Interesting note from Credit Suisse’s Neal Soss, commenting on last Friday’s jobs report:
Whiff of rebalancing in the labour and profit shares. Aggregate hours worked for January/February stand 3.0% annualized above Q4. But expenditure-side GDP inputs (such as today’s sharp widening in the trade deficit) are pointing to a weaker GDP than that (closer to 2%). This profile hints at a long-awaited “rebalancing” in the economy in favour of the hugely depressed labour share of GDP but away from the elevated profit share of GDP.
This is what we talked about on Saturday, that we’re seeing the opposite of the jobless recovery. We’re now seeing the GDP-less recovery*.
The GDP-less recovery was fantastic for investors — lots of profit, not much need to hire people — and so one has to wonder whether the opposite situation (decent labour gains, not great growth) will be so favourable.
Surely seeing strong jobs growth is unambiguously good, but whether there’s a bright line between jobs gains and gains in the market remains to be seen.
Obviously this question is now becoming a hot meme.
Goldman’s Jan Hatzius wrote about the same thing in his latest weekly note, observing that while the labour market is gaining traction, there’s no reason to think GDP will do so.
BTW: If you haven’t seen it, this chart showing “labour’s Share” of the national income is resoundingly near an all-time low. Any real rebalancing will have a long way to go, if in fact that occurs.
*Also we should note that economist Karl Smith is the first person we’ve seen use the word GDP-less recovery.