March 2010 Jobs Data Somewhat Disappointing in Real Terms, but Good Enough for Wall Street
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Today's data on employment was a bit disappointing versus expectations but it is probably perfect for Wall Street. Remember, in the perfect paradigm the economy shuffles along at a pace that is not that great for Main Street but perfect for the country's speculators... i.e. a level that allows Ben Bernanke to keep his easy money spigot on full. If economic data is too strong, it might even compel the Enabler in Chief to consider increasing rates.
I don't do a full analysis of the jobs data anymore (garbage in, garbage out) because this is among the most flawed data set there is coming from government. Even *if* you believe every word from this report, it is still revised sharply both a month from now and then a year from now - so it is almost surreal to watch Wall Street change the valuation of companies by the hundreds of billions the first Friday of each month based on a number that looks almost nothing like the 'real' number the governmenta will adjust to, a year hence. But that's the gambling hall we live in.
(as an aside, let me say I love having the economic data happen on a day equity markets are closed. If it were up to me all economic data would be released on Saturdays so people would have to... wait for it... read the data, and not just the headline, before acting on it. Instead we must make (as humans) decisions within 3 seconds and of course thousands of trades have been done by the computers in that same 3 seconds based on 1 phrase. It must be killing the gamblers speculators to not have been able to place bets based on a CNBC news flash)
Either way, it is what it is and we're stuck in the gambling hall so let's take a quick look. As I opined last month at this time:
...we are set up for a nice 4 months or so ahead on the labor front. As we've been saying for a few months, the public sector workforce (federal) is completely protected from job losses, and the state level is the beneficiary of stimuli after stimuli to offset loss of tax revenue. The private sector has been bled out for a few years straight ...
So even without the census workers coming online, you'd expect after 2+ years of epic job losses, to start seeing some gains due to conditions listed above. We can now expect 200-350K (maybe more?) type of gains in the next 3-4 months, with the census workers flooding in. (keep in mind the US needs 125,000 gains each month just to keep up with population growth)
I was wrong this month on the 200-350K (as reported by government statistics) but only because census hiring only came in at 48,000 when the expectation was around 100,000. That would of turned today's 162.000 gain to 214,000. Still below my estimate of 300,000. Charles Biderman of TrimTabs (who uses payroll tax data) estimated the job gains should of been closer to 280,000 - so lo and behold this number might actually be revised UP a year from now. [Dec 6, 2009: TrimTabs Continues to Dispute US Government Payroll Data]
The unemployment rate held steady at 9.7%; I don't even talk about this number since it has become a mirage of government adjustments. If you measure by standards we used pre early 1990s its roughly a 13.7% unemployment rate - the gap between pre 1990s estimates and current standards leads to about a 4% gulf. My analysis here [Apr 3, 2009: Real March Unemployment Rate Reaches 12.5%] [Oct 2, 2009: True September Unemployment in America Reaches Towards 14%; Our System is Broken]
Further, the labor force participation rate has hit post war lows (% of Americans working) - no one is sure where all these people "went" (some 3M workers), but they have simply dropped out of the labor force in huge swathes. We saw a slight uptick in this area this month to 64.9%. If and when those discouraged workers start flooding back into the job market, you actually could see a dichotomy of job gains while the unemployment rate rises in the months to come. And with the jobs numbers America will post in the next 3 months I expect many to pop their head out of wherever they are hiding and start pounding the pavement.
I saw today on
Wall Street Promotional TV CNBC that nearly 1 million census jobs will be created in April - June, of the 1.3M total. [Dec 20, 2009: NYT Economists See Lift in 2010 Census] I can't vouch for that but I've been searching for that data point online and have run into brick walls, so this is all we have. Hence if you straightline that it's about 325K a month for the next 3 month's from these temporary jobs, so the total number could certainly be even higher than I guessed last month - perhaps 400-500K job "creation". Just census jobs + birth death jobs alone should put us over 400K. This will create a 'false dawn' in my opinion. The talk at that point is that the Fed should be raising rates blah blah (which I assume the Fed will ignore). Then we will begin losing those census jobs in ensuing months. Which will take us to some sort of reality check around Halloween/November in the labor data, as the flush in/out of census jobs should have cleared.
