and political upheaval in the White House, you might think that US stock markets would be in free-fall. You would be mistaken. Although markets were down over the most recent fortnight, the damage was fairly limited—about two percent overall. Even with the recent declines, the S&P 500 remains 8.3 percent higher on the year and just 2.2 percent below its record high, while the NASDAQ is up 15.5 percent in 2017. Given these numbers, its not surprising that the most frequently asked question that I have fielded over the past month has been, “I can’t believe that market is doping so well, considering (fill in the blank)…SHOULD I SELL MY STOCKS?”

Amazon vs. Wal-Mart

Amazon vs. Wal-Mart

American consumers will soon have an easier time: they will shop at either Amazon or Wal-Mart. That’s overstating the situation, but after Amazon announced that it was buying Whole Foods for $13.7 billion and Wal-Mart (which last year bought fledging Amazon competitor Jet.com for $3.3 billion), said it had purchased online men’s retailer Bonobos for $310 million, the retail landscape shifted once again. Both transactions signify that to succeed, companies will need robust digital as well as a brick and mortar beachheads. Whenever big deals are announced, it can make you feel like there are going to be three or four companies left in each sector. In the past, there have always been cycles of expansion and consolidation and just as big conglomerates were created, they could also be pared down.

April Jobs Report: The Two-Tiered Recovery


The April jobs report continued the saga of a two-tiered labor market. The economy added 160,000 jobs and the unemployment rate remained at 5 percent. Revisions to the previous two moths amounted to 19,000 fewer jobs than originally reported. But the broad numbers may not paint a true picture of the employment landscape. The biggest complaint is that overall wage growth has been unimpressive. In April, average hourly wages increased by 0.3 percent, nudging up the annual increase to 2.5 percent. Given the impressive number of jobs added, most analysts have been promising that wage growth would soon follow, but annual wage growth has remained between 2 and 2.5 percent for the past few years, below the near-3 percent seen in previous expansions. While 2.5 percent is not a bad number, we have been here before and now need to see consistent readings that are trending higher.

It’s not supposed to work this way. If employers are having a hard time filling positions, and workers are more willing to jump ship, wages should be rising faster. However, according to economist Joel Naroff, “No matter how tight the market may be, companies are still willing to go without new hires and limit pay increases.”

It may be that the labor market is not quite as healthy as the top line measures indicate. In addition to the 2.1 million Americans who have been out of work for more than six months, the number of workers who work part-time but would rather be full-time remains at a still-elevated 6 million. According to research from the Federal Reserve Bank of Chicago, the high numbers of “part-time for economic reasons” is a contributing factor to limiting wage growth.

What appears to be happening is that workers in the high growth fields can demand higher wages, but the vast majority of workers either don’t feel like they have bargaining power or have made a different kind of adjustment: if the boss can’t pay me more, maybe I will work a little less. This could be part of the reason why worker productivity has dropped off. According to the Labor Department, in the recent 2007-2015 period, annual labor productivity has slowed significantly to 1.2 percent, the worst period since the late-1970s to mid-1980s. Naroff says the downshift is understandable because “until workers have reasons to work harder (i.e., greater compensation), they will find ways not to work harder.”

Of course, with corporate earnings set to drop for a third consecutive quarter, companies are unwilling to take the first step to incentivize their workforces. This strange game of chicken is unlikely to continue for too much longer. Unfortunately, there is probably an equal probability that we see a downshift in the economy, which would spur workers to step it up; and an uptick, which would force companies to pay more.


