By Zach Scheidt
This post Where Did 800,000 Invisible People Come From? appeared first on Daily Reckoning.
How do 800,000 Americans just “appear” out of thin air?
That’s the question investors are asking themselves after last week’s payroll report showed that the better part of a million new people joined the work force last month.
Where did these people come from?
And are there more “hidden” Americans that are going to show up in March, April or May?
Today, I want to explain to you how the 800,000 workers that no one is talking about in the mainstream media, will actually save the economy from the inflation pressures that so many investors are worried about.
The Hidden Gem in Friday’s Payroll Report
If you were paying attention to the financial news Friday, you know that the employment report for February was very strong.
For the month, the U.S. economy added an extra 313,000 jobs. We haven’t seen that many jobs added in one month since July of 2016.
Stocks moved sharply higher on the news. The Dow added more than 440 points. The Nasdaq was up more than 132 points. And the S&P 500 added 47.6 points. It was one of the strongest days the market has seen since first starting to pull back in February.
But wait a second… Why would stocks rally on a positive payroll report?
After all, last month this same report sent stocks into a tailspin after a strong boost in January employment. So what was different about this report that got investors excited?
The answer all boils down to wages.
In January, hourly wages grew by 2.9% sparking inflation fears. investors sold stocks and the market pulled back sharply because people were worried about inflation and the potential for higher interest rates. That’s what sent the market sharply lower.
But in February, hourly wages only grew by 2.6%. That may seem like a small difference. But the fact that wage inflation didn’t pick up gave investors a big sigh of relief!
And that’s where the 800,000 new workers comes into play…
An Expanding Workforce Offsets Inflation Fears
One of the biggest inflation concerns is that there simply aren’t enough workers available for the jobs that employers want to fill. And so investors worry that companies will have to pay higher and higher wages just to get employees to stay and fill those positions.
But the interesting twist from Friday’s report is that 800,000 Americans entered the job market.
These are primarily workers that were discouraged after the great recession and simply weren’t looking for a job. But now that the economy is doing better, the market is heading higher, and these workers are more optimistic about getting a job.
And so in February alone, an additional 800,000 workers entered the market, giving employers more options when hiring workers, and allowing these employers to hire without raising wages too much.
That’s great news for the market, because it means inflation shouldn’t pick up too quickly.
But if you’re like me, you’re probably wondering how many more workers are likely to enter the market in the months …read more
Source:: Daily Reckoning feed
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