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What The Job Reports Mean
This article originally appeared in The Daily Capitalist.
This morning's BLS job reports came out showing unemployment down from 9.8% to 9.4%:
What was disappointing to the market was that nonfarm payrolls were only up 103,000, well below the consensus expectation of 160,000 new jobs. The decline in unemployment is seen as an aberration because it was due in part to a drop in the labor force which amplified the number of job holders as a percentage of the overall labor force.
Here are the specific data from the BLS:
Private sector payrolls increased 113,000 in December, following a 79,000 advance the month before. The consensus expected an 180,000 boost.
For the latest month, strength was in private service-providing jobs which rose 115,000 after an 84,000 increase in November. Good-producing jobs declined 2,000, following a 5,000 decrease in November. In December, manufacturing grew 10,000; construction fell 16,000; and mining rose 3,000. Government jobs fell 10,000, following an 8,000 dip in November.
Within private services for December, leisure and hospitality increased by 47,000 while health care rose 36,000. Also, professional & business services gained 7,000 and were led by temp hiring, up 16,000.
Health care employment expanded by 36,000 in December and by 266,000 in all of 2010. Over the month, employment continued to rise in several health-related services, including outpatient care centers, hospitals, and nursing and residential care facilities. Employment in temporary help services also continued to trend up in December and has increased by 495,000 since a recent low in September 2009.
Manufacturing employment was little changed over the month. Following modest job growth earlier in 2010, manufacturing employment has been relatively flat, on net, since May.
The drop in government jobs was led by a 20,000 fall in local government, with non-education declining 12,000. Federal employment increased 10,000 while state government jobs were unchanged.
Average earnings went up 1.8% for the year, but that was offset by a rise in the CPI-U of 1.1%. The workweek declined slightly by 0.1 hour in December but was 1.5 hours above the low point of 38.7 hours in June 2009.
Here is what concerns the government (from the BLS report):
The number of unemployed persons also declined over the month, from 15.0 million to 14.5 million, largely reflecting a decrease in the number of unemployed adult men. Among the unemployed, 44.3 percent had been jobless for 27 weeks or more in December, up from 40.1 percent a year earlier.
The labor force participation rate edged down in December to 64.3 percent and was slightly lower than a year earlier (64.7 percent). The number of persons working part time who would have preferred full-time employment was essentially unchanged in December at 8.9 million. The number of discouraged workers grew over the year by 389,000 to 1.3 million in December (not seasonally adjusted). Discouraged workers are persons outside the labor force who are not looking for work because they believe their job search efforts would be unsuccessful.
As noted in an accompanying Wall Street Journal article:
The unemployment rate has now been above 9% since May 2009, or 20 months. That is the longest stretch at such an elevated level since the Second World War. In the recession of the early 1980s, the jobless rate rose to 9% in March 1982 and remained above that mark until September 1983.
There are some 1.5 million people unemployed for more than 99 months now.
Look at the data table for U-1 through U-6.
The big drop in the overall unemployment rate and the U-6 measure was primarily due to a decline in the number of unemployed, which fell by 556,000 in December. That’s good news since the number of people who are employed increased by nearly 300,000. But that still leaves over 250,000 workers leaving the labor force altogether. That likely means a substantial part of the drop was due to workers giving up. Anyone unemployed over 99 weeks has no access to unemployment benefits and many lose access even earlier. Once those benefits expire, the unemployed may stop considering themselves part of the labor force.
And once they completely drop out of the labor force, they aren't counted in the data.
How long will it take to get back to "normal" unemployment? See this calculation by Sudeep Reddy of the Journal's Real Time Economics blog:
The economy lost almost 8.4 million jobs from December 2007 to December 2009. It added 1.1 million jobs in 2010. At December’s pace, just replacing the rest of those lost jobs would take 70 more months — roughly six years, taking us to November 2016. That would be almost nine years from the start of the recession for U.S. payrolls to return to where they peaked before the downturn.
But the economy also needs to add 100,000 to 125,000 jobs a month just to keep pace with growth in the labor force. That means the gap created since the recession started was closer to 12 million jobs (leaving 11 million after the gains in 2010). The U.S. unemployment rate is unlikely to move much lower if job gains continue only at December’s pace. Even employment gains close to October’s pace (210,000 jobs) would take us into the next decade before seeing the unemployment rate back near 5%.
