On usually the first Friday of every month, the Bureau of Labor Statistics (BLS) releases its estimate of net job creation (or destruction) for the nation as a whole.  The figures in the report are perhaps the most influential economic indicators in the world, including estimates on wage growth, unemployment, labor force, and industry job creation.

A couple of weeks after the national report is released, the BLS releases state level estimates.

Here’s what job creation through the first eight months of 2015 look like by state.

Job Creation by State in 2015 So Far

On top of the job creation geography are businesses headquartered in California.  Through the first eight months of 2015, net new jobs created is a little over 324K.  In second place is Florida at about 154K.   Rounding out the top five are New York at 93K, Washington at 66K, and Michigan at 63K.

On the other end of the job creation picture are states where businesses have been shedding jobs.  This group includes West Virginia (down 21K), North Dakota (down 10K), Oklahoma (down 7K), Kansas (down 6K), and Alaska (down 5K).

Growth in 2015

Why Is California on Top?

With such a high tax burden, a goofy regulatory environment, and a drought, how can California be on top?

Four reasons probably explain the results.  Unsurprisingly, the answer is probably more of “in spite of” rather than “because of” the deterrents to economic growth just mentioned.

First, California has the largest employment base, so job growth of 324K isn’t all that much.  Here’s a look at employment base by state.  If one converted the absolute job growth figures to a percentage basis, job growth in California wouldn’t look so great.

Employment by State

Second, the figures provide relatively little reliability on what the growth is in terms of part-time and full-time.  With the onset of Obamacare and the high cost of labor in California, a large chuck of the employment growth is part-time.

Third, when looking at the figures by industry, employment in retail and leisure & hospitality dominates, which are low-paying industries.

With these three as the background, it’s still relatively amazing that job growth in California continues to be number one with the internationalization of labor and the mobility of businesses.

What’s the real cause?  The best possible explanation is the red hot private equity/venture capital/Silicon Valley conditions.  The world’s labor supply has keen interest in the Bay area, and this has far flung dynamic effects on other industries in California.


Overall, job creation in California continues to lead the nation, with total net new jobs through the first eight months of 2015 at a little over 324K.  The 324K net new jobs is well ahead of second place Florida at about 154K.

Although lots of factors influence job creation, perhaps the largest driver of California’s job growth is the red hot venture capital/private equity/Silicon Valley connection, driving lots of investment and human capital to the drought-stricken state.


When you think of venture capital/private equity investing, what’s the first place that comes to mind? If you’re like most, you probably think of Silicon Valley’s tech companies or biotechnology in Massachusetts, as places with a strong venture capital base. You’d be right.  On an absolute dollar basis, venture capital in the United States is still the top place in the world, and by a large margin.  Here’s the graph to prove it.

Venture Capital Investments by Country, 2006 to 2013

Sometimes, though, it’s useful to look at the figures on a relative basis.  By doing this, it may give us an idea of where things are heading.  Here’s a map of venture capital investments by GDP. The green countries are the countries with high venture capital to GDP ratios, while the dark red countries are the countries with relatively little venture capital investments as a percentage of GDP.

Perhaps unsurprisingly to some, the United States is still close to the top, along with some northern European countries, Canada, South Africa, South Korea, and Israel.  But, who’s on top?  The table following the map has the answer.

Venture Capital Investments

Another Look at Venture Capital Investments as a Percentage of GDP

Here’s another look at venture capital investments as a percentage of GDP. Interestingly, on a percentage of GDP basis, venture capital investing in Israel is tops, at an amazing 27%.  Other members of the top 5 include United States (10%), South Korea and South Africa (6%), and Canada (5%).

On the other end, venture capital investing represents an incredibly small portion of GDP in Greece (0.01%), Italy (0.16%), Czech Republic (0.19%), Slovak Republic (0.23%), and Poland (0.23%).

Some of these countries are quite unsurprising.  It’s long been known that the young, just-entering-the-workforce Greek citizen has long had the desire to enter government or other bureaucratic employment.  Italy, although somewhat better, is not too much different.  This attitude, unsurprisingly, shows up in venture capital figures.  Perhaps the debt Greek debt crisis and slow economic growth is starting to change that mindset.

