Financial Review

Go Placidly

Sinclair Noe — May 19, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW + 141 = 20,804
SPX + 16 = 2381
NAS + 28 = 6083
RUT + 6 = 1367
10 Y + .01 = 2.23%
OIL + 1.18 = 50.53
GOLD + 8.80 = 1256.60

Stocks finished with triple digit gains but well off session highs as news headlines once again rattled traders. The Dow gave back more than 50 points and the S&P 500 saw gains cut in half following an afternoon news dump. The Washington Post is reporting that a current White House official is a significant person of interest in the law enforcement investigation.

Separately the New York Times reported that Trump told Russian officials at the White House that firing FBI Director James Comey relieved “great pressure” from an ongoing probe into Russia and the election. The Times report cited a document summarizing the meeting.

Trump is on the first leg of a ten-day overseas trip that starts in Saudi Arabia, then moves to Israel, the Vatican, Brussels (for a NATO summit), and then Sicily for a G7 summit. The Trump administration planned to announce $110 billion in sales of advanced military equipment and training to Saudi Arabia this weekend.

Despite the firing of James Comey, and a general sense from the mainstream media that the Trump White House is in disarray, and the lowest public approval ratings since the inauguration, Wall Street continues to trade near record highs.  For the week, the Dow and S&P dropped 0.4 percent and Nasdaq was down 0.6 percent.

The dollar index lost 1.6 percent in the five days, the worst week since July 2016. Gold capped its best week in a month. The yield on 10-year Treasuries climbed less than one basis point to 2.23 percent, after rising as much as three basis points earlier in the session. It fell nine basis points this week.

Oil prices rose. West Texas crude rose 2.2 percent to settle at $50.53 a barrel in New York, for a weekly increase of 5.4 percent, the most since March and the second week of gains, on growing expectations that OPEC and other producing countries will agree next week to extend output cuts.

OPEC and other producers including Russia are scheduled to meet on May 25. They are expected to extend output cuts of 1.8 million barrels a day until the end of March 2018. U.S. crude production has climbed 10 percent since mid-2016 to 9.3 million barrels per day as shale producers have taken advantage of higher prices to boost activity.

Iran holds its first round of presidential elections this weekend. If President Hassan Rouhani remains in office, it should encourage Western investment and boost Iranian oil production. If the winner is Ebrahim Raisi, a critic of Iran’s nuclear deal with the West, then it is possible that new sanctions could be imposed, which could reduce the oil supply from Iran.

After two weeks chock full of retailers’ earnings — largely disappointing Wall Street and missing analysts’ expectations — the S&P 500’s Retail ETF (XRT) finished the week down about 3.5%. Leading the declines were names like Ascena Retail Group, Foot Locker, American Eagle and Sears.

Ascena — the parent of clothing companies such as Ann Taylor and dressbarn — saw its shares plunge more than 30 percent earlier in the week, after it adjusted its second-half outlook to reflect worse-than-expected business conditions. Meanwhile, Foot Locker’s same-store sales fell short of expectations.

Off-price retailer TJX, which operates T.J. Maxx, Marshalls and HomeGoods stores, was expected to be an upbeat outlier for the week, but even its first-quarter comparable sales couldn’t match Street estimates. Gap reported a surprise rise in quarterly same-store sales, bucking the trend of dismal results in the U.S. retail industry, as the company benefited from the robust performance at its Old Navy brand.

Campbell Soup’s quarterly sales and profit missed analysts’ estimates, hurt by higher promotions and weak demand for its condensed soups, broths and V8 vegetable juices, and the company warned that its full-year sales could decline.

Deere & Co raised its full-year sales and profit forecast for the second time, as demand improves for its farm and construction equipment, particularly in South America, sending its shares to a record high of $122. The company said it expected fiscal 2017 industry sales of tractors and combined harvesters in South America to be at the high-end of its earlier forecast of about 15-20 percent rise.

While farmers in South America have been complaining about low prices, they have enjoyed big gains in corn and soybean output.