Bill McBride at Calculated Risk puts out this chart on employment level and duration per Post-WWII business cycle. I've used it before and here is the latest version:
There are other indices of employment that came in this week, ADP, Monster, plus the job cut report, which all appeared favorable, especially the ADP report which had its biggest ever jump in private employment of 295,000 jobs. But these reports for various reasons rarely tally with the BLS's report (there are perhaps technical reasons why ADP's dramatic jump is inaccurate). So I wait for the BLS rather than trumpet good, but ephemeral, news.
Here is the wrap. The employment situation is still very bad. It brings up the specter of long-term structural employment in our economy. Job growth is still weak, buoyed by temp and health care workers. There are some positives in this report but job growth is still insufficient to overcome layoffs and a growing labor force. Some of the gains are technical in nature, and I expect unemployment to go up again in the next few months. The traditional drivers of growth, manufacturing and services (other than health care and temp) are still mostly flat. It appears that the Fed will continue its destructive monetary policy as long as unemployment remains high. It is conceivable that we are looking at another 5 to 10 years of sluggish job growth and a stagnant economy as a result of government fiscal and monetary policies.
There is always good news, and if the Republicans can effect change by repealing Obamacare, making meaningful reductions in the federal budget, and rein in the Fed, that would help long-term economic prospects. It was interesting to note that Speaker Boehner was quoted in a letter to Ben Bernanke about quantitative easing:
House Speaker John Boehner of Ohio, then the minority leader, and three other Republicans voiced “deep concerns” in a Nov. 17 letter to Bernanke about a policy that they said may undermine the dollar and create asset price bubbles.
If that is not an "Austrian-ish" statement, then what else? I would attribute that kind of language to Ron Paul's influence.
I have little faith in politicians, including the Republicans other than the Ron and Rand Paul, to do anything but political eyewash. Believe your eyes, not your ears.
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http://www.marketoracle.co.uk/Article24581.html
You had a good article a few days ago about the fact that we have been seeing some better stats, and I agree with you, but I have to say that there is still a bad smell in the air.
"The unemployment rate in Mexico was last reported at 5.6 percent in November of 2010"
http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=MXN
Maybe, because 1/2 of the Mexican population is in the US with fake SS card numbers and are contributing to our employment woes!
the report means: buy the bubble on margin. dis hear is a jobless recovery
Meaningless trivia. Get ready for the draft.
Agree.
The only way out is inflation and a good War (and by war, I mean a World War and not the current skirmishes where we are so overly polite and politically correct that we lose 80% more brave souls than we should). God Bless anyone who has made the ultimate sacrifice; however, 10,000 men died in one battle during the Civil War, and over 20,000 on Iwo Jima - we don't quite comprehend real war as much time has passed.
I hope China's new stealth fighter has woken some people up. It looks large enough to carry a small neutron nuke (high gamma and xray - increase in neutrons versus protons).
Or...a weapon designed to create an Electromagnetic Pulse or EMP on the West Coast and Pacific that would cripple our response and infrastructure and likely be combined with a coordinated cyberwarfare attack (I hope the old copper phone lines are still working at NORAD).
Has the Navy done research on the effect of an EMP pulse on a submarine? The Chinese subs are tailing ours in the Pacific, thanks to Toshiba sharing out our prop technology; the Japanese may regret that. If the Chinese knew where our subs were and could knock them out with an EMP from a nuke over the Pacific we would have a challenge responding (maybe the X-37).
The goal of China would be domination of the Pacific and world trade. They are heavily involved in Africa and working on South America. If we do not control the seas of the world we will be the empire in decline and follow the fate of Spain, France, and England.
That piece of Chinese junk?
...are you mad?
Inflation runs hand in hand with inflation. Read the history of about any war in human history, look at the UK post WW2, or WW1, or France, or Germany. I know you are thinking the war brought the US out of the depression, it didn't. What brought it out was a devastated wrecked planet with only the US standing tall and able to make consumer goods. It was not building bombs that brought prosperity. If that was profitable then why has not feathering the nest of the Mil-Industrial complex not worked for the past decade? Or maybe because not enough Americans have died. Easier answer kill every male high school graduate for a few years, that should boost the GDP right? Put them on a big boat and blow it up, endless prosperity for all!
So if we fight a war what are the chances the US wins fast enough to not wreck the economy with inflation, and is able to destroy the worlds manufacturing base without losing ours? Infinity approaching 0%.
There probably will be a war and the US will not like it. Gas might only be $2 a gallon, but good luck finding it for less then $10.
Right, I agree with both of you.
I was not arguing for it, just making the observation.
China has Imperial desires, cold war or real war, it is the U.S. they need to bleed out and conquer.
Our Capitalists are more than happy to accomodate them and sell out Western Civilization as long as they have their bonus and paycheck today and to hell with tomorrow.
