Just How Ugly Is The Truth Of America's Unemployment: David Rosenberg Explains

Tyler Durden's picture

Over the past 3 days America has been battered by one after another apologist explaining just how good the employment data is if one strips out all the "bad", and how all the "bad" can and should be stripped out by all patriots, and attributed solely to bad weather. For those who are beyond sick and tired of listening to this tripe, here is David Rosenberg once again telling it how it is. In summary: "The data from the Household survey are truly insane. The labour force
has plunged an epic 764k in the past two months. The level of
unemployment has collapsed 1.2 million, which has never happened before.
People not counted in the labour force soared 753k in the past two
months. These numbers are simply off the charts and likely reflect
the throngs of unemployed people starting to lose their extended
benefits and no longer continuing their job search (for the two-thirds
of them not finding a new job). These folks either go on welfare or they
rely on their spouse or other family members or friends for support."



It is laughable that everyone believes the labour market in the U.S.A. is improving. Lost in the debate over the weather impact was the benchmark revision to 2010 — overstated by 215k or 24%. The U.S. economy generated 909k jobs last year, which works out to just under 76k per month. That is insignificant considering that the population grew around 160k per month. The level of U.S. employment today stands at 130.265 million, which is where it was in January 2003.

The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months.

These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support.

Meanwhile, it does look like real weekly earnings contracted in January for the third month in a row — that last occurred from April-June of 2009. Once the payroll tax cut effect fades and material cost pressures come to bear with a lag in margins the retail space will be squeezed hard.

Saving the day now are the payroll tax cuts but this effect wears off in Q2. Congress is about to cut spending and Bernanke doesn’t have a ton of support for QE2 from within the ranks. And the story ahead is one of profit margin squeeze more generally, though the market doesn’t yet see it.


We were asked about this on Friday because it was already known that it went from 16.7% to 16.1% — everyone wants to believe that this is a harbinger of labour market tightening. But it may be time for a reality check. The broad U-6 jobless rate measure was 8.8% when the recession began, was 9.0% when Bear Stearns failed, 10.5% when Fannie and Freddie imploded, 11.9% when AIG was taken over, Lehman failed and Merrill taken over, and 15.6% when the stock market hit its cycle low.

There’s also some seasonal adjustment quirks because of the massive increases in the raw unemployment data in January 2010 and January 2009 and the current seasonal factors are most sensitive to smoothing out what happened in the same month of the past two years. In January 2009, the U6 spiked 1.9% on a nonseasonally adjusted basis and in January 2010 it rose 0.9%. So the seasonal factors now were looking for an increase of 1.4% and instead it comes in at +0.7%, which on a raw basis is pretty normal for January, and it gets translated into a decline to 16.1% from 16.7%. Remember, the raw data showed an increase to 17.3% from 16.6%.

Nobody seemed to know what to do with the job data on Friday due to weather. It’s interesting that the storms seemed to have little effect on the ISMs or chain store sales, but everyone believes that just because a bunch of folks didn’t make it into the office in January the impact is probably hugely exaggerated. We saw an economist quoted on the front page of Investor’s Business Daily stating so arrogantly that he is “comfortable” with the view that the snow subtracted 100k from nonfarm payrolls in January. Even if true that would still be 138k, which is still abnormally weak for this stage of the cycle, not to mention still quite a bit below the post-ADP whispered estimates of +180k.

This U.S. labour market is still one sick puppy. The fact that 2.8 million Americans said they had given up on their job search in January was overshadowed by the debates surrounding the weather impact on the headline. Talk about being small-minded and totally myopic on the small picture. Then again, we have to admit that is what drives speculative rallies — the “noise” in the data. Of all the analysis we saw over the weekend, the only one that made any sense was the editorial by Bob Herbert on page A15 of the weekend NYT:

“The policy makers who rely on the data zealots are just as detached from the real world of real people. They’re always promising in the most earnest tones imaginable to do something about employment, to ease an awful squeeze on the middle class (policy makers never talk about the poor), to reform education, and so on.

They say those things because they have to. But they are far more obsessed with the numbers than they are with the struggles and suffering of the real people. You won’t hear policy makers acknowledging that the unemployment numbers would be much worse if not for the millions of people who have left the work force over the past few years. What happened to those folks? How are they and their families faring.

The policy makers don’t tell us that most of the new jobs being created in such meager numbers are, in fact, poor ones, with lousy pay and few or no benefits. What we hear is what the data zealots pump out week after week, that the market is up, retail sales are strong, Wall Street salaries and bonuses are streaking, as always, to the moon, and that businesses are sitting on mountains of cash. So all must be right with the world.

Jobs? Well, the less said the better

What’s really happening, of course, is the same thing that’s been happening in this country for the longest time — the folks at the top are doing fabulously well and they are not interested in the least in spreading the wealth around.

