As for upcoming employment reports, while the headline payroll numbers will continue to be important, and the unemployment rate should continue to slowly trend down with jobs gains, I’m also focusing on wage growth, hours worked and labor force participation changes. These figures will be vital to judging how the Fed is likely to react.”
I believe a decent amount of the recent decline in the labor force participation rate has to do with secular demographic factors, such as Baby Boomer retirements, as well as with individuals who have left the work force due to disability.
As a result, I don’t expect to see large improvements in participation numbers as the labor market continues to recover. Also, while the wage data in September’s jobs report was a bit disappointing, it’s important to keep in mind that wage pressure operates with a significant lag in the labor markets. So, while the jobs market may be tightening today, greater wage pressure may still be six-to-twelve months out.
For more on adjusting your fixed income portfolio in the current economic environment, check out my colleague Rob Kron’s post on three questions to ask your financial advisor regarding bond investing today.
Sources: BlackRock, Bloomberg.
Rick Rieder, Managing Director, is BlackRock’s Chief Investment Officer of Fundamental Fixed Income and Portfolio Manager of the BlackRock Strategic Income Opportunities Fund (BSIIX) and BlackRock Total Return Bond Fund (MAHQX.) He is a regular contributor to The Blog. You can find more of his posts here.