I had to address it, I cannot express how many people I know who are otherwise quite bright that are in love with the idea of war as economic growth. That brainwashing is DEEP inside most people. Tell a crazy lie and tell it often enough and people will believe it to be true.
As to China, a war is slightly different for them.
1. Massive male population. A mass of young men with limited future prospects for advancement or women. A revolt waiting to happen.
2. A desire to reduce population in general. Their goal is 700 by mid century IIRC.
3. Nationalism. China has a lot of hate to call on. They can point to the Opium War if they have to and start drawing parallels to rile the people up. Not saying it's right, just that the average Chinese person is proud of China and the CCP can play on that.
I think that there is a fair chance for a shooting war. CCP won't back down and our leaders are batshit insane. I know military guys that brag how we would kick China's ass and "bomb them back to the stone age", if they get "uppity". I have been hearing an anti China drumbeat build since Barry's election. Nothing would cow both masses like a real shooting war, maybe limited nuclear exchange.
Of course to any rational, sane person such a war is pure madness. However to the bloodthirsty monsters in charge, can you put it past them? Wouldn't they kill 50% of the people if it meant staying on top even just a few more years? If there is any sanity it's that with reduced nuclear warheads it's unlikely we would extinct ourselves...
Right, like China is going to make war on one of their best customers? Outside of a nuclear exchange, the US at present would definitely lose a conventional war, we no long have the mfg capability to sustain a major conflict at that level.. China does, however -- along with the worlds largest standing army. There isn't going to be anything but a cold war at the most. There will be other small wars that I'm sure we will get involved in though. Hey keep enough people unemployed long enough and they'll all be happy to join the military.
Less people die in wars nowadays because of the advances in medical technology. Most of these guys coming back from Iraq & Afghanistan with serious wounds would formerly have been dead, as they were in Vietnam, 60,000 of them.
Not if the US gets some leadership that does not like China and is willing to pursue that.
Withdrawing the foot from the fiat accelerator will cause a great deal of wailing and gnashing of teeth. That is written on Ben's wall behind his desk....inherited from Alan. These pesky electeds come and go and each group will pick up a piece of the blame for the latest bust til no more bubbles can be blown. Meanwhile, the un and underemployed will reconfigure their lifestyles and attitudes to conform to creditless reality. Obama, the great undisputed champion of the People, thought they really wanted that "free healthcare" in 2014 while Ben produced jobs.....a textbook example of mandate misread and confused functions.
No evidence yet the US will evolve much differently from the Japan underemployment model.
Your misgivings are well-founded. History will find "Cryin' John" Boehner to simply be Denny Hastert II. His fiscally conservative credentials are suspect...Washington has that way about it: power corrupts -- particularly when the chamber under your direct authority controls the purse strings of Government.
Just got the good news today that my unemployment insurance is kicking out fiat money again to my bank account. I will use every bit of it to buy silver, since I moved into a giant house in a long foreclosure process and four of my housemates have paying jobs. We feel rich like the old days when we were in the middle class. Also it is orange foraging time in FL.....BTFD!
Unemployment will only rise with more automation. Computers are robots will take job from China. You need to make sure that robots in your country can compete. Otherwise you will have to buy products made by robots overseas.
A running joke in an IT office I worked in was that as software guys all we did was eliminate jobs and at the end we would make an AI to eliminate ourselves. Made more efficient software and processes that let fewer people do more work and made some redundant. Hell I know one job we iced by totally automating the entire process.
Can argue if it's progress or not, but tech moves costs down. Sucks for the people on the receiving end of the pink slips though. I'm in the field and IT moves at blazing speeds, can only imagine how hard it would be for older people not used to it to keep up.
We are IT guys. And we eliminate others' jobs with blazing speed. At the same time our "robots" make repeatitive and boring job for people. So people can concentrate on more creative stuff. And our "robots" do the job 24/7 almost free. So the dismissed people can theoretically do nothing. The "robotic" companies should pay more tax and the tax should be spread among humans left with no job. This is called socialism. Here we are :)
Right on!
bottom line is, many folks will never work again.
You are correct Sir, I know many people in their late 50's and early 60's who have basically given-up on ever finding another job. One has been out of work for 3 years and is now 61. What are his chances of finding meaningful employment? Slim to zip.
And due to no inflation according to the manipulated US Gov numbers those near retirement will not only burn through their saving early due to unemployment, their So-So Security will be worth-less. Nice way to literally kill off the elderly population early, thus saving in government-funded Medical obligations.