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Jobs Report: Was It That Bad?
By Dian L. Chu, Economic Forecasts & Opinions
A precipitous sell-off in the stock market took place last Friday (Chart 1) as the Labor Department’s May monthly report showed that job growth was weak in the private sector. The NYSE had to invoke “Rule 48″ again, marking the fifth time this year it has used the rare rule, which is intended to help smooth the opening following volatile futures action.
So the employment report disappointed, but was it really as bad as evidenced by such a disproportionate selloff?
Market Mis-Expectation
The answer is no, it only failed relative to an incredibly optimistic benchmark set by some economists and the media, not to mention the Obama administration who mismanaged expectations.
The headline numbers for May do suggest reason for optimism — employers added 431,000 jobs and the jobless rate fell to 9.7%, from 9.9 % in April. However, the majority of focus is fixated on that almost all of the growth came from the 411,000 temporary workers hired by the Census Bureau, and the private sector created 41,000 positions, far short of the over-optimistic expectations for 150,000 to 180,000 jobs.
Hype & Over-Reaction
One needs to bear in mind that the big picture for the employment report should be based upon the following rationale: Are we better off in terms of job losses compared to a year ago, six months, three months, last month etc.? In other words, are we trending in the right direction, from 500,000 job losses each month to finally being net positive in job gains?
There is a tendency on Wall Street and the world in general to overreact to news events, and economic reports are not immune to this phenomenon. This kind of knee-jerk reaction to every micro bit of news is part and parcel of the sensationalistic news media model that has been employed to drive ratings and sell advertising space.
This often distorts the true significance of news events, and in the case of the latest jobs report, the underlying positive trend that is taking place in the employment environment.
If “Employment” Were A Stock
If one was trading this stock called ‘Employment’ and we graphed the year over year numbers on a chart it would appear quite bullish. (Chart 2)
In fact, this graphed line would be a trend trader`s dream stock to trade as we are in a marked uptrend which is steadily rising at a right angle, and will probably remain bullish, putting in higher highs and higher lows, for the next five years.
Big Picture - Trending Up
So the big picture of the employment trend needs to be the key takeaway from the latest jobs report, and not the extreme short-term reactionary view represented by Friday`s selloff in the market.
Eventually Corporations will start to feel more confident in the economic recovery to start putting those profits to work in pursuing new growth opportunities which require more risk.
And these new growth opportunities will require droves of new employees which will further reinforce the positively trending employment reports for the next five years, thus reducing another jobs figure some economists tend to focus on - the number of Americans out of work for 27 or more weeks--which remained at historical high.
Selloff = Bargains
With interest rate likely to remain zero for the rest of the year as one benefit for US investors due to another over-hyped news scenario in the European sovereign deficit scare, and speculations of stimulus 2.0, there are some real bargains in the market which will be snapped up ahead of the next earnings cycle as corporate productivity and profits are quite robust right now in the business cycle.
Overall, the labor market is trending in the positive direction. Smart investors would focus on the fact that the US economy is improving vs. three months ago, and take the recent selloff as bargain hunting opportunity, particularly in the resource sector, to enhance your portfolio.
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"...In other words, are we trending in the right direction, from 500,000 job losses each month to finally being net positive in job gains?"
Isn't much of the "improvement" you're pointing to akin to celebrating when the air finally stops running out of a deflated ballon?
asiablues........I have read several of your posts.......I don't know maybe 3 and I am starting to think you're worth the read if only just to confirm a fade.
At first glance the work looked credible, but if recollection serves me properly I think you called the top of the oil market May 2nd with the article entitled Crude Oil To Break To New 52 Week High. Oil traded that day close to $87 and it did make it all the way to $67........starting May 3rd.
And nice call on Heating Oil and RBOB Gasoline too there dude, "Make no mistake, Heating Oil and RBOB Gasoline have both broken out last week as well and will be going higher through the next couple of months, with the RBOB contract leading the way for the CL (crude) and HO (heating oil) contracts."