The people running the country — the ones with the real clout, whether Democrats or Republicans — are all part of this power elite. Ordinary people may be struggling, but both the Obama administration and the Republican Party leadership are down on their knees, slavishly kissing the rings of the financial and corporate kingpins.”

Look, these are just excerpts for your convenience. The whole column just oozes with the truth — the true state of the labour market that is widely dismissed.

As a trusted and loyal reader notified us on Friday after the data were released and the consensus view out of the bond market was how reflationary this labour market report was, the civilian population rose 1.872 million last year. At the same time, the labour force fell 167k. Those not in the labour force soared 2.094 million. Just in January, we saw 319,000 people drop out of the work force. These numbers are incredible. This is a highly dysfunctional labour market. People are falling through the cracks at an alarming rate as they come off their extended jobless benefits — “doubling up” as Bob Hebert put it — and we have traders and economists debating the weather effects of a nonfarm payroll data-point that will most assuredly get revised no fewer than three times in the next couple of years.
It’s incredible how the masses of pundits have responded to the data.
Real labour compensation contracted at a 0.6% annual rate in Q4, and since the recession technically ended, it has shrunk in four of the last six quarters. How is this the hallmark of a well functioning labour market? We can see now how this environment has been wonderful for equities:

  • The Chinese government stimulates to the effect of 13% of GDP in late 2008 and this spills over globally.
  • The T.A.R.P. money is distributed around the financial and industrial sector in the U.S.A.
  • Bank shares are bought by the Treasury; ditto for shares of auto companies.
  • Accounting rules are changed so the banks can start showing a profit.
  • The Fed radically steepens the yield curve by cutting rates to zero and then promotes financial sector profitability by purchasing mortgages en masse. The mantra is that the Fed and Treasury saved us from a Depression.
  • The Fed moves to expand its balance sheet even more in November but unofficially announces the extension in late August.
  • The U.S. government embarks on a spending spree in early 2009 and runs up a record debt bill and then extends the stimulus in late 2010.

So the corporate sector has been receiving tremendous support from the government. All the while, the acute anxiety among the working class has allowed companies to continuously cut unit labour costs, which in turn has prompted a V-shaped recovery in profit margins.

Now what about the top-line? We just saw in those Q4 productivity numbers that came out for Q4 that the price deflator for the nonfarm business sector actually fell at a 0.9% annual rate. But, you see, companies don’t have to worry about that — they can afford to keep prices down because not only can they cut labour costs quite easily in this environment, but the federal government is ensuring that people still get paid even if it’s not from their employer. We have a situation now where a record near-20% of total personal income is coming in the form of government assistance, whether that be in Social Security, food stamps, or the unprecedented expansion of jobless benefits.

But to be calling for a labour market recovery when real compensation per hour is declining at a 0.6% annual rate is just slightly a case of looking at the situation through rose-coloured glasses. Just a tad.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
The Axe's picture

The markets tell another story....strength is off the grid.  Bonds higher--growth. copper higher growth..stocks higher growth....I can't listen to DR....markets tell another story..he has to be wrong...

d00daa's picture

Markets tell another story, until they don't.


But maybe you're right.  Maybe this time it's different.

Mr Lennon Hendrix's picture

You would have been a hoot in Weimar.

Problem Is's picture

DRosenberg Is Correct
Your markets are all POMO, ZIRP and QE 1,2, ..., n

if's picture

What was the Nasdaq telling you at +5k back in 2000 ?

fredquimby's picture

Personally, I think MoneyMcBags translation of the jobs number is far superior!!


The most important point is that these numbers are SEASONALLY FUCKING ADJUSTED (bolding intentional, because, yes Money McBags is yelling) which means that they should TAKE IN TO ACCOUNT THE WEATHER because, you know, THAT IS THE WHOLE FUCKING POINT OF SEASONALLY ADJUSTING SOMETHING.  Now look, Money McBags is no Willard Scott (and not just because he doesn’t have a GMILF fetish), but as far as he can tell, the weather this past January wasn’t any kind of anomaly (like Carrot Top’s career), it was just kind of an average January, or at least within one standard deviation of a normal January.  So given that, the seasonal adjustment should have seasonally adjusted for the fucking weather and thus this huge miss shouldn’t have been caused by a little snow.

Cindy_Dies_In_The_End's picture

Let Them Eat Hope.


Fight The Future.

RobotTrader's picture

Rosenberg always does an excellent analysis.

If he had focused all that intellect, time, and energy into watching the tape, he would have made a fortune being long stocks since the 2009 bottom.

lieutenantjohnchard's picture

so i presume you have made a fortune. where did you retire to?

Hephasteus's picture

Someplace where the gains aren't wiped out by a monetising global reserve currency.

