Wednesday, June 8, 2011

JP Morgan's Freoli: Show Me The Money

Data on Employer's Costs was released. We're back to 2007's levels in some metrics, but in real terms things certainly do not look to good.

Here are some charts and comment from JP Morgan's Mike Freoli:

Today's Q1 report on employer costs for employee compensation (ECEC) confirmed that labor income growth remains anemic, with total compensation -- wages and salaries plus benefits -- up only 1.2% over a year ago. Unlike the average hourly earnings measure in the employment report, the ECEC includes data on growth in employee benefits, and not surprisingly the trend there mirrors that seen in the hourly earnings numbers: paid benefits also increased only 1.2% over a year-ago. Within benefits, the weakest category has been bonuses and other supplemental pay, which declined 4.1% over a year-ago and is now back to 2007 levels. Benefits growth has been soft in other areas as well, for example, insurance benefits -- 95% of which are employer-provided health insurance costs -- are up only 1.9%, down from 4.0% as recently as last year. The main message of this report confirms and strengthens the conclusion from other more closely-followed gauges of labor income: compensation cost growth remains very weak, and a firming in underlying inflation pressures is still a distant concern.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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