And just so I am not accused of taking you out of context, "So overall, investors should remain bullish on crude oil for the next couple of months and take any significant sell-offs as entry points to establish long positions through the upward bias--the summer driving season."
I give up.
I did not take into account this fear en masse about the euro, Greece and now Hungary would tank almost everything imaginable. I believe euro and Europe will eventually be rescued and not be let collapsed as many have feared, although that does pose a significant challenge and drag to the global outlook.
Meanwhile, that does not change my long term bullish position on commodities, the resource sector, and emerging markets/China, which I've consistently maintained.
Thank you for the reply, but I believe the 'debt' you refer to as Greece to Hungary is correlated to FUNDAMENTALS as are jobs, jobs and jobs.
Quick question; who is stepping up to rescue Europe and the Euro? Would that be the Germans? Or the IMF which is primarily funded by the United States and Japan and relatively insolvent itself according to Bhutros Ghali as of last Thursday?
The reality is that markets do not trade and move on pure fundamentals. Many big players and sovereigns have big stakes in euro and I don't see them just sit by and let it crash.
The reality is that I think your work is well written, appreciate your point of view and agree that trading is complex; I just disagree with your positions, at least the ones I have read so far related to Oil, NFP and the effect of excessive debt.
It always seems when markets have no hope or unlimited hope it is exactly when the reversals occur. Just another risk associated with trading and have learned that the hard way.
If the Europeans balk at Geithner and an expansion of QE which looks to be the drift post G-20 that implies fiscal tightening and by extension financial responsibility not just for govt's, but also individual consumers.
Agreed RoRo. If I recall about 2 weeks ago, Europe tried the $1Trillion "save", and this is where it has gotten us. What do they do next? The $10Trillion "save", and we sink 10x faster?
It is absurd to think the Euro, bankrupt country next door to bankrupt country, will "save itself".
As I've been saying since 2007: "We must deflate, it is our destiny!" Might make a good movie.....
Your post made me think about what Earnest Hemingway wrote about bankruptcy and how it happens; at first gradually and then suddenly. Thanks.
The biggest BS I've read on the NFP report. The reaction actually mild for what going on and any forward thought process. The market should actually be lower than it was in march '09. The only thing that has driven any growth has been an increase in debt....and that is not a good thing it's a bad thing. There has been zero positive news...zero!! I'd love to debate that issue. Until they start eliminating debt and quit creating more nothing positive will result.
If you understand who is the real boss of this country, then you begin to understand everything
What has been obvious to many of us for a long time, is that things have to get worse before they can get better. For my part that is a direct consequence of just too much debt creating a classic debt deflation. When you have too much debt, government stimulus adds to the debt making the economy worse, rather than better, which is what we're seeing. In the US, stimulus flowed into the markets instead of stimulating loans into the general economy. Too many traders believed this was a real recovery. Even so, they needed reassurance, and this report needed to support the recovery theory. But it blew a big hole in it. Looking elsewhere there are signs of a double dip forming.
On top of that, Europe has embraced austerity, but what is austerity if not deflation? And you see China rolling over, which was another lynch pin in the recovery fantasy. Add an oil spill, world wide riots, volcanoes, N Korea threatening war, Israel picking a fight with Turkey, Hungary, Spain's banks rolling over, and you have what is called a sudden realization. Perhaps it was precipitated by the employment report, but this plunge is really about the last hopes turning to fears.
There is so much fast money looking for some kind of return over the short term, that there could a multitude of bounces. But I think this bear market rally has finally hit its top.
Obama's total cluelessness has been as big of a factor as anything. Even after the numbers were released he was too ignorant (and had too many stupid people around him) to see the problem. The man can not get out of campaign mode and into a leadership role. As Peter Schiff and others predicted, Obama and his administration will make the problem worse by cheerleading and not facing the graveness of the situation. I think history, over the long run, will not be kind to Obama. Historic, yes, historically pathetic.
http://news.bbc.co.uk/2/hi/politics/10250603.stm
Once again, Strong dollar will make big corporations' profit disappear, stock market smells this trent ahead of time. Beside all these noises, ZHers shall sense now that CNBC girls stop painting 'green shoot' everywhere and the reason I repeat my old post here: Soon Ben will find he has no other option but has to let stock go under to protect "In God We Trust".