Brazil’s Supreme Court released explosive plea-bargain testimony today accusing President Michel Temer, along with former presidents Lula da Silva and Dilma Rousseff, of receiving millions in bribes. The testimony raises serious doubts about whether Temer, who replaced the impeached Rousseff last year, can maintain his grip on the presidency.

The testimony implicates both ruling and opposition parties and indicates that Temer, a conservative, accepted $4.6 million in bribes from JBS, which ranks as the world’s largest meat processor. It also alleges that Lula, who is already facing five corruption trials, received $50 million in bribes in offshore accounts from JBS, while Rousseff took $30 million in bribes.

Temer said he would not resign from the presidency. The Supreme Court released an audio tape of Temer, approving the payment of hush money to former lower house speaker Eduardo Cunha, who last year orchestrated Rousseff’s impeachment and was later convicted for corruption.

Many politicians fear that if Cunha should turn state’s witness, his testimony could implicate scores of congressmen and members of the executive branch.

About 37,000 AT&T workers, or less than 14 percent of the company’s total workforce, began a three-day strike after failing to reach an agreement with the No. 2 U.S. wireless carrier over new contracts. This is the first time that AT&T wireless workers are on strike, which could result in closed retail stores during the weekend.

The workers on strike are members of the CWA Communications Workers of America union. The workers are demanding wage increases that cover rising healthcare costs, job security against outsourcing, affordable healthcare and a fair scheduling policy.

Slightly over half of the workers on strike are part of the wireless segment and the rest wireline workers, including a small number of DirecTV technicians.

Fiat Chrysler plans to update software that it expects will resolve the concerns of U.S. regulators about excess emissions in 104,000 older diesels. The software update would begin rolling out once the Environmental Protection Agency and California Air Resources Board approved.

In January, the EPA and California accused Fiat Chrysler of illegally using undisclosed software to allow excess diesel emissions in 104,000 U.S. 2014-2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks in a notice of violation.

The Environmental Protection Agency and California Air Resources Board announced approval of a fix for about 84,000 older Volkswagen diesel vehicles that can emit excess emissions. Volkswagen agreed last year to offer to buy back up to 475,000 2.0-liter diesel vehicles that had been sold in the United States or offer fixes if regulators approved.

Friday’s announcement covers a fix for 84,000 2012-2014 Passat diesel vehicles with automatic transmissions. A fix for vehicles with manual transmissions has not yet been approved. In January, regulators approved a fix for 67,000 2015 model diesels, leaving around 325,000 older vehicles still awaiting approval for a fix.

The federal government has, in recent years, paid debt collectors close to $1 billion annually to help distressed borrowers climb out of default and scrounge up regular monthly payments. New government figures suggest much of that money may have been wasted.

Nearly half of defaulted student-loan borrowers who worked with debt collectors to return to good standing on their loans defaulted again within three years, according to an analysis by the Consumer Financial Protection Bureau. For their work, debt collectors receive up to $1,710 in payment from the Department of Education each time a borrower makes good on soured debt through a process known as rehabilitation.

They keep those funds even if borrowers subsequently default again. What constitutes rehabilitation? Nine months of on-time payments, even if the borrower only pays $5 a month. That means that in many cases, the government pays $38 to collect one dollar. The department has earmarked more than $4.2 billion for payments to its debt collectors since the start of the 2013 fiscal year.

Seven years into an economic recovery, nearly half of Americans didn’t have enough cash available to cover a $400 emergency. That’s according to the latest findings from the Federal Reserve’s annual economic well-being of U.S. households, which found 44% in 2016 said such an expense would have to be covered by borrowing or selling something.

That’s a similar percentage to what was found in past Fed surveys. Of the group that can’t pay in cash, 45% would use a credit card to pay off the expense over time, about a quarter would borrow from friends of family, another 27% just couldn’t pay the expense and smaller fractions would turn to selling items or using a payday loan.

We now know where all the money is hiding. Retirees who are usually expected to spend that hard-earned nest egg are instead cutting their spending and living frugally, according to a University of Michigan survey analyzed by software company United Income. The median retiree spends 8 percent less than they comfortably could afford; the result, retirees now hold assets totaling more than $25 trillion.

