This page has been archived and commenting is disabled.
The Nonfarm Payroll Bombshell
Any doubts about what the ‘new normal” is all about were dispelled yesterday with the bombshell March Nonfarm Payroll Report showing a gain of only 54,000, the smallest in seven months, and a huge shortfall from the 190,000 consensus.
The headline unemployment rate bumped back up for 9.0% to 9.1%, taking the total number of unemployed to 13.9 million. The real U-6 unemployment rate including the long term jobless leapt to 15.8% totaling 24.1 million, and is closer to 20% in states like California.
Private sector employment rose by 83,000, with the biggest gains in business serves (44,000) and health care (17,000). Falls were seen in leisure and hospitality (-6,000) and manufacturing (-5,000). March and April reports were revised down 39,000.
The big hit was in government employment, which plunged by 29,000, all but 1,000 occurring at the local level. This trend is likely to accelerate in the summer, when many teachers already given pink slips are not rehired, as they were in years past. This is a trend that is likely to continue for another decade.
Let me give you a simple English lesson here. Spending cuts mean job losses. Reducing the deficit means job losses. Balancing the budget means job losses. Austerity means job losses. And lots of job losses means slower economic growth. This reports shows that for every two workers hired by the private sector, one is fired by the government, leaving us with net job growth that is meager at best. Since the jobs recover started 18 months ago, the private sector has added an impressive 2.2 million, while the government has been shoveling jobs away half as fast.
This is a major ingredient of my long term forecast that American GDP growth has permanently downshifted from the 3.9% we saw from 2000-2009 to 2% for this decade. That is the harsh reality behind the chart below showing job gains during this recovery compared to those in years past.
As an investor and trader, you must know that the financial markets don’t believe or understand this yet. Stay cautious and stay nimble, and for the time being, stay short.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
- advertisements -
http://www.youtube.com/watch?v=GzjPXbKlLOU
Everyone gets this ass backward. The time to cut government spending and government jobs is when the economy is booming. But no one give a rats ass about government spending when we're in a boom. Now is not the time to cut spending. It's very counterproductive as the poster says. Anyone who actually read Keynes would know this.
Nobody actually reads, much less understands, any of this stuff - Smith, Marx, Keynes, Rand, etc - that's the only way to explain the mountains of myopic stupidity that political "debate" in this country is full of.
liquidate the banks and blame terrorism on them... that should fix most of the problems, the rest we can deal with
MHFT - Did you actually have lunch with a private sector employee?
A formerly virtuous cycle has turned vicious. What real-life Bond Villain George Soros terms "reflexivity" can run in either direction.
I would suggest that the unemployed find ways to self-employ, preferably dealing in cash or otherwise making oneself a smaller target for what are sure to be government tax depredations designed to support a bloated welfare/nanny state.
Grow your own food even if they want to make you plow it under (Wickard v. Filburn). Store your own rainwater even if they want to make that illegal. Do for yourself and for those you love.
And watch out for snitches.
The ultimate "free lunch" is given to banksters and to corporate welfare bums.
jal
Mad hedgie you nailed it.
We need more monetization and deficit spending ( via tax rebates to working people) as the most likely way to avoid contraction.
With an output gap and mercantilist currency manipulating trade partners this is as close to a free lunch as it gets.
You have to fire all the hangers on before you can get thim intot he sweat shops producing the goods that will pay off our debts.
As the Bernenk would say, unemployment is transitory. Eventually the govt won't pay the benefits to keep these people fed and clothed so they will have to do something - anything.
Unemployment will start dropping when we have factories popping up to make cheap plastic toys to ship to China paying Mexican wages.
Yeah mexico always has the lowest unemployment rate in NAFTA and there are essentially zero welfare and unemployment benefits.
Coincidence? Not likely!
Fear and hunger motivate people to work.
And when there is no "rich" middle class worker in America to buy their cheap junk with those fat margins? Think, you fucking dingbat.
so you are predicting job losses?
Someday you will have to pay a "fine" if you do not work directly for the government.
Oil decides all of this. This obsession over temperature, RPMs, cylinder pressure and spark plug gap width means NOTHING when you take fuel from the engine.
That is what is happening and it will go on and on and on, getting relentlessly worse and worse and worse.
Focardi & Rossi may have a solution...
Yay, less government jobs! Maybe we can get less taxes and regulations eventually.
"less government jobs -> less taxes and regulations eventually"
ROFLMAO
Just more giveaways from politicians to special friends...
+ google
My guess is that as local govt downsizes, military recruitment goes up.