  • DJIA: 17,740 down 0.2% on week, up 1.8% YTD
  • S&P 500: 2057 down 0.4% on week, up 0.6% YTD
  • NASDAQ: 4736 down 0.8% on week, down 5.4% YTD
  • Russell 2000: 1114, down 1.5% on week, down 1.9% YTD
  • 10-Year Treasury yield: 1.78% (from 1.83% a week ago)
  • June Crude: $44.66, down 2.7% on week
  • June Gold: $1,294.00, down fractionally on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.21 (from $2.21 wk ago, $2.65 a year ago)


Mon 5/9:


Tues 5/10:

Walt Disney

6:00 NFIB Small Business Optimism Index

10:00 JOLTS

Weds 5/11:


2:00 Treasury Budget

Thursday 5/12:

Kohl’s, Ralph Lauren, Nordstrom

8:30 Import/Export Prices

Friday 5/13:

JC Penney

8:30 Retail Sales

8:30 PPI

10:00 Consumer Sentiment

Is the US Economy at Full Employment?


Full employment is often described as the level of employment at which virtually anyone who wants to work can find employment at the prevailing wage. Given that over the last half century, the unemployment rate in the United States has ranged from a low of nearly 2 percent to a high of nearly 11 percent, what is the specific rate at which the economy has reached the magical level? According to the Federal Reserve, full employment is subjective. It’s “largely determined by nonmonetary factors that affect the structure and dynamics of the job market. These factors may change over time and may not be directly measurable.” In other words, your guess is as good as anyone else’s. In the Fed's March 2016 Summary of Economic Projections, the Committee estimated that the longer-run normal rate had a median value of 4.8 percent, but even if we drop to 4.8 percent when the government releases the March Employment report, that may not cut it.

The Fed also closely watches wage growth and hoping that it picks up from the paltry 2 to 2.5 percent seen during the recovery. Part of the problem is that even though job creation has been robust over the past few years, many of the new positions added have been lower paid ones, which has dragged down the average. As 538 Blog points out, this is perhaps why many American workers without college degrees are so angry. They have gone from working in factories, earning “more than $25 an hour before overtime” to the service sector, where “the typical retail worker makes less than $18 an hour…More than 80 percent of all private jobs are now in the service sector.”

Still, with the pace of average monthly job gains remaining above 200,000 and the labor market tightening, analysts believe that wage growth should accelerate this year. Until it does, most consumers are happy to see low inflation, which allows them to keep more of their paychecks. Indeed, the upward revision of Q4 growth to a still-slow 1.4 percent was due almost entirely from consumers, not from businesses. Consumer spending increased at a 2.4 percent annual pace in the final three months of 2015, up from a prior 2 percent estimate.

On Monday, the government will release data on Personal Income and Spending for March, which could provide a preview of the jobs report. Although wages have been disappointing, the addition of other income, like rental income, non-farm proprietors' income and investment income, the numbers look a little better: Personal income increased 4.4 percent in 2015.

MARKETS: Stock indexes snapped a five-week winning streak and that was before the holiday release of Corporate Profits, which fell 3.2 percent last year, versus increases of 1.7, 1.9 and 9.1 percent in 2014, 2013 and 2012 respectively. It was the first negative reading since 2008, but with energy prices moderating and dollar appreciation slowing, analysts expect that profits should rise this year, which could help the labor market.

  • DJIA: 17,516 down 0.5% on week, up 0.5% YTD
  • S&P 500: 2036 down 0.7% on week, down 0.4% YTD
  • NASDAQ: 4773 down 0.5% on week, down 4.7% YTD
  • Russell 2000: 1101, down 1.3% on week, down 3% YTD
  • 10-Year Treasury yield: 1.90% (from 1.88% a week ago)
  • May Crude: $39.59, down 2.4% on week
  • June Gold: $1,218.70, down 2.6% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.04 (from $1.98 wk ago, $2.42 a year ago)


Mon 3/28:

8:30 Personal Income and Spending

10:00 Pending Home Sales

10:30 Dallas Fed Manufacturing Survey

Tues 3/29:

9:00 S&P Case Shiller Home Price Index

10:00 Consumer Confidence

Weds 3/30:

8:15 ADP Private Jobs Report

Thursday 3/31:

