Sunday, August 11, 2013

Leisure and Hospitality

The following chart shows leisure and hospitality employment as a percentage of all nonfarm employment.

Click to enlarge.

This exponential trend shows no signs of stopping any time soon. Apparently this is where the jobs of the future will be. We keep cranking out college graduates with massive student debt though. Woohoo! Sigh.

The next chart shows leisure and hospitality earnings as a percentage of total private earnings. I'm only including production and nonsupervisory employees.

Click to enlarge.

Generally speaking, these jobs pay about 41% less. It's actually a bit worse than that. Average private earnings are being pulled down by these low paying jobs (more and more so as these jobs expand). Put another way, if leisure and hospitality jobs grow to 100% of employment (which they clearly won't), then leisure and hospitality jobs would pay the same as overall employment. They'd be one and the same thing.

The next chart shows how many years the typical leisure and hospitality production and nonsupervisory employee would have to work to buy a house with cash, assuming 2,000 hours worked per year and no other expenses (like interest on a mortgage loan, home maintenance, appliances, property taxes, income taxes, food, clothing, furniture, gasoline, new car purchases, auto maintenance, health care, and so on).

Click to enlarge.

As seen in the eyes of a leisure and hospitality employee, hello Housing Bubble II. Fantastic. This is where many of the jobs are being created and yet these employees cannot afford to make a median new home purchase. Hello?

The next chart shows how many hours the typical leisure and hospitality production and nonsupervisory employee would have to work to fill a 15 gallon gas tank (assuming no payroll taxes of any kind).

Click to enlarge.

4.6 hours! Is it any wonder that vehicle miles traveled per capita has peaked? This "new and improved" economy apparently requires workers to move very close to where they work. Unfortunately, the old economy was all about trapping people in the 'burbs.

Let's summarize. Leisure and hospitality is apparently the "growth" engine of the future. Production and nonsupervisory leisure and hospitality employees currently earn an average $11.76 per hour. They make roughly 41% less than the typical production and nonsupervisory employee. They have seen their real inflation adjusted earnings fall throughout most of this "recovery" (other than an initial dead cat bounce). They are working 4.6 hours to fill a 15 gallon gasoline tank (with additional hours to pay the payroll taxes on those earnings). They'd have to work 11.3 years to pay for the median house with cash (assuming no other expenses or taxes of any kind).

This is not investment advice. If it was, I'd suggest that the nearly 1.3 million leisure and hospitality employees added since the bottom should probably not be looking at new homes to purchase in the weeks ahead, especially if they have massive student debt. That's just the crazy opinion of a permabear though. What do I know?

Source Data:
St. Louis Fed: Leisure and Hospitality Employment Analysis
St. Louis Fed: Leisure and Hospitality Earnings Analysis
St. Louis Fed: Leisure and Hospitality Housing Analysis
St. Louis Fed: Leisure and Hospitality Gasoline Analysis

1 comment:

Stagflationary Mark said...

Roughly 20% of the jobs added since the bottom were leisure and hospitality jobs.

It all makes sense now. No wonder the stock market is doing so well.

Leading Economic Indicators imply stock market is a SURE thing again! The Fed has permanently put a stop to recessions again!


Code cracked!

No, no, no, no. I spoke to soon. I forgot to run it through the anagram machine. There may be a secret code within the secret code.


Speaking of sure things and/or sure lies...

``People have taken their eyes off the good news, the fact that the economy seems to be poised to reaccelerate, that earnings have been much better than expected,'' said Jack Caffrey, the New York-based equity strategist at JPMorgan Private Bank, which has more than $300 billion in client assets. ``This has been something of a gift. You have the chance to buy at particularly low valuations.''

I'm just not willing to take that kind of risk, even at particularly low valuations. Are you?

Before you answer I should probably let you in on a little secret. The quote is actually from July of 2007. ;)