Yo, asiablues, You workin for the Obama / CNBS spin team?
Hardly, zh'ers should know by now I take no political sides and am pro oil and business. I'm just looking at it from a contrarian view.
Enron is a buy!
Moron.
Was it that bad? Of course not, but don't say it too loud here or else you're going to get all the fleas jumping on you, even accuse you of promoting "sexual exploitation of women". Whenever you have something bad to say, they love you here, but whenever you say it's not that bad, they attack you with hatred and venom. Have a feeling a lot of tea crackpots lurk on ZH crying "we're mad as hell and we aren't going to take it any longer". Poor fools, they're powerless, and don't know what to do about it.
Leo, Why do you never respond to posts made by Tyler, whose ideas are in sync with most of the people you disagree with on here?! You have a response for everyone, why don't you respond to the constant stream of content from the site's actual owner???
I respond to everyone's posts, including Tyler's. Don't spend my day here reading all the comments. It's a dreary, rainy Sunday in Montreal, so I took advantage to catnap while watching a documentary on the Broad Street Bullies. There are seven parts to this. Here is part one:
Leo,
I don't get it...we are talking about a gov that just spent Trillions trying to get escape velocity (folks reaching to resume leverage, confidence to grow, consumers ready to invest in homes, cars, etc.)...I listen and look at LEI's and commonsense...both are saying the recovery is in a slowdown (not neccesarily a recession but slowing). Invertory rebuild is pretty much over and stimulus slowing. Dollar strengthening hurting exports and crimping earnings repatriating. I work for a large, industry leading corp and the top management are scared to death as we are US consumer facing and the feedback is not good. We continue to shed jobs / outsource / technologize (my word) or way to savings. No slowdown in leaning down and definitely no move to start hiring. Same is true for friends at other corps (Intel, Nike, MS, AT&T, you name it...none of the insiders are seeing what you are...Hiring...folks I talk to in all these corps see no job postings, not replacing lost workers, continued consolidation). Small biz new hiring surveys are weak. You are a smart guy and what are you seeing that the rest of us aren't understanding??? Not attacking but I truly want to know the other side of the coin. BTW - I'm an Ivy league portfolio kind of guy so I'm not vested in one outcome or another but as a history/ poli-sci double major who worked as an expat and now back in the states, I'm living one of the most prescient chapters in the since WW2 just trying to make sense of it all.
Ham- Leo doesn't live in our real world.
I had a great drafting/design biz for 10 yrs(3 more than usual cycle, due to MBSs) Grossed $100K for 10 yrs, it went to ZERO. Wife got cancer, I had to go back to my union grocery job of over 20 yrs ago.(Supervalu unit) I got LAID OFF twice in 13 months. The grocery biz sucks. They have cut all part-timers to 24 hrs/week. Laid off all rehires like me, after working my way back to journeyman wages/night crew, which is ball-busting hard hours. They are selling chains, selling stores. I've been in the other major chains. Same thing, it's CUT-THROAT. Paranoi rules, moral is in the toilet with So. Calif union contracts up in March 2011. My COBRA runs out July 31st.
Trust me, I live in the real world. Was diagnosed with Multiple Sclerosis 13 years ago. I know more than anyone that health is the most important thing. My prayers are with you and especially with your wife. God speed and best of luck with your employment prospects.
First, I hope your wife is on the recovery path and wish her the best. Second, I wish you luck in your job pursuits.
It is important that brave souls like you share these stories, this is the stuff the MSM would like us to think simply doesn't happen. Flowers and rainbows baby!
You make an astounding point about "paranoia". I have also noticed this, in New York, "paranoia central" for the office/hive worker, that feel is coming back in the air.