Spending money, besides being a boost for the economy, could help retirees be more active, if they physically get out of the house to do it. Meanwhile, younger Americans, whose incomes are falling behind those of previous generations, aren’t saving enough.

So, the moral of the story is get out and spend some money this weekend, you might feel younger.

Financial Review

Business as Usual

Sinclair Noe — April 11, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW – 6 = 20,651
SPX – 3 = 2353
NAS – 14 = 5866
RUT + 9 = 1376
10 Y – .06 = 2.30%
OIL – .03 = 53.37
GOLD + 19.60 = 1275.00

The Labor Department’s JOLT survey, or Job Openings and Labor Turnover, shows job openings rose 2.1 percent in February to a seasonally adjusted 5.7 million. While more employers are seeking workers, hiring fell 2 percent compared to January to 5.3 million. Job openings have increased 3.2 percent over the past 12 months.

More than 2.5 million people quit their jobs in February, but that was a sharp 19.6 percent decline from January. More people quitting their job is a positive sign because workers typically only quit one job when they have another job, or are optimistic they can find one. And the reason workers change jobs is typically motivated by better pay. So, this is where optimism meets reality.

The National Federation of Independent Business said its monthly sentiment gauge fell 0.6 point to 104.7. Small business optimism declined as sales expectations and earnings came back to earth after a post-election surge.

In March, some warning signs appeared. The uncertainty index rose to 93, its second-highest reading on record. “More small business owners are having a difficult time anticipating the factors that affect their businesses, especially government policy,” noted Bill Dunkelberg, the groups’ chief economist.

But pessimism was widespread in March. Of 10 survey components, only three notched an increase. Owners say they’re still struggling to find qualified labor: 85% report few or no qualified applicants for open positions. More survey respondents said finding qualified workers was their single biggest business problem — more than those citing weak sales. Economic expectations remain “very elevated,” with 46% expecting better conditions six months from now.

OPEC states cut oil output in March by more than they pledged under supply curbs and Saudi Arabia has told OPEC officials it wants to continue output cuts for an additional six months. Those cuts are being matched by US production. US crude inventories have touched record highs at the storage hub of Cushing, Oklahoma, and in the Gulf Coast in recent weeks.

World stockpiles of corn and wheat are at record highs. From Iowa to China, years of bumper crops and low prices have overwhelmed storage capacity for basic foodstuffs. Global stocks of corn, wheat, rice and soybeans combined will hit a record 671 million tons going into the next harvest – the third straight year of historically high surplus, according to the Department of Agriculture.

In the United States, farmers facing a fourth straight year of declining incomes and rising debts are hanging on to grain in the hope of higher prices later. They may be waiting a long time. The overflow in the United States has prompted a rush for temporary storage.

The USDA has approved permits for more than 1.2 billion bushels of temporary and emergency grain storage – such as tarp-covered piles and open-air mounds. That’s a record amount, according to the USDA. The USDA forecasts net farm income will fall 8.7 percent this year to $62.3 billion – the lowest level since 2009.

New York lawmakers have approved a plan to make attending public colleges and universities free for students from middle-class families. New York is the first state to offer free four-year tuition. Previously, Tennessee and Oregon created programs that made community college tuition-free.

Altogether, the program is expected to cost New York $163 million and is expected to benefit roughly 940,000 families; although it might require a college degree to understand the details. The New York plan, nicknamed the Excelsior Scholarship, will be phased in over three years: Families earning up to $100,000 a year will qualify in 2017, families making up to $110,000 per year can participate in 2018 and families with income up to $125,000 can take part in the program in 2019.

Students must first apply for, and use, other money like federal Pell Grants, before turning to the scholarship. By zeroing out tuition, low-income students won’t be able to use their other scholarship and grant money to cover living expenses. Books, fees, food, housing and incidentals aren’t covered by this scholarship, so students without family support must work or borrow.

