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Avram Fisher, Founder & Portfolio Manager of Long Cast Advisers, is a former equity analyst at CSFB and BMO covering industrials and business services. He has prior experience in private equity; as a corporate governance analyst; as a writer; reporter and private investigator; and as a lifeguard and busboy (I still clear plates when my kids don't). This blog is an open book of ideas about patient investing and about starting up a small-cap focused RIA. It is part decision-diary, part investment observations and part general musings. Nothing on this blog is a solicitation for business nor a recommendation to buy or sell securities. It is simply a way to organize and share thoughts with an expanding audience of independent, patient and talented small cap investors. www.longcastadvisers.com

Friday, March 8, 2013

Unemployment Rate is Down, But Growth is Slowing;Is the Market Out Over its Skis?

Employment numbers are out today and as usual, headlines are focused on the improvement in the overall employment rate to 7.7%, down 20 basis points from last month and 60 basis points y/y.

Construction employment was particularly impressive, up 2.9% y/y (NSA), with strength in all major areas including Heavy Civil (+4.6%), Residential (+3.4%), Arch / Eng (+2%) and Non-Residential (+1.9%).

However, as the charts show below, growth rates are slowing for all but one major end market that uses constructed facilities. These end markets account for 85% of Total Non-Farm employment.

Slowing growth means employment trends appear unlikely to break through old highs from five years ago. With the market breaking through old highs but employment growth waning, I question whether Mr. Market is out over its skis on the continued strength of this recovery, particularly given the brevity of the US "Manufacturing Renaissance". 

Y/Y changes in employment by sector last 12-mos vs prior 12-mos (click to enlarge)

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