Moneybeat: Jobless rate remains low

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

NICK EICHER, HOST: It's time now to talk business markets and the economy with financial analyst and advisor David Bahnson. David is head of the wealth management firm, the Bahnson group and he is here now. David, good morning.

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

EICHER: Okay, David, let's begin with the jobs report. Wow! American employers adding 300,000 new jobs in the month of March. That's better than expected. The headline unemployment rate ticked down a bit. So when you include the numbers from last week, David, the jobless rate has now remained below 4% for 26 months in a row. That is the longest streak since the 1960s. Really big numbers here.

BAHNSEN: Yeah, big, big numbers. Indeed. And it's, you know, really very difficult to say much negative. I mean, the one statistic I don't think people can get around, is that initial weekly jobless claims have been very, very low. And when people don't have a job in this country, and they have unemployment available, they take it, and people aren't taking it. So I don't know how you can interpret that as any other way than most people up and down the wage tiers that wants a job, have one. The labor participation force also ticked up a tiny bit, but it went from 62.5 to 62.7. I want it back in 67 or 68%. So we got a long way to go there. But overall, this was a great jobs report, Nick.

EICHER: So let me take a stab at negative. I was chatting with a colleague and looking deeper. You find the number one area of job growth was government. 71,000 of the 300,000 were government jobs.

BAHNSEN: Yeah, on a month over month basis has been a couple, but there are only a percent or two higher than the norm. You know, if 19% of the population is employed by city, local, and federal government, and 22% of new jobs are from government—those statistics are not exact, but I'm just approximating to make the point—you expect new job creation to, over a full year, kind of round out to about what the average of the whole workforce is. So that's picked up. I don't think they're super high quality jobs. But Nick, 39,000 jobs in March were construction. And so you do see a very healthy pickup in some of those blue collar private sector working class jobs as well.

EICHER: And then one other thing to mention just that leisure and hospitality finally snapped back to pre-pandemic levels. So that's a marker.

BAHNSEN: Yes. And again, those aren't real high paying jobs, either. But there's a lot of people that need those jobs, and they have definitely come back. And it's been a source of big restored job creation post COVID.

EICHER: All right, David, a couple of stories I'd like to hit this week. The Treasury Secretary is in China, Janet Yellen. What is she hoping to achieve there, do you think? It's not a quick trip. This is a five day trip. What is success on this?

BAHNSEN: You’re right, it is a five day trip. And they have not been very forthcoming as to what exactly the agenda is. Out of five days you expect there's going to be a lot of conversations about trade. I've tried to get a little bit deeper dive, and I have good sources in Treasury to understand a little more. But I think we're going to end up hearing after the trip, what they were looking to do if something good came out of it. But the fact that they haven't really announced much of an agenda, I believe is probably indicative that they're going there to try to get some concessions and then announce them later. But that they don't want to set expectations ahead of time because nothing is certain. And then ultimately, whether it ends up being a second term for Biden or a first term for a new administration. They most things that are on the table with U.S.-China economic and trade relations are very likely to take place in 2025. I do not expect much needle-moving activity in an election year.

EICHER: Okay, makes sense. But let me ask you what should Secretary Yellen be trying to achieve with a trip like this?

BAHNSEN: You're not having a conversation right now about the big picture long term. Like the best case—and you're asking David Bahnsen—the best case is for trying to agree to stop being a Communist country. Okay. I mean, that's not the agenda of this trip. It's trying to get concessions around we'll export certain chips to you guys. And we'll allow part of the chips to come to you for supply chain if you stop tariffing this and we stopped tariffing that. It's in the weeds of what they're going to allow to happen in a quid pro quo. That's all that is really on the table right now. Big picture, best case of improving that relationship with Communist China, that's not right now in discussion whatsoever.

EICHER: All right, David, and then could you address the proxy fight, the big corporate showdown at Disney last week. It seemed at least part of it had to do with culture issues, some of the bad content that Disney has been putting out. But the whole drama was expressed in highly technical corporate governance terms. Could you break that down a bit for us?

BAHNSEN: Well, it starts with them knowing what they're doing. Nelson Peltz is one of the most significant activist investors for 40 years now. He's had a career that goes back to the mid 1980s, and has had incredible success stories. But in this particular case, the first step is for anyone to care. The company is not going to care about your activist inclinations, unless you own a ton of shares. He not only owns a ton of shares, but he has the clout and the history of launching proxy fights. But then you need other shareholders to agree that there's a problem. And Disney's stock is down huge over the last couple years. And Nelson has a belief system of certain things that are not being done well. So even though he may not have won this proxy fight to get a couple people on the board, he definitely is on track, I think, to win the bigger war of getting some of the concessions he wants. But that's really what activism comes down to is having the muscle and the competence to affect change. And with a company as large as Disney, it's hard to do. But with an activist investor as good as Nelson, it's a lot easier to do.

EICHER: Okay, so this term proxy fight, that's probably our “Defining Terms” for this week. Explain what is a proxy fight.

BAHNSEN: Yeah, and what it's a reference to is shareholder votes. A publicly held company has a CEO who works for the company, and they have a board who are elected by the shareholders. But nothing changes the fact that the shareholders own the company. And there could be hundreds of millions of shares, and a CEO who's famous, and a board of directors that's impressive, but the shareholders own the company. Which means they elect the board of directors, and the board hires and fires things like a CEO. So a proxy is when you're trying to get resolutions for shareholders to vote on. And I've done some of this myself with different companies. But in addition to resolutions about policies, and things and strategies you want for the company, it most commonly refers to people who are going to be on the board. And if you want to go effect change in a company, there's no easier way to do it than getting a proxy fight for shareholders to vote on who will be on the board. And that's all we're talking about, but it's applied to corporate America.

EICHER: All right, David Bahnsen, founder, managing partner, and chief investment officer of the Bahnson group. David's latest book is titled Full-Time: Work and the Meaning of Life. And you can find out more about that book at fulltimebook.com. David, I hope you have a great week.

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

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