9:45 Chicago PMI

Friday 4/1

Motor Vehicle Sales

8:30 March Employment Report

9:45 PMI Manufacturing Index

10:00 ISM Manufacturing Index

10:00 Consumer Sentiment

Strong Jobs Report Puts Fed in a Quandary


The US economy added a much stronger than expected 242,000 jobs in February and the two previous months were revised higher by 30,000, pushing up year-over-year job creation to a solid 2.67 million. The unemployment rate remained at 4.9 percent, the lowest level since February 2008. The report puts the Federal Reserve in a quandary for its upcoming policy meeting. With job creation averaging 228,000 over the past three months and the labor force increasing by 555,000 in February and by 1.5 million in the last three months, the participation rate rose to a 15-month high of 62.9 percent. According to Capital Economics, the report shows that “remaining labor market slack is getting eaten up very quickly.”

If the central bankers are in fact “data dependent,” then the strong jobs report, along with rising core inflation (the Fed’s favorite inflation measure, the core PCE price index, was up 1.7 percent in January from the prior year), would add to the rationale for increasing the fed funds rate by another quarter of a percent in March.

But by now we know that the Fed likes to err on the side of caution. Officials are likely to cite some negatives from the February jobs report as a rationale for doing nothing in March. Chief among the concerns would be the drop in average earnings in February, which translated into a 2.2 percent annualized increase—that’s down from 2.5 percent in the previous month — and average weekly hours worked, which fell sharply to 34.4, from 34.6.

Part of the issue on wages may be the quality of jobs created in February. Big gains in retail and food and drinking establishments contributed to the weakness. Additionally, although the broader unemployment rate (U-6), fell to 9.7 percent, that is still about 1.5 percent ABOVE the precession level.

Bond investors put the likelihood of a March rate hike at essentially zero, believing that the slowdown in global growth will prompt the central bank to do nothing in a week and a half. But if there is continued improvement in the labor market and inflation marches towards the Fed’s desired 2 percent pace, the central bank may by eyeing April or June for the next increase.

MARKETS: HAPPY ANNIVERSARY! I hate to bring you back to a scary time, but seven years ago this week; US stock markets plunged to their worst levels of the entire bear market of 2008-2009. Although the entire financial system almost went over the cliff in September and October of 2008, it wasn’t until March 9, 2009 that stocks hit rock bottom. On that day, the Dow closed at 6547; the S&P 500 fell to 676; and the NASDAQ was at 1268. Time may not heal all wounds, but it certainly has helped investors...

  • DJIA: 17,006 up 2.2% on week, down 2.4% YTD
  • S&P 500: 2000 up 2.7% on week, down 2.2% YTD
  • NASDAQ: 4717 up 2.8% on week, down 5.8 % YTD
  • Russell 2000: 1081, up 4.3% on week, down 4.8% YTD
  • 10-Year Treasury yield: 1.88% (from 1.77% a week ago)
  • Apr Crude: $35.92, up 9.6% on week, up 37% from the 13-year low in Feb
  • Apr Gold: $1,270.70, one-year high
  • AAA Nat'l avg. for gallon of reg. gas: $1.81 (from $1.74 wk ago, $2.46 a year ago)

THE WEEK AHEAD: A few key speeches by Fed officials could provide the last clues before the central bank’s March policy meeting. All eyes will be on the ECB—it is expected that Draghi & Co will provide more stimulus to the ailing European economy.

Mon 3/7:

3:00 Consumer Credit

Fed Governor Lael Brainard and Fed Vice Chair Stanley Fischer speak

Tues 3/8:

6:00 NFIB Small Business Optimism

Weds 3/9:

10:30 EIA Petroleum Status Report

Thursday 3/10:

ECB Policy Meeting

Friday 3/11:

8:30 Import and Export Prices

Will Stock Correction Lead to Bear Market?


