The Very Fair Sex... And Wage Disinflation

The Fair Sex has been a mystery and a delight to men. The effect of women on today’s happy financial news has been a mystery, too — only because no one has bothered to look at it.

You, dear reader, will be among the first to do so. You will see that the economy, and more particularly, low inflation in labor rates despite record employment, has been…well, at least in part, women’s work. As on so many other things, women have cast a very fair light on U.S. labor costs.

At a dinner party over the weekend, celebrating the 50th birthday of a man I knew only as Nicolas, I had the pleasure of being seated between two talkative females and across from another. First one began the conversation. She spoke of education, the wallpaper, the wretched state of her kitchen and the appalling marriage made by a friend’s son…all while scarcely taking a breath.

When she finally had to stop for air, the one on my right seized the opportunity. She was a reader of history, it emerged, and eager to talk about the Cathar heresy. Encouraging her, I mentioned that I had recently visited the Cathar area around Toulouse. She went on at length on the subject, without adding appreciably to my knowledge. The Cathars were not finished with until after the main course, at which point the woman opposite me opened up with all guns — that is to say, all the charm of which she was capable. But she was not in top form — suffering, I believe, from a cold — so while her charge was impressive — I think she spoke of the guest of honor’s family…or perhaps his wife, an entertaining lady of South American origin — her stamina was reduced by fever and she was forced to yield to the woman on my left again.

Thus was I able to get through the entire dinner party without saying much more than a monosyllable…”Oui…” “Non”…and occasionally imitating one of the Gallic facial expressions that are so meaningful and yet utterly ambiguous.

None of these women had jobs. They were bourgeois French women with children, completely engaged by the familial, Trollopian stories around them — births, marriages, education, houses, religion, social status. Perhaps they worked — once, while waiting to marry. But that was a long time ago.

By contrast, the latest numbers from America show an increasing number of women are in the workforce. Unemployment has hit a 30-year low — at 3.9%. But even that fails to do justice to the tremendous job creation machinery of the U.S. economy. Because, unlike 30 years ago, more women work. Not only do more people find work – – more people look for it, too.

In 1948, just over 27% of the workforce was female. Today, almost one out of every two jobs is held by the distaff half of the population. What’s more, women have moved into jobs of greater pay and authority. Over the last 10 years — according to a chart from economists Andrew Harless and James Medoff, reported in Grant’s (, the percentage of women in managerial ranks has risen from just over 45% to nearly 50%.

We have already speculated about the effect of women on stock prices. A study, reported here, showed that women and men trade stocks differently. In a pattern that may apply to other things in life, women make more money — but men work harder at it.

The study suggested that men exhibit more confidence in their judgement…and perhaps more impulsiveness in their selections. There is no reason to think that this characteristic would work only on the upside of the market, by the way. In a decline, women might be expected to be less prone to panic and perhaps more likely to stay on the sidelines when the market’s direction is less certain.

If this had been a prediction about how the market would act as the Nasdaq finally topped out, I would be boasting about it. Investors have not panicked — even though they should have. And volume has been low.

But what of the effect of women on the economy itself? The burden of the Harless-Medoff report is that women have helped create the conditions known as the “Goldilocks Economy” — that is, healthy growth without significant inflation.

In their view, the increasing feminization of the workplace has helped hold down unit labor costs, despite very high demand for labor.

“There is a rumor you may have heard concerning the relative pay of men and women,” Grants quotes the economists. “Our extensive experience with corporate personnel data…convinces us that the rumor is true: Women get paid less than men — which means lower unit labor costs, and therefore, less inflation for the economy as a whole…”

Women have been in the labor force for a long time. But the increasing numbers of women in managerial roles is, in the Harless-Medoff view, both decisive and terminal. “Inasmuch as women already make up about 50% of the managerial and professional employees,” they write, “we don’t expect that number to go much higher. Consequently, we don’t see much room for a continuing `gender-based disinflation.'”

“With women no longer entering the labor force in large numbers,” they continue, anticipating objection, if not outrage, “the supply side of the supply-and-demand equation is no longer working against women. And the pressure of the market to equalize pay, or to match pay with productivity, should, in the fullness of time, show its impact.”

Wherever they go, women change everything — from dinner conversation to the level of wage inflation.


Bill Bonner

Paris, France May 9, 2000

P.S. A business idea — After dinner, we retired to the grand salon for coffee. There I was faced with a serious man who had recently launched himself in the business of raising and marketing snails. That is, escargot.

“Most of today’s snails,” he told me, “come from Eastern Europe. But snails are cold-blooded. And they pick up whatever diseases, bugs, contaminants and heavy metals are in the soil. And there are a lot of them out there. And they don’t have any real controls on the quality. Many of the escargots that they ship are too old.”

“We’re producing a finer quality product,” he continued, “and we’ll be able to charge more for it.”

