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…

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…

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…

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…

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…

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…