The Excelsior Scholarship is good for two years for a two-year program like an associate’s degree, or four years for a four-year program. Only about one-third of students earn a degree in 4 years or less. There will be deferments for graduate school and “extreme hardship.”

The plan also requires students to work in New York state for at least two years after they receive an associate’s degree, or four years post-bachelor’s. If they leave, the full grant retroactively becomes a loan. This is how New York taxpayers will be repaid for their investment in a more educated workforce.

It’s only April, and nine retailers have already filed for bankruptcy since the start of the year — as many as all of last year. Annual retail bankruptcies peaked at a total of 20 in 2008 — a level that the US could reach by September if the current rate of filings continues.

Payless ShoeSource, hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gormans, Eastern Outfitters, and Gander Mountain are among the retailers that have filed for bankruptcy so far, this year, and most are closing hundreds of stores as a result. On top of those closures, retailers that are staying in business — at least for now — are shutting down a record number of stores.  More than 3,500 stores are expected to close over the next several months.

Traditional retailers with large fleets of physical stores have been hit the hardest. Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013. Malls across the country are struggling to stay open as stores close in droves. But it’s getting increasingly more difficult to find replacements for lost tenants.

By now you’ve seen the video of the United Airlines passenger dragged off the plane. This is a case study that will be re-lived in textbooks for years; an example of how not to do it. United Airlines CEO Oscar Munoz today released another statement regarding the violent removal of a fare-paying passenger from one of his airline’s flights over the weekend.

After two poorly received releases on Monday, Munoz has finally apologized to the customer. The tone of Munoz’s latest statement is a departure from his first, which apologized only for having to “re-accommodate” certain passengers. Yea, I remember watching Mike Tyson re-accommodate his opponents in the ring, but I never saw it on an airplane.

In a later letter, Munoz reaffirmed his support for his employees; their work just got much more difficult. And the apology would have resonated better if it had come out before United shares lost close to $1 billion in value intraday (shares closed down 1.1%, a loss of about $250 million). The incident is not all that surprising; rather it seems like a sign of the times.

Yesterday, we talked about the Wells Fargo report on its fake accounts scandal; which included $75 million in clawbacks from 2 key executives who were earlier fired. The chairman of the board was also making the media rounds trying to persuade skeptical newscasters that having Stumpf retain 3/4 of the pay he’d earned when the abuses were underway was adequate.

The New York Times depicted the report as “scathing”. In fact, it is a carefully crafted document to dump all responsibility on Stumpf and Toldstedt, both of whom clearly are culpable, and shield the board and the new CEO. Anyone who knows much about banking will see clear footprints that the board ignored basic risk management failures and poor governance structures.

The report describes the glaring risk management failures. But the report tries to normalize them as being unfortunate features of how Wells did business that worked out badly rather than glaringly obvious control failures where not only top executives but ultimately the Board is responsible.

Even worse, the report proves the board’s negligence by indicating it had noticed a major deficiency, that control functions were reporting to unit/profit center managers like Tolstedt, in 2013, yet was leisurely about addressing it. Keep in mind that is the same kind of deficient structure that led to the JP Morgan London Whale scandal.

It is a basic risk management failure to have control staff report to profit center managers.

The fact that the total hard dollar customer losses were small despite the brazenness and scale of the fraud was the big reason the former CEO thought he could brazen this out. And given that sanctimonious Wells had taken vastly more from customers via foreclosure abuses, this lackadaisical effort might have otherwise seemed reasonable.

After all, the traditional check on this kind of nickel and dime grifting, class action lawsuits, have become almost as rare as the dodo bird thanks to the successful efforts of Corporate America to cut them back.

Several prosecutors are supposedly still considering further action but don’t expect much. Whistle-blower retaliation claims and other types of wrongful termination suits could be affected to add up to more serious payouts, and even more important, continued media focus on Wells’ bad conduct. Wells is not out of the woods, but sadly it is more likely to suffer the drip, drip, drip of individual cases than a prosecution or even a nice juicy civil suit against Stumpf or board members derelict in their duties.

