The title sounds like a sports blog haha. Today marks a beginning as we have finished the first week of 2017. However, it also signifies an end as today’s jobs report essentially marks the end of Obama’s economic record as POTUS. New jobs came in at about 150,000+, about 30,000 shy of consensus estimates. Unemployment ticked up slightly to 4.7%, marking the best unemployment rate to end a year since 2006. Perhaps most importantly, wages rose an estimated 2.9%, the consistently lagging variable in this recovery. What do these mean?
$1 The streak of jobs growth continues, now standing at 75 straight months. However, without the accompanying wage growth this essentially equates to people losing money to inflation or increases in low paying jobs, neither of which help the economy much. So the 2.9% growth is encouraging. Also, we can expect more growth going forward since many states have enacted higher minimum wage thresholds recently.
$2 Though this recovery trifles compared to Clinton and Reagan era recoveries, our slow growth after the dot com bubble of 1999-2001 showed that slow growth is the new norm. Further, globalism has essentially served to diversify the world’s virtual portfolio. Diversification widens your exposure so as to avoid risk on an individual investment which also reduces your potential upside. Similarly, during the recovery we saw the U.S. in superior financial position than most of Asia and Europe, growth was tepid because of recessions in Greece, Italy, Spain and showing growth in China. Then when America hit headwinds, Germany took the lead but also saw flagging growth due to slowing U.S. growth and Eurozone risks. The entire world is inter-exposed, so high growth in developed isn’t really realistic anymore.
$3 Trump’s proposed loosening of the purse strings through stimulus and corporate tax cuts has the Fed considering accelerating rate hikes. Great news for banks and other financial institutions, bad news for consumers looking to refinance or buy new homes. This presents research opportunities for investors, but those with real estate of their own will want to consider their options.