=========================
There’s a major divergence in the land of milk and honey.
Those of you who have known me for a long time, know that I’ve been saying for years that there is a structural problem in U.S. job markets. Whether a skills mismatch, a desirability mismatch, a geographical mismatch, or, most likely some combination of the 3, there’s a large (and growing) segment of the labor force that can’t find satisfactory, full time employment.
While employment (and the opportunity for employment) seems as high as its ever been, anecdotal evidence suggests that all is not as it seems on the job front. Indeed, it’s quite the opposite for many. And the new index introduced below adds empirical support to the anecdotal.
It's true, America remains on a record streak for job-creation… US unemployment remains at historic lows. And yet… many Americans still feel like they’re barely keeping their heads above water.
The last 30 years have seen the economy churn out more and more jobs that offer inadequate compensation… to say nothing of benefits. Over that same period the private sector has seen an overall reduction in the ability of many jobs to support households… in some cases even those with multiple jobholders.
According to the Brookings Institution, “There aren’t enough ‘good jobs’ to go around...” The organization proclaimed as much in a report earlier this month that found that 44% of all workers are low wage workers. These workers make a median pay of just $18,000 a year.
Try living on $1,500 dollars per month… alone… let alone if you have dependents.
A group of academics wants to get at this issue by popularizing a new economic metric called the Job Quality Index (JQI). The index goes beyond the usual labor market barometers which tend to focus almost exclusively on the quantity of employment.
Now to be sure, there have always been plenty of jobs that don’t pay well. I’ve actually had quite a few of them myself I'm dating myself, but anyone else remember when the Federal Minimum Wage was $3.35 per hour?
The creators of the JQI found when crafting the index that there’s now a growing number of low paying jobs relative to employment with above average pay.
"In 1990, the jobs were pretty much evenly divided" said Daniel Alpert, a founder of Westwood Capital and one of the creators of the index. In the process of running the numbers, he said, "We discovered that 63% of all jobs that were created since 1990 were low-wage, low-hour jobs [Emphasis mine]. That was a pretty stunning statistic."
Let’s look at that statement again…
63% of all jobs created since 1990 were low-wage, low-hour jobs.
Is it any wonder so many are struggling to stay afloat?
To calculate the JQI value, the creators split up the jobs created every month into those that pay above average and those that pay below average, and then divide the high paying jobs figure into the low. An index value below 100 means there are more lower-paying jobs relative to higher-paying jobs; a value above 100 means the opposite... that the high paying jobs exceed the low paying jobs. But good luck ever seeing that.
This month the JQI is just over 80, meaning there are 80 high paying jobs for every 100 low paying jobs. In 1990, there were 94 high paying jobs for every 100 low paying jobs.
Source:JobQualityIndex.com
That’s not a favorable long term trend.
Looking at the job landscape this way shows an aspect that’s not demonstrated by the headline numbers so often touted by the government such as the near 50 year low unemployment rate or the number of job openings (which has been higher than the number of unemployed people for a year and a half).
The creators of the JQI hope that academics, as well as investors and policy makers, become a regular audience for the index. Had it existed in 2018, they theorize, the Fed would perhaps not have made the mistake of raising interest rates.
That’s expecting a bit much I think, but if it helps at all, I’m for it.
Going forward, the index will be updated and released on the same day the Bureau of Labor Statistics releases monthly jobs figures.
So what does this all have to do with trading?
It should be fairly obvious, but in case you're a bit dense at the moment, short term trading can and should be a great side hustle to supplement to your income...even if your job is numerator of the JQI.