“Yeah,” I replied, eager to offer advice, “you should go on the Internet and sell it directly.”

“The Internet?” he responded, as if he had heard the word for the first time in his life.

“Better yet,” I went on, “set up as a B-to-B business and go public — before the Nasdaq crashes.”

*** Trading volume hit a low for the year yesterday. Everybody seems to be waiting for something — the Fed, Microsoft, the next statistics, who knows what…but it’s not a good portent for stock prices. Stocks rise on volume. They sink when volume shrinks.

*** The Dow managed a small increase yesterday. Just 25 points. The Nasdaq, meanwhile, almost seems to be realizing that the New Era is over. Nasdaq stocks fell 147 points, or 3.86%. Let’s see — that’s about $170 billion lost.

*** “Barron’s” has an article on Cisco in this week’s issue. The article is critical of the company’s enormous market cap…which is being blamed for the drop in CSCO stock yesterday. I have not yet read the article (I just walked into the office), but even without detailed analysis, it is clear that the CSCO price is loony. CSCO uses its stock to buy other companies…of which it has purchased 58. This provides CSCO with extra growth — which further pushes up its stock and allows it to buy even more companies. The stock goes higher and higher…as the business becomes less and less solid. The net effect is not much different from a pyramid scheme, with each subsequent stock buyer less and less likely to get his money back.

*** There were 1,223 stocks advancing yesterday, against 1,711 declining. And 70 stocks hit new highs; 65 hit new lows.

*** Gold was down $2.50. Early this month, Switzerland began selling its gold. The Swiss central bank sales are a milestone in the history of the yellow metal. Switzerland has traditionally held enough gold to back its currency — though the currency itself was not redeemable in the hard money. Now that it is divesting itself of gold — it is a sell signal for the metal? Or a major bottom?

*** Lumber has been going down — evidently anticipating a slump in construction.

*** Can an Old Economy stock paying a huge 22% dividend still deliver growth? “You bet,” says Lynn Carpenter “a 14% price increase since April first…” The Dow dropped 700 points — down 6% — in the same period.

Lynn has a special online report, “The Five Strongest Stocks for 2000,” with details on more of her selections. (Click “Free Articles)

*** George Soros said yesterday on the BBC that the euro risks “disintegration” as a currency. For whatever reason, the euro actually rebounded a little.

*** Richard Russell ( reports that the average price of a home in San Diego has reached $376,568…up 28.4% in the last 12 months.

*** Russell believes the Greenspan Fed has lost control of events. He likens the economy to a car parked on a hill. When the car suddenly begins to roll, Greenspan grabs at the bumper. But the car will only stop when it reaches the bottom of the hill.

*** A similar theme was voiced by Michael Belkin in “Strategic Investment” ( Except he thinks Greenspan doesn’t know how to drive. Belkin says the “Central Banks are like Three Blind Mice — recklessly inflating dangerous speculative bubbles through excessive monetary stimulation…” By attempting to smooth out the business cycle with interest rate cuts and credit subsides, Belkin believes, Greenspan has exaggerated an unsustainable deviation which could cause a crash and a depression.

*** “We’ve gone back over a century of data,” writes Belkin, “and discovered a tendency for the DJIA to revert to its long-term mean (200-week average) roughly every three years.” The longer and further the Dow deviates from the trendline, the worse the reversion that follows. Before ’29, for example, the DJIA rose above the 200-week average for a period of six years. The “average deviation from trend at bubble peaks in DJIA 1929, 1987, Nikkei 1989 and Hang Seng (Hong Kong) 1997 was 66% over 200-week average…The Nasdaq 100 recently reached 200% over its 200-week avarage.” Belkin says the Nasdaq has to fall 62% to get back to its 200-week average.

*** Also in “Strategic Investment,” Lord Rees-Mogg reports that the Chinese have taken up the study of English with great determination. There are more people studying English in China than in America, he tells us.

*** My mother got caught in the V-E parade in downtown Lathus yesterday. A small marching band led a group of about five veterans through town. The old men — including Mr. Mining — stood erect and wore their medals proudly. But the sparse crowd seemed barely aware of the occasion or the cause of their distinction — many were there to only look at the new farm equipment on display or, like my sons Henry and Edward, trying to win a gewgaw of some sort by popping balloons with a BB gun.

*** While yesterday marked the anniversary of the close of WWII in Europe, today marks one of its beginnings. On this day in 1936, Mussolini announced the annexation of Ethiopia.

*** The website “Beyond the Bull” added my daily letters under the banner “Tales from the Dark Side”…so we’ve added the not-too-far “Beyond the Bull” to our site, too. You’ll find “Beyond the Bull” listed with Our Partners on the Daily Reckoning website. Read at your own risk.

*** It was a beautiful holiday weekend. But the trip back into Paris was a trial. Even at midnight, it was bumper- to-bumper traffic and a serious jam up at the Porte d’Orleans.