And that is the problem – airlines can beat a passenger senseless and drag him like a slab of meat off the plane; banks can lie, steal and cheat – and in an extreme example, someone gets fired, they lose their multi-million dollar bonus, and that is that. Nothing much more. Business as usual.

Financial Review

March Jobs Report

Sinclair Noe — April 7, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW – 6 = 20,656
SPX – 1 = 2355
NAS – 1 = 5877
RUT +0.14 = 1364
10 Y + .03 = 2.37%
OIL + .65 = 52.35
GOLD + 2.20 = 1254.80

The economy added 98,000 net new jobs in March, far fewer than expected. The unemployment rate dropped from 4.7% to 4.5%, and that is the lowest level in 10 years.

The January report was revised lower, from 238,000 to 216,000. And the February report was revised lower, from 235,000 to 219,000; or a loss of 38,000 jobs from earlier reports.

A more accurate measure of the pace of hiring, the three-month average, shows the US is adding 178,000 jobs a month so far in 2017. That’s down slightly from 187,000 a month in 2016 and well below the recent high-water mark of 250,000 a month in 2014.

In March, the year-over-year change was 2.13 million jobs. Decent job growth. Despite weakness in March, the labor market is healthy, and it would be difficult to maintain a hiring pace above 200,000, at least for any length of time.

There are a couple of explanations for the weak number – and it basically boils down to statistical noise. February was unusually warm and pleasant weather for much of the country, resulting in a surge of hiring, especially for construction jobs. In March, the East Coast was hit by a blizzard during the time when researchers were gathering data. There will be revisions to the March numbers, so it is too early to call a trend.

Economic growth has been steadfastly sluggish, not matching the strong jobs numbers from January and February. So maybe it was just a reversion to the mean. The latest report will only add to the debate over whether so-called soft data, like stronger sentiment among businesses, is actually prompting companies to hire more workers.

March’s data suggests it is not. The weak headline number is also a stark reminder that it will be difficult to add significantly more new jobs to the economy at this late stage in the jobs recovery. It is highly unlikely that the US will start adding 300,000 to 400,000 new jobs each month. Not gonna happen.

The change in the jobs numbers really is the best single number to understand the state of the economy. While it has a lot of month-to-month statistical variance, it is a reliable indicator — especially if you average a few months together — of whether the economy is growing, contracting or stagnant.

Now, with the jobless rate at 4.5 percent, the binding constraint is the number of available workers; and that is a combination of demographics, skills, and pay. The demographics boil down to birthrates, death rates, retirement rates for the boomer generation, plus immigration.

The skills are constantly evolving and employers are constantly bemoaning the lack of skilled workers; yet as much as they complain, there has been a movement away from job training programs which were once the forte of unions. And the wages component – if wage growth were stronger, you would expect it to have the positive effect of pulling people on the bench into the labor force.

People who don’t see the value in working for $10 an hour might do so for $15. Wages are rising, but slowly, grudgingly. The Federal Reserve may think we are near full employment but wages do not confirm that stance.

Hourly earnings for the average American worker rose 0.2% to $26.14 an hour. And the increase in hourly pay over the past 12 months slipped to 2.7% from 2.8% in the prior month. Although wages are rising faster now compared with a few years ago, they still aren’t increasing as much as they normally do in periods of economic prosperity. In good times, wages tend to rise 3% to 4% a year.

The retail sector continued to contract, with department stores in the process of closing up to 3,500 stores . About 29,700 retail jobs were cut in March, and the clear majority were from department stores that sell everything from furniture to vegetables. Meanwhile, online retailers, the big competitors to physical stores, gained 2,200 jobs. Retail also lost 30,000 jobs in February, so we are seeing a trend develop.

And hiring in the construction industry almost came to a standstill, just 6,000 new jobs, after a huge gain in February. It was the second warmest February in the US since the 1890s. Meanwhile, March roared in like a lion, and the bad weather was likely a factor in hiring for many sectors, not just construction.

