The Slowing Fast Food Economy

Posted On 07 Apr 2015
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We have regularly stated that the first Friday of the month’s NonFarm Payroll number is known to mark the beginning of the end of market direction.
Whilst we know this we have never really analyzed this on behalf of our readership.
This MACRO piece tries to do so by dissecting last Friday’s numbers.
Friday’s Non Farm Payroll was weak. It was very weak. Market expectation ranged from 245,000-251,000. The actual figure came in at 126,000. In other words only 126,000 people joined the labour force in March against an expectation which was nearly double. This is the lowest monthly increase since March 2013.
That is the headline number and the one everyone waits for. What is more interesting however is to try and understand the number.
There are three key elements.


The figure is a hard one to judge accurately and prior month’s figures are regularly updated and revised. Sometimes higher and sometimes lower. Unfortunately in this case both the January and February figures were revised lower.
January was revised from 239,000 to 201,000 and February from 295,000 to 264,000. This is a drop of 69,000 for those two months meaning that over the first quarter of 2015 an average of 197,000 jobs were created every month. This is before the revision to March’s number which we will get next month.
On the face of it this does not look too bad. Nearly 200,000 jobs created every month. However if we compare this to the prior 12 months in which an average of 269,000 jobs were created every month it is bad. It is more than 70,000 jobs per month bad.


The American labour market is upside down. What does this mean? It means that the young cannot and/or do not want to find work whilst the old can and do.
There are two main reasons for this. Firstly as long as interest rates are at zero those coming close to retirement find that their hard earned money does not yield them anything. They therefore have to continue working longer.
Secondly as long as the older folk stay in work, the less opportunity the young have and they are staying in college longer.
The following graph accurately and depressingly shows the situation.
America is currently a country where there are only jobs for old men, those 55 and older, who saw a 329,000 increase in jobs in the past month. Every other age group experienced a loss.
Put another way: since the start of 2007 only the 55 and older age group has seen job increases. Those 55 and younger are still 1.2 million jobs below the level they were at the end of 2007.


There are five main sectors which are currently driving the American job market. All of them are unfortunately the lowest paid:
  • Education and Health increased by 38,000.
  • Retail increased by 26,000.
  • Temporary workers increased by 11,000.
  • Leisure and Hospitality increased by 13,000.
The last category which has been the main driver of employment for the young over the last 3 years has been Food and Drinking Place Workers. Unfortunately this category witnessed a calamitous decline in March.
Americans may just have begun to realise that they cannot eat and drink their way out of the economic malaise they find themselves in.
There are two possible conclusions that can be drawn from this.
Firstly consumer purchasing power, the backbone of any mature economy is on the decline and secondly that obesity may be on the wane but not for health reasons.
Perhaps last Friday’s NonFarm Payroll figure may finally mark the beginning of the end of the risk on trade.


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