• Market Crumbs

Is The Jobs Market Worse Than Headline Data Suggests?

Image via PBS

When it comes to the U.S. jobs picture, the media and politicians usually focus on one statistic - the unemployment rate. It's simple to understand, easy to add to any statement about how well the economy is and recently, is quite low.

In October, the unemployment rate moved slightly higher to 3.6%, still near its lowest level in 50 years. Going back exactly ten years to October 2009, the unemployment rate hit its peak of 10.2%. Given the gains in the stock market and the decline in the unemployment rate over the last ten years, it's not surprising there's so much positive news about the U.S. jobs picture.

However, according to a recent report by The Brookings Institution, a staggering amount of American workers are earning wages that make it difficult to support themselves or their families. 53 million Americans between the ages of 18 to 64, accounting for 44% of all workers, currently qualify as "low-wage." This equates to a median hourly wage of $10.22 and median annual earnings of about $18,000.

Their report found over half of low-wage workers have levels of education indicating they will remain low-wage workers. 20 million workers aged 25-64 have a high school diploma or less, while seven million aged 18-24 are not in school and do not have a college degree. Researchers at the Federal Reserve believe there are not enough jobs paying decent wages for people without college degrees to escape low-wage work.

According to the U.S. Census Bureau, 11.8% of the population, or roughly 38.1 million people, live in poverty as of 2018. While the poverty rate has declined for four-consecutive years, last year was the first year the official poverty rate was significantly lower than the financial crisis.

After ten years of inflating the stock market through low rates and QE, creating record inequality in the process, the Fed is suddenly starting to act as if they care about those who are still not financially secure. Fed Chair Jerome Powell said to Congress recently "We want to remind ourselves that prosperity isn’t experienced in all communities. Low- and moderate-income communities in many cases are just starting to feel the benefits of this expansion." Even Minneapolis Fed President Neel Kashkari wants to "redistribute wealth," saying "monetary policy can play the kind of redistributing role once thought to be the preserve of elected officials."

While Americans having low-wage jobs is not a new concept, it's alarming how many are still living at or below the poverty line despite the media and politicians touting the strong jobs market and greatest economy ever. Even worse, the same policymakers who are driving up their cost of living now believe they have a solution to these issues, just like climate change.

Maybe when Kashkari travels the country visiting Walmart stores to tell people their cost of living isn't rising fast enough he can also tell low-wage Americans how he and the Fed will redistribute wealth in their favor. Leftover Crumbs

  • The buyout is canned. Goya Foods, the largest Hispanic-owned food company in the U.S., is walking away from a deal to be acquired by private equity firm Carlyle Group. The deal fell apart as Carlyle reportedly wanted to run the company, while Goya wanted to leave the founding family, which currently runs it, in place. "Carlyle felt they were not doing a great job with the business," a source familiar with Carlyle’s thinking said. "They needed to professionalize Goya" to get it ready for an IPO, a second source said.

  • This doesn't seem friendly. HP has responded to Xerox's request for "friendly" discussions regarding their acquisition offer by telling Xerox "We reiterate that we reject Xerox’s proposal as it significantly undervalues HP." HP's letter also said "There continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration and concerns regarding the prudence of the resulting outsized debt burden on the value of the combined company’s stock even if the financing were obtained." The stage is now set for Xerox to go hostile and take their offer directly to HP shareholders.

  • They want in on China. Amazon said it will open a pop-up store on Chinese e-commerce platform Pinduoduo through the end of the year. Earlier this year Amazon said it would stop operating a marketplace in China for domestic-selling merchants. "The Amazon Global Store pop-up store on Pinduoduo provides customers with a curated selection of about 1,000 overseas products with competitive prices, authenticity guarantee and convenient shipping," an Amazon statement read.

  • "Oh my f–king God." Tesla's unveiling of its Cyber Truck, which included a failed window demonstration, shaved $768 million off Elon Musk's net worth Friday as Tesla shares fell more than 6%. Musk tweeted the truck generated 200,000 orders so far, pointing to the fact that the demonstration may have been a well-executed publicity stunt. The Cybertruck will retail for just under $40,000 with production scheduled to begin in 2021.

  • They're putting a ring on it. LVMH has reportedly agreed to a deal to acquire American luxury jewelry retailer Tiffany & Co. for $135 a share, or $16.3 billion. The all-cash bid is $600 million higher than the previous offer from LVMH. The move would give LVMH a larger footprint into the luxury jewelry market, where Tiffany is popular among American and Asian consumers.