The first two weeks of the year have been the worst ever for US stock indexes. Indexes are now in correction territory for the second time in six months and the big swings are testing every investor’s internal fortitude and begging the question: will the correction lead to the first bear market in nearly seven years? Understandably, this period may cause a bit of déjà vu all over again, but the current situation is not like 2008 for many reasons. The first of which is that there is no financial crisis brewing and the second is that US economy, while not strong, is still growing by about 2-2.5 percent annually. Although some investors may be tempted to sell, they do so at their own peril. Market timing requires you to make two precise decisions, when to sell and then when to buy back in, something that is nearly impossible. The data show that when investors react, they generally make the wrong decision, which explains why the average investor has earned half of what they would have earned by buying and holding an S&P index fund.

The best way to avoid falling into the trap of letting your emotions dictate your investment decisions is to remember that you’re a long-term investor, who doesn’t have all of your eggs in one basket. Try to adhere to a diversified portfolio strategy, based on your goals, risk tolerance and time horizon -- one that is not reactive to short-term market conditions, because over the long term, it works. It’s not easy to do, but sometimes the best action is NO ACTION.

Where the markets will go throughout the rest of 2016 depends on the answer to the following six questions:

1) Will Chinese growth accelerate? The cause of the early part of the New Year's sell-off was anxiety over a slowdown in China (sometimes referred to as a “hard landing”), which sent stocks there into a bear market, down 20 percent since the December high. This is not a new fear—investors have believed that a downshift in growth in the world’s second largest economy would inflict pain on the rest of the world, especially as China shifts from an economy that relies on government investment in building and infrastructure as well as manufacturing to one that is more consumer-based.

2) How many Fed Rate increases? The central bank pledged to raise rates gradually—according to its own projections, there are likely to be four quarter-point increases in 2016. But the bond market thinks that there will only be two, due to slower growth. If the Fed is correct, it would mean that US growth continues to accelerate and that inflation will rise towards the target 2 percent; if the bond market is correct, growth and inflation will likely stall in 2016.

3) Will crude oil steady/fall further/rise? Oil’s shaky start (down about 20 percent in the first two weeks of the year), comes after last year’s 30 percent drop and 2014’s 46 percent plunge. Crude is now down over 70 percent over the past 18 months. With Chinese demand cooling and supply remaining high -- the world is producing 1 million barrels of oil more than it’s consuming, which is pushing prices down. That’s good news for consumers, who will either save or spend the savings at the pumps, but bad news for energy companies, whose earnings are going to get shellacked.

4) Will US Economic Growth Accelerate? GDP growth last year is likely to come in around 2.25 percent, matching the results of the previous three years. Analysts are expecting growth of 2.5 percent in 2016, with some thinking that a recession is imminent. Part of the answer to this question may also be found in the movement of the US dollar, which in trade-weighted terms, is close to a ten-year high. With anxiety in China and emerging markets pushing capital to the US, the dollar could continue to rise, which would be bad news for US manufacturers and likely keep inflation too low in the eyes of the Federal Reserve.

5) Will Wages Finally Rise? The economy added 2.65 million jobs in 2015, the second best year for job creation in the past 15 years. (The best was 2014). While there was progress on job creation and the unemployment rate (5 percent), wage growth has lagged. With a tightening labor market, employers may have to dig deep and pay up to attract and retain qualified talent. That would be good news for workers, but not so hot for corporate America.

6) Will the Bear Emerge? The current bull market in US stocks turns seven years old in March, making it the third longest in history (1987-2000 is the winner, followed by 1949-1956). Just because the bull is aging, does not mean that it is doomed. However, it does mean that the pressure is mounting for companies to deliver earnings growth in a year when their compensation expenses are likely to rise, but they are unable to pass on those additional costs to customers.

By the way, since the end of World War II (1945), there have been 12 full-blown bear markets (with losses of 20% +). Statistically they occur about 1 out of every 3.5 years, and last an average of 367 days.