Most of the hiring was concentrated in white-collar professional jobs, with 56,000 jobs. Health care and education added 16,000. Mining, which includes oil production – added 11,000. Also, 11,000 new jobs in manufacturing. Manufacturing accounts for only 9 percent of employment but punches above its weight, because factory jobs pay considerably more than many service positions.

In recent months, blue-collar fields like manufacturing and construction have been very solid, a sharp contrast with late last year when service industries like education, business services and health led the way.

Private payrolls increased by 89,000 – which means government added 9,000 jobs. It also means there is a big disconnect between today’s report and Wednesday’s report on private job growth from ADP, which showed 263,000 new private sector jobs.

There are 1.69 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.80 million in February. This was the lowest number since 2008. The U6 unemployment rate dipped from 9.2% in February, down to 8.9%, the lowest level in almost 10 years.

U6 measures unemployed plus underutilized workers, or workers who are working part-time for economic reasons. Of course, many of those part-time workers would like full-time jobs – so this indicates that there is still slack in the labor market.

Part-time work is still a contentious alternative for many workers. There were some 5.6 million involuntary part-time workers in March 2017, little changed from the month before, but down from 6.4 million a year earlier, per the Bureau of Labor Statistics. That number is up from 4.5 million in November 2007, but off the peak of 8.6 million in September 2012.

These figures are almost entirely due to the inability of workers to find full-time jobs, leaving many workers to take or keep lower-paying jobs. And 54% of the growth in these involuntary part-time jobs between 2007 and 2015 were in retail, leisure and hospitality industries, per the Economic Policy Institute, a nonprofit think-tank in Washington, D.C.

The EPI report found a prolonged “structural shift toward more intensive use of part-time employment.” Aside from the frequent lack of sufficient work hours, these part-time workers must also “navigate unpredictable and/or variable hours,” with their work schedules varying week-to-week at a rate more than double that of full-time workers.

What’s more, part-time workers suffer from a lower rate of pay and benefits coverage than full-time workers, such as access to health insurance and paid time off. Compared to similar full-time workers, men working part-time earn 19% less and women working part-time earn 9% less per hour.

Involuntary part-time workers tend to earn less than their voluntary part-time counterparts. Approximately 40% of involuntary part-time workers report a total family income of less than $30,000, compared with just 18% of voluntary part-timers and 29% of the population.

Part-time workers who can’t find full-time jobs struggle to earn enough money to get by, even when they have multiple jobs. More than four out of every five involuntary part-time workers say it’s hard to save for retirement and about seven out of every 10 say they earn less money than they and their family need to get by and pay bills.

The persistence of such large numbers of involuntary part-time workers is an indicator of underlying weaknesses in the labor market, and the weak hand of labor in the labor market. Involuntary part-time workers are twice as likely as voluntary part-time workers to be forced to work on weekends and holidays, and to be given unfavorable work schedules and job assignments.

More than half of Americans (53%) are burned out and overworked, per a survey of more than 2,000 workers by Staples Advantage, a division of office supplier Staples. One reason for this exhaustion does not look like it will be changing anytime soon.

Some 34% of workers took a vacation last year, down from 42% the year before, according to a separate survey of more than 2,000 American adults released in February 2017 by Skift using Google Consumer Surveys. (Nearly 40% only took 10 days or less.)

One theory: Roughly one in four workers don’t get any paid vacation from their employers. Many are low-income workers and are the least able to afford to take an unpaid vacation day. Under The Fair Labor Standards Act, the US is also one of the few developed countries that does not require employers to provide paid time off.

The Labor Force Participation Rate was unchanged in March at 63.0%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics. The participation rate for workers age 25 to 54 (considered the prime working years because people are out of school and too young to retire) was unchanged in March at 81.7%.

Overall, the March jobs report was disappointing but hardly a disaster. Remember that over 8 years ago, the economy was hemorrhaging about 800,000 jobs per month. In March, we added 98,000, and the unemployment rate has been more than cut in half at 4.5%.