With a lot of the other figures in today's data figments of imagination and judgement (rather than simply using tax payroll data), the only thing I really look closely at anymore are these items, since they seem like they are 'clean'(ish): hours worked, wages, and temporary workers.
Average workweek jumped to 34.0 from 33.8 previous month. That's a positive but last month's 33.8 had dropped from 33.9 hours; I assume partly due to weather. But overall we're inching our way up.
Wages fell by 0.1% after a 0.1% increase the previous month, and a 0.2% increase the month before that. Obviously that is a negative but since many Americans are living in homes "rent free", I guess wage gains are not that important in this day and age where making a mortgage payment is optional.
Temporary workers increased by 40,000*; last month was 48,000 and some of the month's before that was above 50,000. I am going to be very interested to look back in 3 years and see if temporary jobs are a bit of a false positive as more and more of Americans jobs are becoming temporary in nature. [Feb 16, 2010: USA Today - Use of Temps to Fill Jobs May No Longer Signal Permanent Hiring]
Some other highlights:
As has been the case during this entire recession the majority of job gains came in healthcare (the other area to hold up being government); the one sector that is impervious to recession. Ironically, a sector also bankrupting the country. As written in April 2008:
We have 2 huge beaurocracies - federal government and healthcare. To keep the government from going even more insolvent we should in theory be cutting jobs from these 2 white elephants. Healthcare costs spiral out of control and we hire more people - I believe healthcare is now 16% of GDP. But how do you cut costs without cutting jobs? Thats the other dark secret - most of our recent gains in jobs are either government or healthcare related.
So how do you fix the long term problems in either? Chicken or egg? They are sapping our national wealth away by their huge excesses/costs BUT they also provide the main job growth as well. As with everything my expectation is the "kick the can down the road" theory will continue - keep growing these massive bureaucracies (create more jobs and costs now) and let another generation pay for it.
Which puts us in a catch 22.... if you dare to make healthcare "efficient" you will lose millions of jobs. So this is one of our great ponzi schemes - the costs for healthcare are subsidized heavily by government so said costs are just added to the national debt, but allows for non stop growth in employment, even during the greatest recession of our lifetime.
(I) "Underemployment" continued to grow - now up to 16.9% versus 16.8% last month and 16.5% the month before. I was talking about this 2 years ago, before it became fashionable [Apr 2, 2008: The Underemployment Rate is Rising]
I've been struggling to think of a term for all these people who are struggling with part time work, working 2 jobs, or in contractor jobs where they get hired/fired on a daily whim ( I call them "nomad workers") This is a systematic and secular situation - nothing to do with 1 month's report or another. It is part and parcel with the erosion of living standards - and why so many in the middle and lower economic strata turn to home equity, credit cards, etc to just get by.
(II) The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) increased to 9.1 million in March. This is up from 8.8 million in February, and 8.3 million in January.
(III) The number of long-term unemployed (those jobless for 27 weeks and over) increased by 414,000 over the month to 6.5 million. In March, 44.1 percent of unemployed persons were jobless for 27 weeks or more.
(IV) The laughable birth/death model? .[Jan 27, 2008: Monthly Jobs Report & Birth Death Model] You know the one - the figure the government told us month after month was creating countless small business jobs across America (only to be revised away each March, long after the market reacted to the news?) [Feb 3, 2010: US to "Find" Extra 825,000 Unemployed this Friday after Birth / Death Model Revised] Showing yet another 81,000 jobs created (versus 97,000 in February). Small business remains "booming" as it has the past 3 years - at least until the revisions come.
In summary, according to government....
162,000 jobs gained
-48,000 temporary census
-81,000 "hocus pocus" birth death model jobs
We need +125,000 each month to keep up with population growth.
Millions of Americans continue to be shuffled into temporary work involuntarily. Millions of Americans are now what I'd call "structurally unemployed" - as their skill set has been offshored and/or become technologically obsolete. Wage growth is muted, if you don't work in the public sector. And the 2 areas of the labor force that are bankrupting America - government and healthcare - continue to be the country's main job drivers. Even though Wall Street has 3 days to absorb this 'under the surface' data all speculators care about is "+162,000", because anything that takes more than 8 milliseconds to absorb is too long. (This is called living inside The Matrix)
Conclusion? None of it matters - Ben Bernanke will keep rates low for an extended period of time. Everything else is just details. Buy stocks.
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