The paranoia is here to stay in the USA unfortunately. We are a country not mentally equipped to deal with what is current and what is ahead, not going to be pretty in my opinion. Let's hope it's ultimately good for the species....
You're asking for logic from a person who argues with insults. And ignores a lot of the detailed responses from critics (stuffs fingers in ears), and only responds toward the lowest common denominator - ad hominems.
I wouldn't go there with Leo, if you sink to that level, he'll beat you with experience.
I guess I'm not sure if Leo is just a proxy for the bullish POV to test the ZH'ers responses or if this is a real person w/ real insights that uber bears (like myself) are blind to see. The reason I use the Ivy league portfolio is I'd never go long again if I wasn't forced to based on the 200dma. I'd miss big rallies because I was looking too far out and not allowing for short or medium term upside. I'm trying to understand, if once again, I and other ZH'ers are too far ahead of ourselves w/ macro issues not allowing for micro bursts?
Ok, but what about the flip side? Micro bursts on downside far outweigh upside. In fact, any movement in speed and magnitude happens on the downside only --- as fast as this bear market rally has been, note how much faster market came down prior to the retracement. That's why I think being risk averse pays off in the long run. But that's not even the issue.
In particular, I think that the discussion between Leo and others on here has merged two things into one: the economy and the stock market. I think one of the things overlooked by both sides is that Even if the economy is recovering, the stock market could still be overvalued. Other permutations of this may hold true as well (economy getting worse, but stock market cheap).
So, my main issue is the leap in saying "economy is improving" and then saying "therefore stocks are going up". In fact,I would argue that by the virtue of the economy improving, stocks must go down.
No one knows the true extent of the recovery or lackthereof. But what I do know is that governments' intervention in the capital markets (via any means -- fiscal/monetary) will only make things worse. If economy does exhibit any recovery, it will be in spite of what the gov is doing, not as a result. Central planning cannot replace private enterprise, yet the government has tasked itself with "creating jobs", keeping "stable prices and low employment" levels, etc. There's a video on North Korea, where the clueless reporter constantly tries to point out how the citizens are brainwashed (http://news.bbc.co.uk/2/hi/programmes/newsnight/8701959.stm?ref=d), meanwhile naively thinking that she lives in free and enlightened a society by the virtue that she gets to eat at McDonalds and use Google.
Gross, unintelligent generalization.
This is the lowest form of insults. In the real world, it's when people whisper extra loudly so targets of the discussion hear the insult even when their 'not supposed to'. Yes, we're all fools, Leo, especially Tyler, the biggest fool of us all.
this is the lamest form of insults would be more accurate.
ostrich survival tactics are clearly acceptable to some, and not others.
ive said it before this is just modern day Darwinianism at work and theres a whole load of dumb-assed dinosaurs going extinct all too soon.
Pointing out the bare facts hardly constitutes "hatred and venom"--you didn't miss the b/d adjustment like the author, right Leo? And somehow the "poor fools" managed to miss the southern Europe bond death trap that you were cheerleading on a couple of months back.
Another cheerleader for the ponzi masters.
Hey we all want to be optimistic but from my observations the typical zerohedge reader is a realist and when the time comes to cheer we will.
Real unemployment is probably around 18-20% of course we will never know and the Ministry of Propoganda will never tell.
CNBC Lie Of the Day: "Eventually Corporations will start to feel more confident in the economic recovery to start putting those profits to work in pursuing new growth opportunities which require more risk.
And these new growth opportunities will require droves of new employees which will further reinforce the positively trending employment reports for the next five years, thus reducing another jobs figure some economists tend to focus on - the number of Americans out of work for 27 or more weeks--which remained at historical high."
This is evidence on the part of the writer of either absolute idiocy or maybe insanity, or complicity in pure, unadulterated propaganda.
I demand specificity as to the names of these "Corporations" who have these marvelous opportunities to pursue but are held back merely by timidity in the face of an obvious (?!?!) recovery. Ms. Chu is an apologist for a Pie-In-The-Sky-Recovery, and should be ashamed of herself.
