Employment, The Fed, And Demographics As Destiny

It’s hard to guess what the Federal Reserve will make of today’s Labor Department employment figures. It’s not too hot, but it’s not too cold. It’s simply kind of lukewarm. However, it did show the unemployment rate dipped to 5.1% and that has to be reckoned with.

As to the 5.1% level, we may at long last be seeing the fading away of the leading edge of Baby Boomer workers. Let’s not forget that through the period of recession and recovery – that is the last seven years – the labor force was growing furiously as the enormous Millennial population cadre entered the job market.

Parallel to that we had Boomers who had lost money in the stock market failure and who, in the beginning of the crisis were not really all that old. (The first Boomers were born in 1946. In 2010, they were only 64 years of age. Full Social Security vesting age for the early Boomers is between 66 and 67 years old.) A combination of factors has kept them working.

Now, however, leading edge Boomers are turning 69 and in 2016, they’ll be turning 70. Retirement beckons at last.

Meanwhile, Millennial generation “Echo Boomers” have made their way well into the first-job years of their lives. Behind them, yet another new generation (yet to be named), is much smaller and not putting pressure on the economy the way Millennials have.

The sum total of this brief demographic overview is that more (older) people are dropping out of the job market while fewer (younger) people are jumping into the scramble for positions.

How serious is the Fed about the 5% unemployment rate? Will it take into account the part-timers who want full-time work? How about soft wages that seem to be softening more? Will the retirement of Boomers finally put wage pressure on the marketplace?

The immediate effects of the jobs report has been a 2% drop in the Dow Jones average and significant swoons in the other two U.S. indices. Europe and Asia did not fare much better, although the Nikkei was hammered down by 2% today.

It seems no one came out on the winning side today. Gold and oil were down. The U.S. dollar was down and the 10-year T-bond yield was weaker.

We are moving into a three-day weekend in the U.S. Traders and investors are looking to minimize their exposure while Europe and Asia trade on Monday and New York floors are dark.

We think this reluctance to bid anything up in the face of a long holiday is as much of a factor on the day as the uncertainty brought on by the employment report.

There are a lot of people on the street who want to get back to a normal state of business operations. Count us among them.

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Wishing you as always, good trading,