Real Income Growth Is In Decline
The labor market is one of the most important factors which affect the markets because it determines Fed policy and it determines personal income growth which is the money the consumer uses to make purchases. Of course, the consumer can borrow money, but people aren't qualified nor able to borrow money when they don't have a job. The reason leverage gets too high is because consumers assume they will keep their job; they take out debt, get fired, and then can't pay the loans back.
The latest data on real personal income growth shows 1.5% growth. This is a great summary of the economy as it peaked at 2.6% in December. The problem with this data it is updated as of March, so we need to look at other data to make forecasts. Delayed hard data does a great job of confirming trends, but it tells us little about the future. Even the latest jobs report, which I'll continue analyzing in this article, has more updated information.
Details Of The Jobs Report
As was shown in the ADP private sector payrolls report, the professional and business services industry added a great deal of jobs. The industry added 43,700 jobs in April. There were 10,300 temporary jobs added which was soft. Generally, when the labor market is overheating, the number of temporary workers added is heightened. Many temporary workers are even added as full-time workers. With the low wage growth, it doesn't appear the labor market is overheating which makes the weak temporary job creation not a surprise. Transportation added 0 jobs which is surprising considering how overheated the trucking industry has become. Wages will be increasing in this segment to solve the supply problem. I find this very interesting because this might be the last business cycle where trucking jobs are in demand since driverless cars and trucks could become utilized in the next 5-10 years. The higher truckers' wages grow, the more motivation firms have to advance the technology, just like how high oil prices encourage the advancement of electric cars.
