Strong Job Growth – It’s the “Summer of ’69” Again

by: , Managing Director, Economist, and Portfolio Manager, New York Life Investment Management; Amit Soni, CFA, Director and Portfolio Manager, New York Life Investment Management

The labor market continues to strengthen. After 91 straight months of job creation, the longest stretch of continuous job creation in United States history, the unemployment rate is at 3.9%, and we are beginning to see signs of labor market tightness.

The quit rate, which measures the number of workers who voluntarily leave their jobs for better opportunities, reached the previous cycle highs of 2005 last month.

Quit Rate Seasonally Adjusted

Source: Bloomberg, as of 2/28/18. Past performance is no guarantee of future results, which will vary.

Employers are getting creative. To attract workers, signing bonuses are on the rise, and some cities now offer to help pay student loans or buying a home. And, the search is expanding to the youngest section of the labor market, teenagers!

That’s right. Unemployment for 16-19 year-olds is now at 12.9%, and this coming July, the month when most teens work, we are likely to see the lowest midsummer rate since the summer of ‘69!

Unemployment Rate for 16-19 Year-Olds

Source: Bloomberg, as of 4/30/18. Past performance is no guarantee of future results, which will vary.

With tight labor markets and Baby Boomers retiring, employers are trying hard to bring more people back into the labor market.

Employee compensation is also trending up. When counting wages and salaries, as well as benefits and bonuses, the last two quarters showed the fastest growth in 10 years! And, workers in the 25-54 year age group are now returning to the labor market.

Employment Cost Index, Quarterly Growth (Annualized)

Source: Bloomberg, as of 3/31/18. Past performance is no guarantee of future results, which will vary. You cannot invest directly in an index.

Tight labor markets are generally a hint that we are entering the later stages of an economic expansion. However, with moderate inflation, the economy is still not showing signs of overheating. Meanwhile, improving worker compensation supports consumer spending.

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The Employment Cost Index (ECI) is a quarterly economic series detailing the changes in the costs of labor for businesses in the United States economy. The ECI is prepared by the Bureau of Labor Statistics (BLS), in the U.S. Department of Labor.

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Poul Kristensen, CFA

Managing Director, Economist, and Portfolio Manager, New York Life Investment Management

Poul Kristensen, CFA is Managing Director, Economist, and Portfolio Manager with New York Life Investment Management’s Multi Asset Solutions (MAS) team

Full Bio

Amit Soni, CFA

Director and Portfolio Manager, New York Life Investment Management

Amit Soni is a Director and Portfolio Manager in the Multi Asset Solutions (MAS) team at New York Life Investment Management. He focuses on quantitative and macro-economic investment research and portfolio management for the asset allocation

Full Bio

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