Table View of Venture Capital Investments as a Percentage of GDP

 Changes in Recent Years

With the previous discussion as the background, how have things changed over the past few years? Here’s a look at venture capital investment growth from 2007 to 2014.  The figure is set relative to 2007; essentially, every country’s venture capital investment to GDP ratio is set at 100 in 2007.  If the figure below is above 100, that means that venture capital to GDP grew since 2007.  If the figure is below 100, then venture capital to GDP declined since 2007. Fascinatingly, a different picture emerges.

The top graph represents where thing grew to or declined relative from 2007 to 2009.  The bottom graphic capture the period 2007 to 2014.  Both represent the venture capital to GDP ratio.

On top in 2009 was Russia at 114.3.  The 114.3 means that venture capital as a percentage of GDP was 14.3% more in 2009 than in 2007. In second place was Austria at 96.4, followed by Ireland at 89.6, Belgium at 87.5, and France at 83.5.

On the other end, venture capital as a percentage of GDP collapsed in Poland (down to 3.0), Hungary (12.1), Portugal (33.8), New Zealand (35.3), and Denmark (40.2).

Venture Capital, 2009

The 2014 picture looks somewhat different.  Hungary shifted to the top, at 296.9, followed by South Africa at 275.4, Russia at 231.5, and the United States at 154.5.Venture Capital, 2014


In looking at venture capital across countries, VC business headquartered in the United States continues to be a large portion of the global venture capital pie.  And yet when taking a slightly different view, growth in venture capital is growing quickly in Russia, South Africa, and select European countries.


Unless you’ve actively tried to avoid the conversation, if you work in the financial world, the topic of the  Fed raising rates in September is unavoidable. Everyone has an opinion, which range from relief that the Fed is actually doing something besides providing the spike to the party’s punch, to disgust that the Fed would consider a rate hike when most other countries’ central banks are becoming looser with their monetary policy.

A Look at the Fed’s Central Tenant

The Fed’s charge, often referred to as its dual mandate, is maximum employment and stable prices.  This vague mandate leaves considerable judgement to officials running the Federal Reserve, mainly the chairperson and members of the Open Market Committee.


Here’s a look at one side of the dual mandate.  It is the year-over-year growth in prices, often called inflation. Interestingly, it is fairly likely that prices may decline into negative territory in the coming months, meaning that, if the Fed raises rates in September, it may be raising rates during a period of brief deflation.

Professionals don’t usually assume that central bankers raise interest rates to eliminate deflation.  In general, it’s the other way around.



Here’s a look at the other component of the Fed’s dual mandate – employment. The graphic shows year-over-year growth in U.S. Employment at 2.09%, a healthy growth figure by recent experience.

What is interesting is that employment seems to have peaked.  If you look closely, employment growth peaked in February 2015 at 2.34%.  Employment growth is now on a decelerating trajectory. Other measures, including Average Hourly Earnings, the Unemployment Rate, the Labor Force Participation Rate, and others suggest the American labor market is on moderately good ground, but no where near bubble territory.

YY Growth in EmploymentWhat Are the Reasons?

With the observation that inflation fails to provide a reason for the Fed to tighten rates, and the labor market looking like it is peaking, what are the reasons the Fed would raise rates in September?  Why are they seemingly in a hurry?

Three reasons come to mind, and none of them have to do with inflation or employment.

First, Fed officials appear to be concerned about financial assets.  In particular, they continue to indicate that they think financial assets are overpriced.  One of the easiest ways to dampen financial asset price growth is to raise interest rates.

Second, Fed officials may be concerned about a recession on the horizon.  With international conditions on shaky ground, the Fed appears to be thinking that if they don’t raise rates now, they may not get a chance before the next recession rolls around.  And, the Fed can’t allow itself to be that passive; not raising rates between two recessions is about as weak of a central bank as it gets.

Third, politics.  Most everyone knows the Fed has a bias for Democratic presidents.  The Fed has yet to raise interest rates during President Obama’s tenure, an incredible length of time.  They are concerned that if they don’t do it soon, the Fed may loose a chance.  How would that look for the Fed to never raise rates during a Democratic president’s administration, the administration that nominated the sitting chairwoman?


In a little over a week, members of the Federal Reserve’s Open Market Committee will vote on whether to raise interest rates. With inflation possibly becoming deflation in September, and the American labor market in lukewarm conditions, one can reasonably ask why the Fed would want to raise interest rates.

The three potential triggers, interestingly, have little to do with the Fed’s two founding tenants – full-employment and minimizing inflation.


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