Pro Perspectives 4/1/22
April 1, 2022
We end the week, and open a new month and quarter, with the jobs report.
Not surprisingly, the data this morning showed a very hot labor market, and hot economy.
Unemployment is 3.6%. That's just a tenth of a percentage point away from pre-pandemic levels, which were 50-year lows.
The economy added 431k jobs. That number will be revised higher by this time next month, as it has for eleven consecutive months. In fact, last year the labor department undershot the final payroll number, every single month, by an average of 158k jobs.
Bottom line: While unemployment is near record levels, the job growth every month is running just about as hot as it was last year, during the biggest "back to work" phase.
What about wage growth?
Year-over-year wage growth was 5.6%. That's a big number, and a big deal. For much of the decade that followed the depths of the post-financial crisis, wage growth was stagnant, below 3%.
Guess who wanted 3%+ wage growth as a driver for inflation, to assist in escaping the burdensome and dangerous deflationary forces?
Now they have wage growth (a lot of it), and (still) 11 million unfilled jobs, with employers in a position of strength to continue commanding higher wages. And they have every incentive to do so, as the cost of living has outpaced their wage gains.
Again, what does the Fed tell us wage growth does? It feeds into inflation. This is known as a feedback loop. More wage growth > more inflation > more wage growth …
This should haunt the Fed.
Note for Billionaire's Portfolio members: Our portfolio continues to perform very well (up 8.5% ytd, versus an S&P 500 that's down 5%). I'm still working through a portfolio update, with focus on how we are invested to take advantage of the increasingly important role of cyber security. Please keep an eye out for that note in the next few days.
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