A Commentary from a Major Brokerage Firm
On May 5, the following report was issued.
One should never put too much weight on any one month of employment data. These figures are subject to revision, and further revision. However, the recent employment reports have painted a consistent story. This was an unusually mild winter. As a consequence, the December-to-January decline in unadjusted payrolls was lower than usual and the February payroll gain was higher than usual. The seasonal adjustment turned these into outsized gains in January and February. The March and April payroll gains, in turn, were biased lower.
The Confusion of Information Overload
Now if you understand what all of this means, and you combine it with all of the other data that gets thrown at us daily, you are quite unusual. Add the monthly revision to the previous month’s estimates, and the picture gets a little further murky. But one has to take a higher view and not be immediately swayed by this or that number.
The Important Numbers
US unemployment reached a high of 9.9% during the downturn. It stayed stubbornly at that level and then started dropping (which is good news). It is now at 8.1%.
The change form 9.9% to 8.1% is very significant. One can argue the merits of the importance of these numbers until the cows come home, but the fact is that unemployment numbers, which are comparable to previous methods of accumulating this data, are dropping.
The economy is improving. We have said for a long time, that the US economy will improve, that this is a cycle like all other cycles, and that buying value and good management is a logical and profitable manner of investing.
An interesting feature in the Economist Magazine last week enlightens us as to what is important. The essential comment is that manufacturing is changing dramatically. The labor costs of manufacturing an iPod are only a small part of the overall cost. Whether the labor cost rises or falls a bit is becoming less and less relevant.
There are many stories about how Chinese labor costs are rising, and how labor costs in other countries are now lower than in China. There are stories about factories moving to the interior of China, or to Malaysia, or to Viet Nam.
The Real Story
The real story as set out so well this week in the Economist, is that the very nature of manufacturing is changing. Many products are now “printed” in computer software. Enormous and simplified assembly lines, such as what was created by Henry Ford, are now becoming less commonplace.
They are being replace by the ability, because of computer software and computer printing, to produce single items as cheaply per unit as producing enormous quantities on an old-fashioned assembly line.
If you look at the US employment numbers in some detail, a very interesting statistic emerges. Manufacturing jobs ARE INCREASING in the USA. Amazing isn’t it? Some jobs are staring to shift to where the technology and skilled workers exist, and away from low cost labour jurisdictions.
This trend will continue. The USA will gradually outpace the world, and investing in the good old US of A will again become fashionable.
A Record of Accuracy
Te Cymorfund blog has published a large amount of opinion in the last two years since inception. We have been remarkably accurate over that period, and suggest that you might wish to view some previous commentary. One of the consistent themes has been the position of the USA throughout this fiscal disaster.
The US is a good place to invest because of its inherent strengths. It will remain so.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.
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