Consumers? Out. Next new industry in the US that will result in all of this employment? Name it, please. Manufacturing? Are you kidding me? Green tech? Maybe, years from now. This is a lot of noise, and dangerous noise at that, since it fails to challenge and encourages current policy allowing Bernanke, Geithner, Summers et all to keep on rocking on behalf of their bankster masters.
Show no mercy when the time come for these guys to be called to the dock to account for their misadventures. Sorry, but I am losing my patience with these business-as-usual, buy the dips idiots.
Hate to add another negative but the suddenly strong dollar is making US exports to Europe very ugly (either cancelled orders or exporters accepting declining margins...either way, there goes top or bottom line) plus EU exporters products are suddenly very attractive to all other quarters (ie, US exports less attractive) of the world either crowding out US exports or negatively impacting margins. This will not help US exporters (ag, computer, machinery, planes, you name it) to be hiring. As if that aint bad enuf, US corps have been enjoying a weak dollar to bring their profits home and now this advantage is gone in a few weeks time. US corps are getting hurt at both ends...this is not good for US jobs (plus so much more stated above). Strong dollar (+ health care ?'s) will only make US jobs outsourcing pace increase. ACKKKK.
If you think Friday was precipitous, wait till you see what it looks like a week later.
I think some disappointment was because the government didn't try any harder to pump up the numbers. It's almost like they don't care enough to lie to us any more.
ouch.
The reason for the fall in the jobless rate is that the *participation rate* is the lowest in decades. This is not a cause for optimism.
Especially, as that "participation rate" is a fictional fantasy concocted to manipulate the spread.....
Well, yes the jobs report really was that bad (bottom-line is that we spent a metric fuckton of money we don't have over the last 18-months are are already starting to crap-out on the "new employment").
As to why the massive sell-off, well hopium and Benron Bucks is pretty much all that is holding the market up at these ludicrous values at present - so that minute anything intrudes on that fantasy I suppose we should expect to see some pretty vicious selling, no?
Um, and now for something completely different.
http://gawker.com/5556281/was-obama-in-the-1993-music-video-for-whoomp-t...
Was Barack Obama In the 1993 Music Video For 'Whoomp (There It Is)'?
Was Barack Obama In the 1993 Music Video For 'Whoomp (There It Is)'?Was Barack Obama In the 1993 Music Video For 'Whoomp (There It Is)'?Finally, a Barack Obama conspiracy theory for the rest of us! Everyone from Tea Partiers to hip hop message boards thinks Obama was an extra in the music video for Tag Team's single "Whoomp (There It Is)".
Before you do anything else, check out 1:01 of the music video for Tag Team's 1993 smash hit "Whoomp (There It Is)". A tipster sent in the video along with a note:
Barack [is] in the Tag Team "Whoomp there it is" video. Don't believe me? Judge for yourself.
We were highly skeptical, since "Judge for yourself" sounds like something from a multi-colored ALL CAPS email that proves Barack Obama is the Anti-Christ, as predicted in THE BIBLE. But we had to admit that the guy at 1:01 wearing shades and a Compton hat really does resemble Barack Obama, talking on a cell phone! Seriously! Judge for yourself!
http://cache.gawkerassets.com/assets/images/7/2010/06/obamavid.jpg
http://i48.tinypic.com/2ildbao.gif
http://cache.gawkerassets.com/assets/images/7/2010/06/500x_barack-obama-...
This is not the observation of just one random Internet weirdo. Other Internet weirdos have come to the same conclusion, including posters on the hip hop message board Tha Corner, the message board SomethingAwful and the Tea Party website Tennessee Sons of Liberty. The latter wrote: "This is an observation. This is not meant to be derogatory or inflammatory." Yeah, just randomly noticing that Obama was in this RAP video. But so what? As far as musical infractions go, Obama committed a much graver one by listing Sheryl Crow as one of his favorite acts.
