Unemployment fall, but is there a catch?
April unemployment data was released on Friday morning before the market opened. Expectations by forecasters suggested a 10 basis point rise month over month, but data given by the Bureau of Labor Statistics calculated a decrease in unemployment to 4.4 percent (Bureau of Labor Statistics). This is the lowest jobless rate since May 2007. Although unemployment keeps improving, other underlying factors suggest a couple of imperfections in the façade.
The labor force participation rate still seems to show little improvement compared to unemployment. Last month, the participation rate hovered at 62.9 percent, but trajectory over the past 10 years shows a declining workforce (Bureau of Labor Statistics).
Looking geographically at each state, rustbelt states are lagging behind the national average for unemployment. Ohio and Michigan’s unemployment rate is .70 percent above the national average at 5.1 percent (Bureau of Labor Statistics). Pennsylvania is above the national average by .40 percent (Bureau of Labor Statistics).
While participation and geographic disparities are lagging factors for unemployment, wages and hours worked continue to improve. Average hours worked per week stands at 34.4 hours and average wage per hour was $26.19/hour (Bureau of Labor Statistics). This is a year over year improvement for both month over month (Bureau of Labor Statistics).
1st Quarter Market Sales and Earnings
The past several weeks has been a major focus for both analysts and corporations. The majority of S&P 500 companies report earnings within a 3 week window every quarter. Using a market cap weighted average, earnings growth across domestic companies increased 3.94 percent year over year in the first quarter (Morningstar Direct). Weighted average sales growth increased 1.05 percent. Sectors with the greatest income growth were energy, up 19.33 percent, and healthcare, up 4.64 percent (Morningstar Direct). The communication services sector continues to struggle with a decrease in earnings of 1.45 percent (Morningstar Direct).
While earnings are growing at a steady pace, revenues continue marching close to the rate of inflation. The sector with the greatest increase in sales was energy, 4.99 percent (Morningstar Direct). Industrial sector revenue growth remained relatively flat year over year growing .33 percent (Morningstar Direct).
Compiled by the Camelot Portfolios Investment Committee
Darren Munn, CFA, Chief Investment Officer
Sarah Berndt, Portfolio Manager
Eric Kartman, Research
Drew Steinman, CPA, Trader/Research
Frank Echelmeyer, MBA, CKA®, Advisor Consultant
-for Broker/Dealer and RIA use only-
Bureau of Labor Statistics. "April Unemployement Rate." 2017. News Release.
Morningstar Direct. direct.morningstar.com. May 2017. 2017.
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