MARKETS: All three indices are in correction territory and the Russell 2000 index of small stocks, as well as certain other indexes like the Dow transports, is already in a bear market, defined as a 20 percent decline from the highs. For the Dow, which would be 14,681; for the S&P 500, it would be 1,708; and the NASDAQ would be in bear market territory if it hit 4,185.

  • DJIA: 15,988 down 2.2% on week, down 8.2% YTD (8/24/15 low: 15,370)
  • S&P 500: 1880 down 2.2% on week, down 8% YTD (8/24/15 low: 1867)
  • NASDAQ: 4643 down 3.3% on week, down 10.4% YTD (8/24/15 low: 4292)
  • Russell 2000: 1007, down 3.7% on week, down 11.3% YTD, down 23% from 6/15 high)
  • 10-Year Treasury yield: 2.04% (from 2.12% a week ago)
  • Feb Crude: $29.42, down 10.5% on week, lowest settle since Nov 2003
  • Feb Gold: $1,091.50, down 0.7% on week
  • AAA Nat'l avg. for gallon of reg. gas: $1.91 (from $1.98 wk ago, $2.08 a year ago)


Mon 1/18: US Markets closed for MLK Day

Tues 1/19:

Morgan Stanley, Bank of America, IBM, Netflix

China Economic Data: Q4 GDP, industrial production, retail sales

10:00 Housing Market Index

Weds 1/20:

Goldman Sachs

8:30 CPI

8:30 Housing Starts

Thursday 1/21:

Starbucks, Schlumberger

Friday 1/22:

General Electric

10:00 Existing Home Sales

Solid Jobs Report = Fed Rate Hike


The government said that the U.S. economy added 211,000 jobs in November, which was the high-end of the predicted range of 160,000-220,000. There is now little doubt that the Federal Reserve will raise short-term interest rates when it meets in a week and a half. The three-month average of job creation stands at a solid 218,000 and year-over-year, 2.64 million jobs were added. Although 2015 average monthly job creation of 210,000 is less than last year’s strong pace of 260,000, it has certainly been strong enough to push down the unemployment rate from 5.8 percent a year ago, to a seven-year low of 5 percent. The broader measure of unemployment, which includes those who have stopped looking as well as those working part-time for economic reasons, edged up slightly to 9.9 percent, though remained under the key 10 percent level for a second consecutive month.

The Fed is also likely to be encouraged by the breadth of job gains, including the domestic-focused construction, retail and health care sectors. That said, two areas that continue to be under pressure are mining and manufacturing, both of which have been struggling under the triple whammy of lower oil prices, weak demand overseas and a stronger U.S. dollar. Another area of weakness is the still low level of working-age Americans who have jobs or are actively looking for work. The participation rate edged up to 62.5 percent, due to a 273,000 increase in the labor force, but because of demographics and the large number of would-be workers giving up their job searches, participation remains near 40-year lows.

Back to the good news...after a swift 2.5 percent annual increase in October, wages in November were up a still-respectable 2.3 percent from a year ago. In a separate report released by the government earlier last week, Q3 hourly compensation jumped by 4 percent in the third quarter, on an annualized basis and was up 3.6 percent compared to the same quarter a year ago. If that trend holds, hourly compensation is on track to rise by the largest amount since 2007 and when adjusted for inflation, the increase would be the fastest since 2000.

Overall, the results confirm that the economy continues to expand; the labor market is improving and workers are gaining leverage; and the Fed will soon hike interest rates for the first time in over nine years.

MARKETS: The US jobs report, along with promises of “no limit” on additional ECB stimulus measures, was enough to save what was shaping up to be a losing week.