A pygmy tribe in new guinea.

homersimpson's picture

Maybe if you focused all your intellect, time, and energy into  posting top ticking charts when they only support your viewpoint, you could be the next Robert Kiyosaki of stock market investing.

lieutenantjohnchard's picture

homer, that's his/her/robotdouche's modus operandi. he doesn't believe his own posts or writing, nor should anybody else. today he mocks rosie's skepticism. two weeks ago the douche was bearish, now he's bullish. tomorrow he'll be - well, who know, especially not him/her.

remember, he's 30% invested for all his bullishness in such stellar stocks as - wait for it - vz and hd. wow! the creativity of hours and hours of analysis and he comes up with the grand idea to invest in hd and vz.

topcallingtroll's picture

You pussies have never seen a recession until you have seen a third world recession. We got food stamps, homeless shelters, and when is the last time you saw a street urchin in america? 19th century? Life is good! At least you buggers arent pushing an ice cream cart or eating ruminant feedstocks. We can hedonic down a lot further than this. Cat food and dog food really arent that bad if i remember correctly as a curious kid.

merehuman's picture

hey, troll it must not have touched your door yet. I see people losing all they woerked for. I see folks divorcing, dying and living in tents. I see a slower  death by pieces as some of us have to give up their pets. Death by a thousand cuts for us Little people as we lose hope, knowing there  aint a damn thing we can do about it.

Help your neighbors, find strenght in union and share the sacrifice and the wealth, cause in the end after all is said and done , its each other we really need and should love and treasure.

HarryWanger's picture

Seems like Rosie has been grasping at straws trying to explain over the past few days why this was not a good report. We get it, Rosie. Apparently, the rest of the investment community sees it a different way. There were several unbiased opinions regarding the report and most conceded it was indeed a very good report. So, maybe it's time to move on to something else, like buying stocks.

morph's picture

By the rest of the investment community, you mean the FED.

bob_dabolina's picture

He does. And the Fed has gottin' it wrong for the last 30 years (really the last 100 years, but in particular they have really fucked up the last 3 decades)

Think about this. In 08 every major bank failed in reality. Had it not been for the tax payer the banking system epically failed. Let that ferment. That is how bad the Fed did. F -

iDealMeat's picture

Wasn't just the banks. Many, many people in the US over-leveraged.

Keynesian manipulated markets breed greed..

It all failed..

The only thing keeping the game going is Banana Ben Bucks.

yeee haw...

Quaderratic Probing's picture

Total failure gets pretty good bonuses these days... aside from the fact you get to keep your job.

lieutenantjohnchard's picture

harry, fourth request. when you made your 9% call on the u3 rate after you said you ran the numbers, did you base your analysis on the drop in the labor participation rate, organic job growth, or was it just a wild baseless guess?

HarryWanger's picture

I based it upon Gallup's twice a month poll of 30,000 individuals regarding employment. It's been remarkably consistent and pointed directly at 8.9-9.1% rate base upon their surveys.

lieutenantjohnchard's picture

and gallop's was based on the drop in the labor participation rate which undermines your economic bullishness.

d00daa's picture

It was the snow.


It's always the snow.


Don't expect a response.  He's a fucking moron.

lieutenantjohnchard's picture

i know. the world needs fools like harry. who else could we take money from on poker nights?

HarryWanger's picture

Gallup's poll was based upon a twice a month survey of 30,000 individuals and had nothing to do with labor participation rate. That's not the way their polling system is designed.

lieutenantjohnchard's picture

harry, you can't have no job growth and a falling u3 rate without reducing the labor participation rate at the same time. it's mathmatically impossible.

d00daa's picture

What exactly in Gallup's poll pointed to an 8.9-9.1% BLS ????????






Once again, I eagerly await your reply.

myshadow's picture

'several unbiased opinions regarding the report and most conceded it was indeed a very good report.'



Name two.

HarryWanger's picture

Calculated Risk

Washington Post


ABC News

earnyermoney's picture

that's one as the requirement was "unbiased" sources. Clearly, WaPO, AP and ABC News fail this test.

d00daa's picture

1) Washington Post + ABC News + AP = ONE SOURCE (but you already knew that).

2) The fact that you attempt, with a straight face, to list the above as UNBIASED (Calculated Risk??? LMAO) sources is fucking laughable (but you already knew that, too).

HarryWanger's picture

CR gives the most unbiased look at economic data and analysis anywhere on the web IMO.

Judge Smales's picture

You must be joking, right? Since Tanta died, CR has essentially turned into another arm of the hopium-smoking MSM, only with a bizarre obsession with hotel RevPar. Used to be a great site, but now they've bought into the BS and can't be taken seriously.

Problem Is's picture

I was surprised by Bill at Calculated Risk's summary on unemployment...