Financial Review

February Jobs Report

Sinclair Noe — March 10, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

Subscribe: iTunes | Android | RSS

DOW + 44 = 20,902
SPX + 7 = 2372
NAS + 22 = 5861
RUT + 5 = 1365
10 Y – .02 = 2.58%
OIL – .84 = 48.44
GOLD + 3.70 = 1205.50

The US added 235,000 new jobs in February, and the unemployment rate dropped to 4.7% from 4.8%. The consensus estimate was for about 210,000 new jobs.

The Bureau of Labor Stats said 238,000 new jobs were created in January instead of 227,000. December’s gain was trimmed to 155,000 from 157,000. In February, the year-over-year change was 2.35 million jobs. It was the 83rd straight month of job creation.

Over the past three months, including revisions announced today, monthly job growth has averaged 209,000, while year-over-year wage growth jumped up to 2.8 percent.

In February, average hourly earnings for private payrolls increased by 6 cents to $26.09, following a 5-cent increase in January. Over the year, average hourly earnings have risen by 71 cents, or 2.8 percent.

Hours worked was unchanged at 34.4 a week. The Labor Force Participation Rate increased slightly to 63.0% in February, indicating more people were in the labor pool. The U-6 unemployment rate, which measures unemployed workers, plus underutilized or part-time for economic reasons, dropped to 9.2% from 9.4%.

In February, construction employment increased by 58,000 (this was likely the result of a very warm month); employment in private educational services rose by 29,000; manufacturing added 28,000 jobs; health care employment rose by 27,000; employment in professional and business services continued to trend up in February, gaining 37,000 – the industry has added 597,000 jobs over the year; employment in mining increased by 8,000 in February; Government added 8,000 jobs, meaning private payrolls increased by 227,000 for the month.

Retail trade employment lost 26,000 jobs in February, following a gain of 40,000 in the prior month. First, retailers hired too many people for the holidays. Sales never came back in January and workers got pink slips in February. Sales have started off slow in the first quarter thanks to tax-refund delays.

As we reported yesterday, jobless claims are near a 44-year low. Recruiters and employers complain that qualified workers are scarce, pushing them to raise wages and strengthen benefits. Even lower-skill workers in some sectors are finding themselves in more demand.

Staffing agency Manpower North America’s annual survey of 2,200 hiring managers showed that 46 percent reported they had difficulty filling job vacancies in 2016, up from 32 percent in 2015.

Where you live and what you do for work can determine how bright your job prospects are. Those who reside in or near larger cities are receiving the highest gains, despite high housing costs. Large metropolitan counties have seen more than twice the annual wage growth of non-metropolitan areas, per the latest figures from the Bureau of Labor Statistics.

This jobs report marked the first full report for the Trump administration; the January report was based on data collected before the inauguration. White House press secretary Sean Spicer tweeted: “Great news for American workers: economy added 235,000 new jobs, unemployment rate drops to 4.7% in first report for @POTUS Trump.”

And while it was a good report, it is 3,000 fewer jobs than January. Technically, Spicer violated an obscure federal rule against federal officials touting public data too soon after the official release of the data; maybe Spicer can nominate that rule for deregulation.

The Drudge Report published a headline: “Great Again + 235,000”.  And then Trump retweeted the headline. But in the past Trump has called the same monthly report “phony” and a “hoax.” During a press conference in 2015, Trump said the unemployment rate, then at 5.1%, was phony and the real rate of unemployment was closer to 42%. In today’s press conference Spicer said Trump had told him, “They may have been phony in the past, but it’s very real now.”

And while the jobs report is an imperfect measure, it is the most accurate gauge of the labor market that we have. And while it is correct to credit or blame any given administration with specific numbers from the day of inauguration on, Trump did virtually nothing to affect the numbers.

By mid-February, Trump had done nothing that would have a direct impact on the economy. No changes to the tax code or federal spending had been enacted at that point. What about those jobs he saved at the Carrier air conditioning manufacturing plant? Well, that was great, but it was only about 1,000 jobs out of an economy with 146 million jobs – not enough to move the needle.

