High and Tight on the Hiring Front

The Manpower survey tends to predict the BLS data, which means the economy's not slowing any time soon.
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A Man of Means by No Means

JACKSON HOLE, Wyo. -- It looks like labor markets will tighten even further through the end of the year.

Manpower

is a Milwaukee-based staffing-services firm that surveys the hiring intentions of more than 16,000 public and private employers every three months. It released the results of its fourth-quarter 1999 survey yesterday.

The Manpower column in the table above shows the year-on-year change in net hiring strength (or the percentage of firms reporting they will add to their permanent workforces next quarter less the percentage of firms reporting they will subtract from same). The first payrolls column in the table shows the year-on-year change in the

BLS

measure of nonfarm employment; the second shows the average quarterly increase in same.

Note how well the Manpower measure of employment tracks the year-on-year change in the BLS measure. Both peaked during late 1997/early 1998 and then continued down through the second quarter of this year, and the recent change of direction in the Manpower measure predicted the acceleration in nonfarm job growth.

Then note that the Manpower measure says that we can expect upcoming employment reports to deliver nothing but a heightened degree of strength.

There are three things to take away here.

The first is that the

unemployment rate

will continue to fall.

Why?

Cause it takes monthly employment increases as "little" as 160k to keep downward pressure on the unemployment rate.

The jobless rate has fallen during each of the last six years.

It will fall again this year.

And that is something the

Feds

don't want to see.

The second thing is that

compensation growth

will continue to accelerate.

The

Employment Cost Index

measure of compensation (wages and salaries) is

growing at a 3.6% year-on-year rate. The

employment-report

measure of compensation (average hourly earnings) is

growing at a 3.8% year-on-year rate. The

productivity-report

measure of compensation (which, unlike the first two measures, includes stock options) is

growing at a 4.3% year-on-year rate.

And what seems more likely in future? That these numbers will get smaller under a tighter labor markets scenario?

Or that they'll get bigger?

Your narrator votes the latter -- especially now that wage growth in the manufacturing sector, which has accelerated by almost three percentage points (to 4.2% from 1.6%) since it bottomed in December, is no longer squashing overall compensation growth.

And keep the following Fed

nugget in mind.

Should labor market conditions continue to tighten, there has to be some point at which the rise in nominal wages will start increasingly outpacing the gains in labor productivity, and prices inevitably will begin to accelerate.

The third thing is that the

economy

is unlikely to slow meaningfully anytime soon.

There will be no meaningful economic slowdown without a meaningful consumption slowdown.

There will be no meaningful consumption slowdown without a meaningful income slowdown.

There will be no meaningful income slowdown without a meaningful employment slowdown.

And there ain't no meaningful employment slowdown

afoot.

And that's the

facts, Jack.

Destination Bangor, Maine

(

Editor's Note: Seeing as the purchasing lackeys published their numbers early, ruining what would have been a great call, your narrator felt compelled to share with you his before-the-mistaken-release feelings about the NAPM data.

)

Hey. Check this out.

Your narrator tracks the price components of five regional purchasing indices: The

Philly

, the

Cincy

, the

Hillary

(formerly the

New York

), the

Milwaukee

and the

Chicago

.

The increases in the Hillary, the Milwaukee and the Chicago summed to 28 points in August.

Which is virtually identical to the total they turned in back in April.

When the price component of the

NAPM PMI

jumped 6.7 points.

Does that guarantee that the August NAPM numbers to be released tomorrow will hammer the market?

Hell no.

Seems like a cool little trade, though.

Side Dish

Best Murray movie?

Stripes.

Meatballs.

Rushmore.

Caddyshack.

Groundhog Day.