I think he needs to look a little harder at the revisions to employment in 2010 and 700k+ unemployed being relabeled to discouraged or marginally attached...

300k... If you run out of unemployment benefits are you any less unemployed?

As per economists with phd's from the "right" schools labeling you are...

But then economists with phd's from the "right" schools usually have government jobs and wouldn't know what unemployment is from the safety of the tax payer teat...

subqtaneous's picture

Well, since you have your usual aversion to details (and Rosenberg), try David Stockman's numbers . . . ouch!


d00daa's picture

He's not making equity calls, you stupid fuck.  He's speaking reality:  THE LABOR MARKET IS ABSOLUTELY TRASHED.  STRUCTURALLY TRASHED.


Please explain away the anemic job "growth" since the "end" of the depression...  hell, why not start circa 2001??  Leaving your perverse tunnel-vision toward equity investing aside for just a split second, HOW THE FUCK IS THIS GOOD LONG-TERM FOR AMERICA IN GENERAL???


I eagerly await your reply, you mindless automaton.

homersimpson's picture

Another dumb HarryWanger comment sponsored by HarryWanger - where even eediots make money based off dumb luck.

Sophist Economicus's picture

Do you really think this guy 'makes money'?   Probably gets stopped out often...

earnyermoney's picture

"What’s really happening, of course, is the same thing that’s been happening in this country for the longest time — the folks at the top are doing fabulously well and they are not interested in the least in spreading the wealth around"


How many low paying jobs you going to create this year?

HarryWanger's picture

We're adding four production jobs and two admin jobs at the end of this month. Both pay well relative to similar positions at competitors. 

Arrinex's picture

You're right harry.  Where I work we've forecasted possibly adding 35-40 sales folks out of our 800 total current number. Unless this recovery is mostly based on certain sectors...

Oh, and did I mention I work for one of the big banks. I mean it's so hard for us to make money in this environment...right....


Sorry...had to troll...but dude, seriously. It's all smoke and mirrors with the recovery job numbers unless your getting TARP or work for the government.

gorillaonyourback's picture

it is smoke and mirrors, i have a plumbing company and the past 2 years i have been doing 80% commercial work, schools, hospitals, fire stations, etc. prior i was 80% residential.  the residential is at the same point but now there r so many people bidding on the government projects its ridiculous.  i did have 6 employees at the end of summer down now 2.  its the same all over for the construction field. i was not a fan of relying on government spending but if thats all you got,,,,.  lets hope harry optimism plays out, but i doubt it.

oldmanofthesee's picture

I'm a new "reader" Harry, and wonder why you ignore all the abuse, and come back for more, every day? Are you a tool of someone, or a Manchurian type, or.........just askin'.

Max Hunter's picture

There is no fundamental reason to buy stocks. Maybe a few select stocks but in general, until we no longer have 1.5 trillion deficit and 500 billion trade deficit my view of this economy's end game is still in place.

Pure Evil's picture

Shouldn't you be getting back to your highly successful home decorating business? Exactly how do you find the time to run your business and troll this and other websites spreading your propaganda?

I like you Hairy, I find your posts comical and quite entertaining, so don't give up.

merehuman's picture

I envision Harry in a room with 40 other government workers at a bank of computers going over diverse websites lying and messing with us. wherever truth arises it must be diverted , waylaid, obfuscated. Karma is coming, the poor fool Harry has sold something precious. Integrety is earned slow but fast to go. some of us, thats all we got.

AnAnonymous's picture

one after another apologist explaining just how good the employment data is if one strips out all the "bad",


That is a typical US way of thinking. Once all the counter-examples are removed, one is left with only examples supporting a point.

Once you remove the casualties, nobody died. Etc... Largely used in the US to show how universally good the US world order is.

Not surprised as it comes back home.

Rogerwilco's picture

There is a limit to the time businesses can squeeze workers. My brother works for an aircraft service company near DFW. For the past year they have been working six days a week, often 10-hour days. His annual bonus, usually several thousand dollars, was a paltry $300 this year and the CEO claimed bonuses were small because the company had to conserve cash.

When I talked with him yesterday, he said they are now working a shift on Sundays, but it's *only* six hours, and management has no plans to hire outside of replacements!

He's fed up and I can't blame him. Working seven days a week, even with big OT pay, gets old fast.

Sophist Economicus's picture

We've made the same decision in one of our businesses.    We're not hiring, using OT as the way to fill the gap.   It's a hard call.   You don't want to staff for peak demand periods in a shakey economic environment because you don't know when the bottom will drop out.    Many of my competitors are hurting, several have closed their doors - I could cherry-pick some great talent - but I won't in this environment.  

I told the guys they can either complain that they are tired during longer than normal weeks or they can complain about not being able to pay their bills working only 20 to 30 hours a week.    They understand, but it DOES GET OLD...