"Let me give you a simple English lesson here."
Well, it certainly isn't an economics lesson, that's for sure. Which cornflakes packet did you get your degree out of?
I doubt GDP growth averaged 3.9% 2000-2009 either. Productivity growth was slightly higher than in the 1990s though.
Thirty years of excessive debt creation and malinvestment are bound to cause pain. NO EASY WAY OUT. Sorry kids.
Spending cuts mean job losses only on Planet Keynes. According the Aug. 10, 2010 edition of USA Today [1], "Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis."
We can also compare this to the median household income in 2010 of $52,026. The simple truth is that the more government jobs that have a total compensation of more than this number that are ELIMINATED, the more private jobs we will have in the long run.
The only mitigation of this is the factor of time lag. When Congress slashes budgets, those appropriations don't generally show up as changes in government headcount until the next fiscal year or unless they alter the Continuing Resolution the particular employee is being paid from. So, in the very short run, we could see some drop in net employment, but fewer government employees mean fewer obstructive regulations being proposed, fewer coming through the rule-making apparatus, fewer being passed, and fewer being enforced.
Yes, we have some rules that need to be enforced (like drilling permits) in order to get new private projects approved, but in the environment where BHO's approval numbers hinge on net jobs, the bureaucracy that survives the cuts will quickly get the signal to approve projects where they can and obstruct as little as possible.
There are very few government jobs that actually increase the wealth-generating capacity of the country. Most government jobs have a substantial net cost to the economy. In my opinion, Congress cannot slash government spending fast enough.
[1] http://www.usatoday.com/money/economy/income/2010-08-10-1Afedpay10_ST_N....
In Pennsylvania, the average state worker brings in only $34K before taxes. I wish the ideologues and agitators would take just a moment to differentiate the two types of public service (three if you count the prostitutes you keep electing). Of course I know that doesn't fit their narrative of evil rich public employees and poor persecuted bankster saints.
We can cut government spending but cut taxes even faster and monetize the resulting deficit to get an efficient stimulus and smaller government at the same time.
even if you are right, the operative phrase is, as you noted, "in the long run". in the short run, next several years, there will not be the gdp/earnings growth that the current level of stock prices expects. that i believe is mhft's point.
FEMA camp guard positions to fill ... with benefits!
Do you really believe that? FEMA camps reeducting people. Someone watched too much red dawn or stop taking their meds. There is no evidence of it, it simply isnt happening now or anytime soon, and yet you beilve it. zI believe your an S&M freak and like pain or like seeing people in it and are hoping for some apolocolypse so your twisted fantasies are filled.
"As an Internment/Resettlement Specialist for the Army National Guard, you will ensure the smooth running of military confinement/correctional facility or detention/internment facility, similar to those duties conducted by civilian Corrections Officers,” a classified ad posted on the web states. “This will require you to know proper procedures and military law; and have the ability to think quickly in high-stress situations. Specific duties may include assisting with supervision and management operations; providing facility security; providing custody, control, supervision, and escort; and counseling individual prisoners in rehabilitative programs.”
A video describing the job:
http://www.youtube.com/watch?v=iB5xwKJCClA
These ads were on monster.com last year some time, now they are all gone. Looks like they filled all of those positions...
How do you spell "end of the line", my friend.
Not to worry, there will be plenty of jobs at the Fema Camps, even for the "Trader Types".
Are you suggesting we NEVER reduce size of gov't or size of expenditures and deficits. That sounds like the road to hyperinflation hell and the end of any pretense of having a private sector and/or free markets. Lets just make EVERYBODY a gov't employee! Yippee! Then we can be just like the ex-Soviet Union!
I don't want to speak for MHFT, but that is not how I interpreted his post at all. He's just stating a simple fact: given that GDP=C+I+G-NX and assuming all else equal, lower G means lower GDP (where G is government spending). Lower GDP means more job losses. QED.
We may not like this identity, but that doesn't make it any less true.
If you consider that you need the labor of at least one private sector worker to support the salary of a public sector one, then any tilt away from government jobs towards private sector jobs is a positive development, despite the fact that it might cause short-term pain.
Try staying awake in Econ 101. The more public sector jobs, the more taxes and/or deficits (future taxes).
Ergo the less burden of taxes and future taxes, means the real generator of wealth, the private sector, might have a chance at job creation.
The inane logic that cutting govt is bad for the economy argues that all private employees should be fired and then get govt jobs. Yeah. That's the ticket.
MHFT. emphasis on mad
Private sector 2
Public sector 1
sound like a good score
flag as truth (1)