Moneybeat: Employment data and labor strikes

MARY REICHARD, HOST: Next up on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: It’s time to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. David’s head of the wealth management firm The Bahnsen Group, and he’s here now.

David, good morning!

DAVID BAHNSEN: Well, good morning, Nick, good to be with you.

EICHER: Well, surprisingly strong jobs report for September, David. Well beyond expectations: 254,000 jobs, the rate of unemployment ticking down a 10th. And overall, sector by sector, we see fairly broad based hiring with just this big exception, manufacturing, the only sector to regress.

BAHNSEN: Yeah, it was. And with upward revisions to the past couple months, there's been chatter about how some of these good jobs reports have been followed with downward revisions. This was you were seeing some of the past couple reports followed with upward revisions. And all of that is part of the challenges of seasonality and various accounting factors. It's funny, I was on Fox Business on Friday morning as the jobs report came out, giving commentary live and talking with the host on the show, and the Kamala Harris campaign tweeted out my comments, as if me just merely commenting that the jobs report being good was somehow some sort of a campaign boost for them. And of course, this is what happens with the over politicization of everything is objective. Economic data is trying to be used by one side negatively and another side positively. But you know, these jobs reports are really not campaign fodder either way, the downward pressure on unemployment should be the norm and is not a matter of public policy almost all the time. What is going on is that there are not a lot of openings and there's not a lot of workers, and then employers are very hesitant to terminate. I would also add employees are very hesitate to quit right now, which is very different than it was three years ago. The quits rate has dropped a lot. And so I think that there is a concern that, well, if we do let people go, we're not going to necessarily be able to replace them. And there's a concern that if someone were to quit, they're not necessarily going to be able to find another job. And so you're kind of stuck in the middle there, and that's a good spot to be the unemployment rate down to 4.1% long term. As you know, Nick and we've talked about dozens of times on this podcast, my more structural concern is for the labor participation force to grow. That isn't moving at all, but in the month by month by month data, most people that want a job in this country are able to get one.

EICHER: So I was going to ask, and I just can’t call it up. Recently there was a massive downward adjustment on jobs, and I wonder whether we’re going to have the same phenomenon here.

BAHNSEN: No, it wasn't from a single report. There was an aggregate that they do every year to update from seasonal factors, and there was a big downward revision over a whole period. In 2019, the same thing happened. It was, I think, 660,000 jobs then. And in the more recent one, it was 850,000. Goldman Sachs thinks that that downward revision is going to end up getting upward revised 500,000, and no one really knows. And I fully understand why people would be frustrated by the lumpiness of this data, but I've intensely studied how this stuff is computed, and you just don't have a choice if you're going to try to have a federally administered labor aggregation, because it's based on survey. And then you want to update it after you get census data. Surveys are not census, so they are lumpy along the way. And then when you get census, you have to true it up. And look, I'm all for finding juicy conspiracy theories whenever we can but this one doesn't add up. And as I pointed out, you know, for those wanting to make it about cahoots with the BLS, which has 2000 federal employees, and the Biden administration, you know this happened during the Trump administration, too, almost to the same number.

EICHER: So speaking of jobs, the very quick settlement of the longshoreman’s strike, settling with the union representing workers at east coast and gulf ports. Did that not have the seeds of serious damage, and it’s got to be good news—doesn’t it?—that we won’t be facing a big supply shock.

BAHNSEN: Well, the thing is, Nick, is it's hard to answer that because the unknowns in these what was essentially a hostage negotiation, and I only can say that because the head of the longshoreman union, fresh off of depositing his $950,000 a year annual salary paycheck, told us that this was a hostage negotiation, that they would shut down the economy if they had to to get what they wanted, and that while they asked for an 80% pay increase, and right now, appear to be settling for a 60% pay increase, the major issue was the demand that there be a permanent ban on ever technologizing and digitizing and some of the various improvements that Malaysia and other very significant global ports have already done. All at once this allows for sympathy for where technology could end up reducing the need for labor.

But really, if we are to think through this as Christians and as citizens, this is absolutely outrageous. The rent seeking and saying, I want to be contractually protected from anyone or anything that can ever do my job better or more efficiently. And had we ever done this with any other sector, we would be living in a primitive world, and so why not focus on “Well, we like retraining commitments, and we'd like certain severance commitments if there were to be,” you know, there's so many creative things you could do that don't inhibit advancement and progress, but to ask in a union negotiation to be protected against the progress of technology just strikes me as incredibly anti market, anti capitalistic and anti American. And yes, it could have gotten bigger. I think that my expectation is it would go about a week longer than it did. But, you know, there's still certain things lingering out there, but you're right, this thing settled up quicker. And obviously the longshoreman unions were not ignorant to the fact that it's an election season, and that gave them even more leverage. And I think that they used it to the hilt.

EICHER: So they did compromise on pay and chose to duck that technology issue. They put it off to January, right after the election, but might we be facing a ticking time bomb here on the tech upgrades to U.S. ports?

BAHNSEN: You're right. That has not been settled. So that's been punted, but they got the other components pushed out. And then I think there's sort of different questions as to the longshoreman union doesn't know who they'll be negotiating with in a few months, either. The country doesn't know. And you know, my particular guess is that with the Harris administration, be after the election is beyond them, they'll probably give them what they want. With the Trump administration, he definitely has a more pro union and pro labor disposition than has traditionally been associated with the right. However, Trump has never backed down on Right to Work states, and I pray he doesn't. If he does get a second term, I pray he'll hold his ground there for the sake of freedom in those states and workers who have them, but that's one of the big issues they want, is protection on the right to work state factor, and I don't know how the Trump administration will handle that. So there's a lot of TBDs still out there, Nick. 

EICHER: Alright, David Bahnsen is founder, managing partner, and chief investment officer of The Bahnsen Group.

If you aren’t subscribing to David’s regular market writing, you can find out more at Dividendcafe.com. It’s free and you can receive it in your inbox. Dividendcafe.com.

Thanks for your analysis this week, David, we’ll see you next time.

Have a great week!

BAHNSEN: Thanks so much, Nick. Great to be with you.

WORLD Radio transcripts are created on a rush deadline. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of WORLD Radio programming is the audio record.