Last Friday’s labor report was strong. As the year ended, unemployment fell to 5.6%, and total job creation at 2.952 million jobs for 2014 was the best since 1999.
While there was no headway made on the U-6 number, as people continued to leave the workforce, the gap remains the lowest since October 2008, which was just before the recession’s real job destruction took hold.
The creation of 2.95 million jobs in 2014 was a good number, but it doesn’t come close to, say, the number of jobs created after the 1981 recession. That said, the state of our economy is much different in 2015 than it was in 1981, more than 30 years ago.
Productivity gains alone show that it takes fewer people to make more widgets. But, many of the service jobs that might have existed 30 years ago just aren’t around any longer, as technology has replaced the need for, say, human operators or accounting clerks or even AAA map consultants, whose TripTiks have been replaced by the GPS in your phone.
And remember, our service economy is twice the size of our manufacturing economy. So, job growth may never reach the levels we saw in the pre-computer days.
It’s hard to sugar-coat Wednesday’s retail sales report for December. Yes, gasoline prices have fallen. So, overall sales didn’t rise as much as hoped for. But the 3.2% year-over-year increase is the lowest since February, and the three-month change was negative. August sales were a bright spot, to a point, but we already knew that. Year-over-year auto sales were up 8.6%, but that’s about average for the last nine months or ever since the polar vortex took its toll on the first quarter of 2014.
Alcoa Inc (AA) stock’s start to the Q4 earnings reporting season was as expected — a positive based on lower energy costs and increased demand from automakers for its core product, aluminum. No surprises there, but good numbers nonetheless.
KB Home (KBH) stock’s surprise on the revenue front was good news, as it shows that at least one company is making hay from the expansion of the housing market.
Volatility is up. Tuesday’s rocking market — which saw the Dow Jones Industrial Average swing 425 points, or 2.4% from the prior day’s close — was in the top 100 most volatile days since the market bottomed on Mar. 9, 2009. It was also only the eighth day to see a 2% or greater swing in the Dow in over a year. Get used to it.
Of course, despite all this volatility, both the Dow and S&P 500 are less than 5% below their all-time highs. The numbers are about the same for small stocks and mid-caps. Not a big deal and not even close to the 10% to 15% correction that I think we are overdue for.
Senior Editor Dan Wiener and Editor/Research Director Jeffrey DeMaso publish The Independent Adviser for Vanguard Investors, a monthly newsletter that keeps abreast of recent developments at Vanguard, and the annual FFSA Independent Guide to the Vanguard Funds.