  • DJIA: 17,847 up 0.3% on week, up 0.1% YTD
  • S&P 500: 2,091 up 0.01% on week, up 1.6% YTD
  • NASDAQ: 5,142 up 0.3% on week, up 8.6% YTD
  • Russell 2000: 1183, down 1.6% on week, down 1.8% YTD
  • 10-Year Treasury yield: 2.28% (from 2.22% a week ago)
  • Jan Crude: $39.97, down 4.2% on week
  • Feb Gold: $1,084.10, up 2.6% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.05 (from $2.09 wk ago, $2.79 a year ago)

THE WEEK AHEAD: December 9th marks the 50th anniversary of the debut of “A Charlie Brown Christmas”. The image of the sad little Christmas tree that Charlie and Linus selected may be a good symbol of the U.S. economy. At first glance, it seems a little thin and wobbly, but upon further reflection, it’s not “such a bad little tree. It's not bad at all, really. Maybe it just needs a little love.”

Mon 12/7:

Tues 12/8:

6:00 NFIB Small Business Optimism

10:00 Job Openings and Labor Turnover (JOLTS)

Weds 12/9:

Thursday 12/10:

8:30 Import/Export Prices

Friday 12/11:

8:30 Retail Sales

8:30 PPI

10:00 Business Inventories

10:00 Consumer Sentiment

Janet Yellen Pulls an Emily Litella


There are just three more jobs reports before the December Federal Reserve policy meeting and each one is carries even more weight than usual. The September data are out this Friday and the consensus is for the economy to add 200,000 jobs and for the unemployment rate to remain at 5.1 percent. While the pace of job creation has slowed from last year (it was hard to imagine that we could sustain 300,000 per month), even the Fed had to admit that gains in the labor market have been “solid”. So what are the central bankers looking for to convince them that labor market slack is diminishing? My guess is that high on the list would be to see annual wage growth pick up from the sub-par 2 percent level and move towards 2.5 percent; an increase in the participation rate (the number of people employed or actively looking for a job); a continued drop in part time workers who are seeking full time positions; and a decrease in the number of long-term unemployed.

Although the jobs report is the main focus the week, the Fed is also likely to examine data on manufacturing. And spillover from the slowdown in China and other emerging markets is likely to be seen in that sector. If manufacturing indexes hold steady, it would likely provide some solace to Fed officials concerned about a global economic deceleration.

Meanwhile, last week, Yellen seemed to brush aside the China worrywarts, when she said “we do not currently anticipate that the effects of these recent developments on the U.S. economy will prove to be large enough to have a significant effect on the path for policy.” In that same speech, Yellen also said that she expects “inflation will return to 2 percent over the next few years as the temporary factors that are currently weighing on inflation wane”.

So if the labor market is solid, global slowdown worries are overblown and inflation is likely to gradually increase, why didn’t the Fed raise rates at the last meeting? As Weekend Update’s Emily Litella (Gilda Radner) would say “Never Mind”.

But wait; maybe Congress will trump the Fed’s rate increase mission. Even if lawmakers pass a continuing spending resolution to keep the Federal government open through December 11th, that’s just FIVE days before the last Fed meeting of the year. It could be déjà vu all over again (RIP Yogi), as we hurtle to the end of the year, talking about the raising the debt ceiling and defaulting on our obligations. Isn’t this fun?

MARKETS: The biotech sector is under siege again, as it has been at various times over the past couple of years. The biotech index tumbled 13 percent on the week and is now in bear market territory, off 22 percent from its recent high in July.

  • DJIA: 16,314 down 0.4% on week, down 8.5% YTD
  • S&P 500: 1,931 down 1.4% on week, down 6.2% YTD
  • NASDAQ: 4,686 down 2.9% on week, down 1% YTD
  • Russell 2000: 1122, up 3.5% on week, down 6.8% YTD
  • 10-Year Treasury yield: 2.17% (from 2.19% a week ago)
  • November Crude: $45.70, up 1.5% on week
  • December Gold: $1,145.60, up 0.6% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.29 (from $2.30 wk ago, $3.34 a year ago)


Mon 9/28:

8:30 Personal Income & Spending

10:00 Pending Home Sales

Tues 9/29:

9:00 Case Shiller Home Price Index

10:00 Consumer Confidence

Weds 9/30:

8:15 ADP Private Payrolls

9:45 Chicago PMI

3:00 Fed Chair Janet Yellen speaks at Conf of State Bank Supervisors

Thurs 10/1: 9:45 PMI Manufacturing Index

10:00 ISM Manufacturing Index

10:00 Construction Spending

Fri 10/2:

8:30 September Employment Report

10:00 Factory Orders

Will July Jobs Report Convince the Fed?


