Slow jobs report 'Beginning to look like a trend'
The nation's disappointing job growth this summer - just 142,000 net new hires in September, versus predictions above 200,000 - is one sign that "weakness in the global economy is washing onto American shores," writes James Marple, senior economist at TD Bank, in a report to borrowers.
The nation's disappointing job growth this summer - just 142,000 net new hires in September, versus predictions above 200,000 - is one sign that "weakness in the global economy is washing onto American shores," writes James Marple, senior economist at TD Bank, in a report to borrowers.
It's not just factories, where hiring slipped to a five-year low. Professional-services and warehouse hiring were flat, too. Mining hires kept falling with the prices of metals and energy; wages were flat; hours were down a bit. And "deeply negative" revisions overall showed lower-than-projected hiring in August and July.
"This is beginning to look like a trend," Marple concludes, adding that the slowdown makes the Fed less likely to boost interest rates.
The September unemployment rate held firm at 5.1 percent, same as in August and the lowest since 2008, the Labor Department said Friday. Marple noted that a smaller proportion of Americans are working, as masses of baby boomers retire and aren't quickly replaced by young workers or immigrants: "Demographic pressures are beginning to impinge on job growth."
Economist William Dunkelberg, in a report for Boenning & Scattergood in West Conshohocken, looked at the same jobs report and called it "solid" for small businesses, while noting that they are still having a tough time finding workers at the wages they are willing to pay.
Another sign to consider: The market for selling "middle market" companies - sales of $10 million to $250 million - has "finally begun to crest," warns Andrew Greenberg, the Fairmount Partners investment banker who also runs deal-price data-collector GF Data in West Conshohocken.
Mergers and acquisitions of family-size firms are "usually a leading indicator," rising with profit expectations and job growth. And they fall when companies expect a slump in sales orders and buyers face a harder time raising funds, even if the overall economy is still growing, Greenberg said in an interview.
Cheap money is especially important to dealmakers, and it's been dirt-cheap since the recession, helping drive up deal valuations as the economy recovered.
Middle-market sale prices averaged 8.6 times earnings (before financial expenses) for companies with $100 million to $250 million in sales in the first half of this year, up from 7.5 times earnings two years earlier. (Companies in the $10 million to $100 million range also sold for higher prices this year, but the gain was smaller.)
Debt now pays for more than half the typical acquisition, as it did during the merger boom that ended in the 2008 recession. Debt-to-equity ratios are also rising for real estate developers' recent apartment and retail projects.
It's not that commercial banks are loosening up: Non-banks such as New York Life's Madison Capital, private business-development companies, and private-equity firms are pumping money into "financial" investment acquisitions, muscling aside "strategic" industrial buyers and inflating prices, Greenberg said.
The business-development companies, in particular, are backed by individual shareholders who spook easily and will likely retire with their profits when the market slows or interest rates start rising, making it tougher for business buyers to finance new deals, Greenberg concluded.
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