On the other hand, it is entirely plausible that increased consumer confidence and what some are calling animal spirits, is enough to persuade some business owners to start hiring; maybe animal spirits pushed home builders to hire 58,000 construction workers or maybe very warm weather across the country was enough; but attitudes still must be confirmed by current conditions.

And contrary to Trump’s claims that he inherited a mess, the economy, while far from perfect, is better. The 235,000 extra jobs that have Drudge and Trump so enthused are fewer than the results in four of the 12 months of 2016. The unemployment rate has hovered between 4.6 percent and 5 percent for 18 consecutive months, since September 2015.

Yes, President Trump deserves the credit for the economy’s performance from the day of his inauguration until the day he leaves office – as with all presidents. Trying to come up with a different way of measuring a president’s performance is likely to get too muddled. Yes, the economy is still benefiting from Obama’s presidency, but, these aren’t his numbers anymore.

The question is whether the numbers can be sustained. Can we see 300,000-plus new jobs per month? Can we see the unemployment rate drop to 4.5% or 4% or 3.5%? Where will we find qualified workers to fill those jobs of the future? Will employers finally have to pay for those qualified workers? Are the current numbers sustainable or is the economy at or near full employment?

Probably not, the recovery has been uneven and we should be able to add many more jobs. But can we add 2.35 million jobs or more in the next 12 months? And don’t forget, the Fed is tapping on the brakes.

The Federal Reserve has been wary of signs of wage-push inflation. Fed policy makers want to maintain control of inflation and so have begun to slowly raise rates, which makes borrowing and risk-taking more expensive. At the same time, the Fed wants to avoid putting the brakes on job hiring.

Today’s solid jobs report is the last major economic data before the Fed determines monetary policy at their FOMC meeting next Tuesday and Wednesday, and it appears to clear the way for an interest rate hike next week.

While hiring was robust and wage gains strong, the pace might not be fast enough to force the central bank to accelerate its timeline for future rate hikes from the current forecast of three. Dot plot expectations on rates for 2018 by Fed members could also tick higher.

For several years, back to Bernanke and including Yellen, the Fed has argued for fiscal stimulus. The Fed managed to goose Wall Street with Zero Interest Rate Policy and QE 1,2,3,4 – which avoided a meltdown, but it was never enough to get the economy firing on all cylinders. The economy is not a mess but it ain’t great.

Fiscal flow or government spending is flat year over year, and that’s causing economic growth to decelerate to zero. The forecast for first-quarter GDP growth is now down to 1.3%, and we’ll get that only if we’re lucky. It’ll probably be closer to zero.

And while Wall Street has been enjoying a dose of animal spirits, fiscal policy takes longer to sink in; tax cuts, deregulation, and infrastructure spending goes through committees and votes. We’ll be lucky to feel the impact in 18 months, if all goes smoothly; and there is no guarantee that things will go smoothly.

Meanwhile, the Fed is tapping the brakes. The transition from monetary policy as an economic driver to fiscal policy is difficult and can easily result in recession.

Rates will rise, prices will go up. If you have debt, you will pay more. If you want to buy something on credit, you will pay more, or you won’t buy it. Housing will become less affordable. Credit card purchases will be more expensive, you might want to keep that card in your wallet. A new car? Maybe not.

And that infrastructure spending the government is planning – it needs to be financed – and that financing will come at a higher rate, adding to the deficit. Treasury Secretary Steven Mnuchin sent letters to congressional leaders on Thursday asking them to raise the debt ceiling by midnight on March 15 to prevent the Treasury from needing to take “extraordinary measures” for the federal government to keep paying its bills.

This Sunday, at 2 AM, most of the nation will move its clocks forward one hour. Daylight Saving Time reminds us of the sun’s daily effect on our lives and tells us spring is on its way. A Department of Energy study found Daylight Saving, saves the nation about 1.3 billion kilowatt-hours, equal to the yearly energy used by more than 100,000 households.

However, not everyone agrees it offers energy saving benefits. Some studies claim the time switch saves energy on lighting but is surpassed by usage increases for heating and air-conditioning. In Arizona, we do not observe daylight-saving, we have plenty of sunshine in the summer and don’t need more.