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 market takes center stage

Zach Pandl, Portfolio Manager and Strategist | October 15, 2013

Labor market issues have long taken a central role in Janet Yellen’s career. Remarks indicate Yellen views current labor market challenges as potentially very costly for the economy, and she sees a role for monetary policy in promoting recovery. Yellen’s nomination likely raises the bar for Fed tightening, as long as inflation remains low. When it comes to the current priorities for monetary policy, investors already know where Janet Yellen st…

Labor markets in the new digital age

Columbia Management, Investment Team | April 14, 2014

…echnological progress carries long-term benefits raising standards of living and boosting productivity; however, it also causes short-term dislocations and job loss for those displaced by automation. Turnover and churn in the labor market is a normal response to the disruptive change inherent in innovation—killing some jobs but also creating new ones in the process. But the effects of the new machine age have put downward pressure on wages at the…

A tale of two labor markets

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | November 11, 2013

The most recent reports from the Bureau of Labor Statistics give conflicting pictures of employment data. Despite payroll gains, the overall quality of hiring is generally poor and the labor force participation rate dropped. The economy appears to have weathered the government shutdown surprisingly well, but remains stuck near 2% growth. After all the angst and hand-wringing over the impact of the government shutdown on the October employment…

Snow job!

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

The Nonfarm Payroll report for December 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 adde…

Yellen at Jackson Hole

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

At last week’s Jackson Hole Symposium Janet Yellen was not the dove we thought we knew. Balanced remarks on labor market and cumulative progress toward recovery put her views close to center of FOMC. We see this as further confirmation that Fed leadership is increasingly comfortable with moving toward an exit from zero interest rates—likely by June 2015 or a bit sooner. I must have heard it on the radio recently, because Janet Yellen’s speech…

A question for Jackson Hole

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

…dance to investors at the moment. We hope to learn more at this week’s Jackson Hole conference. A consensus among Fed officials holds that the standard U3 unemployment rate—now at 6.2%—“considerably” understates slack in the labor market. As a result, policy should focus on broader measures like the U6 unemployment rate—which includes discouraged workers and part-time workers who would prefer full-time work—or statistical estimates of the total…