Welcome from the Contemporary Resort at Disney World (DIS) in Orlando, Florida where I am speaking at the Money Show this week. Last night, in celebration of the Money Show’s 35th anniversary, we attended a special dinner with guest speaker, Larry Kudlow. Many of you know that I was regularly on the old Kudlow & Cramer show. One of the highlights of my appearances was our lively debate on the then on trial Martha Stewart. In the fullness of time, I was on the right side of the trade and her namesake stock cratered.
During a question and answer session last evening, I asked Larry about unemployment. After all, on Friday we will receive the February Labor situation report from the Bureau of Labor Statistics. My question focused on the Obama Administration’s hyping of the unemployment rate which is down to 4.9%. From my perspective, as a classically trained economist from the Wharton School of Business; this is a deceptive measure of the true unemployment picture in this country.
His response was that he agreed that the headline unemployment rate did not truly reflect the labor situation as it did not include people who have dropped out of the labor force. Many of those have dropped out willingly as they choose to take government transfer payments (we now call them entitlements) rather than work for their money.
Rather he said to look at the U6 unemployment rate, which I agree with. The official unemployment rate which is the U3 rate is defined by the BLS as: total unemployed, as unemployment as a percent of the civilian labor force. That stands at 4.9% as of January.
The U6 rate is defined by BLS as: total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. That is a more robust and representative picture of unemployment which now stands at 9.9%.
According to BLS: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
To see how the U6 rate has fared from 1994 to 2016 see this chart. Needless to say, the picture is not pretty right now.
Kudlow also stated emphatically that people are happier when they work for money than when they don’t work for money. In other words, give them jobs, not handouts. He severely criticized the Obama Administration for dismantling the good results that the Clinton Administration made in putting people to work for entitlements rather than having them sit at home under the current administration.
As to the election, he did not openly support anyone. He did say that the establishment of both parties are getting sent a strong message by the electorate to “kick the bums out.” As to Donald Trump, he likes his ideas, especially on taxes but wishes that he would tone down his act a little. He feels that the Republican leadership is running scared and if they were smart would coalesce behind Trump should the party electorate (not the elite) selects him as their nominee. He also agreed with conventional wisdom that Trump is pulling in both disaffected Democrats and Republicans to his cause.
The markets had a Super Tuesday as did Donald Trump and Hillary Clinton. On Wednesday, a good ADP (ADP) report helped to keep stocks moving higher in a non-volatile session. Today should be a carbon copy of yesterday as we await Friday’s U3 and U6 numbers. I will attend presentations of several prominent investors and commentators such as Larry Kudlow, Steve Forbes and David Kotok
From Mickey and me; have a magical day.
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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long DIS — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
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