Employment Data Not As Bad As They Said, And It’s Also Worse - Contrarian’s Chart View

ilene's picture

According to Lee's research, the employment situation in April was not as bad as the market reaction implied. March had a record gain, borrowing some expansion from the future, resulting in a low number in April. The really bad news was on the inflation front, where weekly earnings overall are soaring in spite of hourly wage growth being less than robust. Inflation is much hotter than the Fed is admitting. ~ Ilene 

Courtesy of Lee Adler of the Wall Street Examiner

Total and Full Time Employment

The number of persons employed full time in April rose by just 83,000, not seasonally manipulated (from the household survey). That compares with a gain of 658,000 in April 2011. It’s the worst April performance since 2007. The average gain in April for the previous 10 years was 653,000. I suspected that this was partly a giveback due to the unusually warm weather boosting the number in March. The March gain of 1.33 million was a record since 2002, and it was multiples of the typical March gain of 289,000. Looking at the 3 months from January to April this year’s gain of 1.47 million wasn’t as strong as 2011?s gain of 2.6 million but was well above the prior 10 year average of 1.11 million.

Full Time and Total Employed Long Term View - Click to enlarge

Full Time and Total Employed Long Term View - Click to enlarge

 

The chart above gives some perspective on how far total employment fell in the first stage of this depression, and how much they have yet to recover. Full time employment is lagging.

 

Full Time Employment Short Term View - Click to enlarge

Full Time Employment Short Term View - Click to enlarge

 

Over the previous 10 years, the level of full time employment in April has been, on average 2.8 million below the previous year’s July level which is usual the high for the year. Last year the April number was 2.1 million less than July 2010. This year the April level is already ahead of the level of last July by 240,000. This report is not the disaster that the pundits, the media, and especially the trading bot Al Gore rhythms seem to believe.

 

Full Time Employment, Stocks, and The Fed - Click to enlarge

Full Time Employment, Stocks, and The Fed - Click to enlarge

 

Stock market performance is at the mercy of the Fed (or over the past 12 months the ECB, not shown), and employment follows them both. While at times there’s a lag, the linkage is undeniable. The SOMA lately does not reflect the impact of the Fed’s MBS purchases from the Primary Dealers, a subject which is covered in depth weekly in the Fed Reports. That graph has been rising steadily since last September and stocks and full time employment have followed.

But all is not rosy. In a stat that virtually no one pays attention to, average weekly earnings for all private sector employees have risen by 3.6% over the past 12 months. While the wages of hourly workers were previously stagnating, even they have been rising lately, with the average hourly wage now up 2.7% in the last 12 months. The change for the past 2 years had been barely 2% per year. With total weekly earnings up by 3.7%, it’s clear that non-hourly employees are doing even better. Those executive salaries are really skewing things.

Average Weekly Earnings

Average Weekly Earnings - Click to enlarge

Average Weekly Earnings - Click to enlarge

 

This brings me back to one of my favorite crying points in the weekly Fed Reports. Dr. Bernankenstein’s inflation target is 2%. Because he and the FOMC only look at the lagged and artificially suppressed core PCE measure, which ignores all the prices that are rising, he thinks that inflation is still below the target. The Fed is so far behind the curve that the train has already left the station and they’re standing on the platform looking the other way waiting for it to arrive.

 

Initial Claims Charts

Actual, not seasonally manipulated, weekly initial unemployment claims, while volatile week to week, have continued to decrease at a relatively constant rate over time since mid 2010.

Initial Unemployment Claims - Click to enlarge

Initial Unemployment Claims - Click to enlarge

 

Plotted on an inverse scale, the correlation with stock prices is strong. Both are driven by the Fed’s operations with Primary Dealers as covered weekly in the Professional Edition Fed Report.

Get regular updates the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Click this link to try WSE's Professional Edition risk free for 30 days!

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