Perspectives Blog

Another look at disability and labor force participation

Zach Pandl, Portfolio Manager and Strategist | April 7, 2014

In searching for explanations for the steep decline in the U.S. labor force participation rate analysts have rightly stressed the importance of retiring baby boomers. Increase in disability share accounts for 20-25% of the drop in the labor force participation rate since 2007 (vs ~45% for retirements). We expect this shift to be essentially permanent, but growth in the disability share will also probably slow down. In searching for explanation…

Labor markets in the new digital age

Columbia Management, Investment Team | April 14, 2014

…2013 The rewards of this innovation fall disproportionately to business at first, as capital is substituted for labor particularly in low and middle-skill industries. In the last few decades, labor’s share of national income has continued to fall while the business share is rising—now at 13% a 60-year high. Exhibit 2 shows the income share of both wages and salaries, as well as the larger total employee compensation (which includes non-cash bene…

Snow job!

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…er showed weaknesses that cannot be easily dismissed. Participation rate continues to fall; in the last year the labor force shrunk by a half-million. Beyond unusual weather-related effects, discomforting trends continue to show stress in the labor markets. The Nonfarm Payroll report for December was certainly an outlier showing payrolls rose a mere 74k (far below consensus of 197k). The private sector added 87K, but the majority came from retai…

Yellen at Jackson Hole

Zach Pandl, Portfolio Manager and Strategist | August 25, 2014

…e less easy. Second, her extensive discussion of slack was more balanced around the structural factors affecting labor markets than her past remarks, in our view (see here for background). We would point to: (A) the comment that labor force dropouts related to disability and school enrollment are “clearly and importantly” affected by structural trends; (B) her view that “some portion” of the rise in involuntary part-time work could be structural;…

Slack and inflation

Zach Pandl, Portfolio Manager and Strategist | July 21, 2014

Today’s low unemployment rate indicates modest slack in labor market, which implies earlier Fed rate hikes and/or more inflation risk. The decline in labor force participation in recent years now looks mostly structural. Investors should remain cautious around U.S. interest rate risk despite a solid first half of 2014. Excerpted from Zach Pandl’s newest whitepaper Structural weakness in labor force participation means there is less slack in th…

A question for Jackson Hole

Zach Pandl, Portfolio Manager and Strategist | August 20, 2014

…ew Levin; see here). This idea has now made it into the official FOMC statement, which said in July, “a range of labor market indicators suggests that there remains significant underutilization of labor resources.” Leaving aside the merits of this argument (see here for our views), one important question remains unresolved: how exactly will policymakers adjust the funds rate and balance sheet in light of this additional labor market slack? Fed of…

Steady as she goes

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | April 7, 2014

The March labor market report was solid, with the overall private level of employment finally exceeding the pre-recession high. The Household Survey had the unemployment rate holding steady at 6.7%. A recurrent problem is the poor quality of job growth in terms of underemployment/part timers and wage growth. The March labor market report from the BLS can be characterized as solid and showing little weather effects and probably some catch-up fr…