But is it really Obam's flashy grin? Consider the evidence:
FOR
* It really really looks like him!
* Obama has a well-documented fondness for hip hop. He likes Kanye West and Ludacris.
* Obama has a history of hip hop cameos. In 2008, reports said he was featured on an upcoming Q-Tip track. Though Q-Tip ended up simply sampling one of his speeches.
* As one commenter on SomethingAwful noted: The man in the video is playing dominoes with his left hand. BARACK OBAMA IS ALSO LEFT HANDED!
* The video was released in 1993. Barack would have been around 31 when it was filmed, a year or two out of Harvard Law. Seems like something cool that our coolest, cigarette-smoking, hoops-shooting future president would do as an early 30-something.
AGAINST
* But, actually, by 1993, Obama was deeply involved in community activism in Chicago. In 1992, Obama famously helped boost voter turnout among blacks through his tireless organizing. How would Obama had the time to film this video? And why the hell would the director of Tag Team's video seek out a notable community organizer to play a domino player? Maybe they were buddies from Harvard or something.
* Also, Tag Team is from Atlanta. If Obama wanted to make his rap video debut, wouldn't he have chosen an early-90s act from his beloved Chicago? Maybe Da Brat, or Crucial Conflict? And he would obviously be wearing a Bulls hat—not a Compton one.
* Most of these conspiracy theorists base their observation on a low-quality YouTube version of the video. Take a look at this screenshot from a higher-quality video: Doesn't look much like him, actually. Also: earrings? Obama is cool, but not that cool.
*
Was Barack Obama In the 1993 Music Video For 'Whoomp (There It Is)'?
* Finally, if this was actually true, Sarah Palin would have already done five Facebook wall-posts about it, and Glenn Beck would have already run a weeklong special on the fact that our President appeared in a music video which appears to celebrate so-called "Party people."
Sorry, Internet, it's not Obama. But as far as conspiracy theories go, it's way better than that whole secret Muslim thing.
Yes.
No. It was worse.
Stocks always look cheap to those who dont understand just how volatile earnings can be. Sure many stocks are cheap assuming earnings maintain at the levels of last quarter. But look at some historical charts on earnings - up 20%, down 30%, up 50%, down 40% etc - you get the picture. Moreover - lets not forget we got a 70% rally which started when the economy and earnings were very very bad. Right? Hmmm.
Asia are you happy with what 2tr got you?
The government estimates it costs on average 100k to create a sustainable job, so where are those 20m jobs?
Keep your Prozac dosage elevated.
The worst thing about this month's report, and yes asiablues it was bad, was that we have nearly every commentator on the more mainstream financial news sources effervessing over how great this report would be. Combine that with a President and Vice President who aren't either smart enough to read the small print, or dumb enough to not understand the nuances of the report they were clearly provided in advance, and we get nothing that can make the market confident going foward until somebody can be shown to know what the F#@& is really going on out there. That is except for ZeroHedge readers who had a heads up some time back with a clear indication of the true nature of the employment picture by looking at how many $$ were actually being paid out, which of course painted a more accurate picture....Duh!! Way to go ZHr's for providing those of us looking for someone other than the talking head punditry to gain an actionable perspective.
Are you an acquaintance of Leo Kolivakis?
I hope his critics of "From Hysteresis to Hysteria?" are kind to you.
it's called a "business cycle." the consumer was loaded up on debt and the so called "banksters" decided to commit "hari-kari" rather than come clean. Uncle Sam to the rescue but insofar as the rest of the business community is concerned they are in a position to hire. insofar as this administration scares anyone with any investment horizon (or just plain old money) to death (and they do) there is a certain "terror alert" problem. of course fixing the problem of the "tar babies in the gulf" is more important as is trying to prevent a break out of a massive middle east conflaguration, neither of which seems to concern this administration which everyday is looking more and more like a Tom and Jerry rerun.
Looking at how they got the number down to 9.7% I think they are telling the survey people to push just a little harder to get that discouraged "I am not actively looking for work response".