In its recent policy meeting statement, Federal Reserve officials said that in the six weeks since the previous meeting, “The labor market continued to improve, with solid job gains and declining unemployment.” The central bankers also noted that a range of indicators point to diminished slack in the jobs market since early this year. With just a little more progress in the labor market, the Fed could finally pull the trigger on its first interest rate increase in more than nine years. Whether that decision occurs at the September, October or December meeting has caused great consternation for analysts, economists and navel gazers. For the rest of us poor schlubs, the exact timing doesn’t matter all that much. The bottom line is that that short-term rates will likely rise before the end of the year.

The rationale for sooner, rather than later on rate increases is clear: start now, while data are improving in order to be ahead of the curve. The “what’s the rush?” argument is: sure job gains are strong, but wage growth still stinks – fresh evidence of which was seen on Friday, when the Fed’s favorite measure, the Employment Cost Index, showed the slowest pace of quarterly growth since at least 1982 in the second quarter. In fact, total compensation grew by just 2 percent from a year ago, down from 2.6 percent in Q1. Without robust wage growth, consumers are unlikely to spend, which will keep annual growth mired at this lousy two percent rate.

The data this week may help clarify things for the Fed. There are only two monthly jobs reports before the next FOMC meeting in September and one of them occurs this Friday. Predictions for monthly jobs created are running between 200,000-250,000. In the first six months of the year, monthly job creation has averaged 208,000, less than the nearly 260,000 monthly average seen in 2014.

The unemployment rate should remain at a seven-year low of 5.3 percent, but that number comes with an asterisk. While more people have nabbed jobs during the recovery, there has also been a big drop in the labor force participation rate, which measures the percentage of people working or actively seeking employment. The rate was at 62.6 percent as of June, the lowest level since 1977.

The participation rate peaked in 2000, when according to Capital Economics, “there were only 18 people in their 60’s for every 100 prime-aged people (those aged 25-54). Today there are 28.” In other words, a lot (probably half) of the falling participation rate has to do with aging Baby Boomers, who are retiring. Sure there are people who are fed up and checking out of the workforce or maybe earning money in some sharing/gig economy type of arrangement, but economists say those numbers are probably not big enough to call it a trend.

MARKETS: Chinese stocks are still in a bear market (down 29 percent from the June peak), but US and European markets edged up on the week.

  • DJIA: 17,689 up 0.7% on week, down 0.8% YTD
  • S&P 500: 2,103, up 1.2% on week, up 2.2% YTD
  • NASDAQ: 5,128 up 0.8% on week, up 8.3% YTD
  • Russell 2000: 1238, up 1% on week, up 2.3% YTD
  • 10-Year Treasury yield: 2.2% (from 2.27% a week ago)
  • September Crude: $47.12, down 2.1% on week
  • October Gold: $1,094.90, up 0.9% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.66 (from $2.72 wk ago, $3.52 a year ago)


Mon 8/3:

Motor Vehicle Sales

8:30 Personal Income and Spending

9:45 PMI Manufacturing

10:00 ISM Manufacturing Index

10:00 Construction Spending

Tues 8/4:

Coach, Walt Disney

10:00 Factory Orders

Weds 8/5:

FitBit, GoDaddy, Herbalife, Tesla

8:15 ADP Private Jobs

8:30 International Trade

10:00 ISM Non-Manufacturing Index

Thurs 8/6:


Fri 8/7:

8:30 July Employment Report

3:00 Consumer Credit