Stocks ripped higher on Fed day, which caught me off guard. I just continue to be amazed by how the central bank is willing to let asset prices go higher with reckless abandon. Frankly, I am getting quite concerned on the structure of the Fed and its powerful role in the world. But, nevertheless, you will have to stay overweight equities with a domestic focus -- especially considering the earnings season clues from FedEx (FDX) and Intel (INTC) -- as a result of Fed policy. Institutions will continue to lever up so long as the status quo is the norm, which appears to be likely at least until later this year.
That said, Janet Yellen and her wickedly smart team always consider tons of economic data (as was outlined yesterday) in determining Fed policy. One figure they check closely on is the labor force participation rate. At 62.8% currently, the labor force participation rate is at its lowest level since 1978.
The labor market is improving for some sectors of the economy. For many others, however, there continue to be shortages of skilled labor. This sheds light on the changing aspects of the economy during this post-recession recovery.
Here are two sectors with worker shortages that Janet Yellen needs to know about:
- According to the World Clown Association, its membership has dropped by 28% since 2004. The trade association has cited a decline in the popularity of clowns, retirement of boomer era clowns and higher standards for a clown as reasons for the shortage. With earnings averaging $300 per birthday party, the World Clown Association notes that the financial rewards for the profession don't incentivize young people to join.
- Next up is the continued shortage in skilled truck drivers. Not at logistics companies like FedEx and UPS (UPS), but haulers of goods such as JB Hunt (JBHT), Arkansas Best (ABFS), and YRC Worldwide (YRCW). The U.S. Bureau of Labor has noted that the number of tractor, trailer and heavy truck drivers in the U.S is 1.6 million, and at least 330,000 more will be needed by 2020. At the core of the shortage are new federal regulations that went into effect in 2013 limiting a driver's workweek and requiring a mandatory 30-minute break during the first eight hours of a shift, as well as little desire by millennials to live a life on the road. On average, a new truck driver could earn anywhere from $37,000 to $40,000 a year, with long-term earnings power approaching $80,000. To lure in new talent, trucking owners have resorted to offering signing bonuses close to $3,000.
Normal recovery? You make the call.
Three Things FedEx Earnings Told Us
Lost in the sauce yesterday, FedEx earnings! Here are three things I saw in the numbers:
- +3% express package volume: supports the argument that the economy has bounced back nicely, maybe a bit more strongly than indicated in the recent retail sales report.
- +8% ground volume: businesses are operating in line to recent solid reads in manufacturing.
- Overall: good to see price increases stick and capex planned higher in the current fiscal year.