Aside from the headline disappointment, there were a lot of positives in the December Employment Survey from the Bureau of Labor Statistics – it had glaring reminders of where the nation is going with respect to jobs and the skills to attain those jobs.
Back in the day (1950 through 1980), most households had a single worker; it typically was the father who earned enough to buy a house and have a decent car and to help his children attain financing to get through college. The great factory boom, particularly in the north, resulted in massive population flows along with the Great Migration of blacks from the south.
In the mid-1970s, a high school graduate earned close to 85% of what a college grad earned. Today, that ratio is rapidly approaching only 50%.
High school diplomas have lost leverage with respect to higher wages. However, the nightmares about young college grads being unable to move out of their parent’s basement have become so commonplace, it is more like ‘man-bites-dog’ when they are married and own homes.
Note: homeownership among those aged 30 years and younger profoundly reflects problems of college debt - 40% of those with a bachelor’s degree or better (and no student debt) own their own homes, but that number plunges to just 33% of those paying off those loans.
In the Middle
What’s the answer to the nation’s crippling skills gap and the expensive out-of-reach cost for college? In a letter to newly-elected President Donald Trump, Ginni Rometty, the Chairman, President, and CEO of IBM, outlined her thoughts on the so-called “new collar” jobs:
Mr. Donald J. Trump
Office of the Presidential Transition
1800 G Street, NW
Washington, D.C. 20006
Dear Mr. President-elect:
Congratulations on your election as the 45th president of the United States.
Last Tuesday night you spoke about bringing the country together to build a better future, and the opportunity to harness the creative talent of people for the benefit of all. I know that you are committed to help America’s economy grow in ways that are good for all its people.
Creating “New Collar” Jobs
Getting a job at today’s IBM does not always require a college degree; at some of our centers in the United States, as many as one third of employees have less than a four-year degree. What matters most is relevant skills, sometimes obtained through vocational training. In addition, we are creating and hiring to fill “new collar” jobs – entirely new roles in areas such as cybersecurity, data science, artificial intelligence and cognitive business.
You’ve spoken about the importance of vocational education, and we agree. IBM has championed a new educational model for the United States – six-year public high schools that combine traditional education with the best of community colleges, mentoring, and real-world job experience.
Chairman, President and CEO, IBM
Getting New Collar Workers
The big question is how we will get Americans looking for work to attain the skills they need for those six million jobs that have gone begging for months? I think it’s wise for businesses to train employees, and to plan for them to stay a certain amount of time to protect the investment, and perhaps a promise to the newly hired folks that they won’t be laid off.
Let’s be honest: if companies can promise billion-dollar stock buybacks for years to come, they can offer job security to their best workers. Of course, there is also an onus on workers to hone or develop new skills.
Here are examples of New Collar jobs from Monster Employment Agency:
- Job title: Pharmacy Technician
- Company: Ladue Pharmacy
- Job title: Diagnostic Medical Sonographer
- Company: Spectrum Healthcare Resources
- Job title: Cloud Administrator
- Company: Vistronix
- Job title: Service Delivery Analyst
- Company: Mercer LLC
- Job title: Cybersecurity Architect
- Company: IBM
Message of the Market
Last Friday, for the first time since President Trump has been in office, I saw the market move on panic buying. The first sign that it could be a huge day was the initial pre-open reaction to the jobs report, which saw the Dow edge higher after it was reported (148,000 jobs) in December; it was 100,000 less than what most of Wall Street was expecting (forget the official estimate).
However, when the market opened, and stocks began to drift, it appeared we could be in for one of those sessions where investors would be thrilled with a solid first week as they headed home to hunker down against the arctic blast covering the nation. Then it happened; on Friday at 2:21 P.M., the Dow took out an intraday resistance point that rebuffed the rally several times in the process, which triggered a series of ‘buy’ signals.
From there, buying begets buying; the Dow Jones Industrial Average soared and closed at the highest level of the session when the closing bell rang.
The result of the frenzy is the best first week for stocks since 2006, and the 74th record high for the Dow under President Trump.
The first week of trading is a pretty good harbinger of things to come. Historically, the rest of the year mirrored that first week 68% of the time.
On Mornings with Maria (Fox Business Network), I mentioned the jobs report was a “Goldilocks” number; not too hot and not too cold, which is important when one of the few known challenges for the rally is Federal Reserve action. For the record, I think the Fed is going to “play ball” and not derail the rally, in part because their official inflation number will remain below their level of concern for a long time.
Moreover, Janet Yellen hiked rates in December 2015 just to prove her independence from Wall Street. The first week of trading in 2016 saw ($2.3 trillion) in value lost in the global equity market.
Where the Buyers Are Buying
Once again, utilities names were the only sector under pressure. Those safe stocks generally set aside for widows and orphans, have been under pressure for weeks. Wall Street has determined that the upside potential in 2018 is too great to ride it out in high-yield stocks.
Indeed, the train left the station in 2017; it’s now picking up momentum, but investors are still looking for dips in indices and in individual names.
The tech sector was the best performer on last Friday, but the best individual stock was Western Union (WU); it has lingered in the takeover rumor mill for some time.
Consumer discretionary sector was another strong performer, but the best individual name was Car Max which bounced off the bottom of a trading channel.
Speaking of consumer discretionary while stories of store closing at Sears and Kmart made mainstream media headlines (in an effort to deny the Trump economy) the modern-day gauge for consumer spending shares of Amazon surged to a record while closing at the high of the session.
Of course, my two favorite’s materials and industrial names continue their steady rally higher.
|S&P 500 Index||+0.70%|
|Consumer Discretionary (XLY)||+0.79%|
|Consumer Staples (XLP)||+0.44%|
|Health Care (XLV)||+0.85%|
|Real Estate (XLRE)||+0.25%|
For those out there waiting for a significant pullback or correction I continue to say you are simply fooling yourselves. Of course, there will be pullbacks and corrections as there has been since the beginning of time, but the underlying fundamentals of our economy are too strong to bet on this locomotive derailing.
There is an avalanche of strong news out of the retail sector this morning. The holiday shopping season, from November to December, saw strong retail sales after having had a year of store closures and same-store sales declines. The news is reflective of revived consumer. Several retailers have upped their sales outlook and guidance for the 4th quarter and full year after a strong holiday season and are up nicely, including:
- Kohl’s (KS)
- Lululemon (LULU)
- Crocs (CROX)
- The Children’s Place (PLCE)
The major indices look to open lower after 4 consecutive days of gains.