Rosenberg On The Unemployment Rate: "If It's Too Good To Be True, Then It Probably Is"
Much has been said about yesterday's laughable jobs report. Here is a little more, only this time not from some politicized CTRL-C/CTRL-V major who was forced to take out the HP-12C for the first time from their storage closet and pretend they have any idea about finance and economics, but from David Rosenberg.
Via Gluskin Sheff:
There is no doubt that the bullish crowd is doing high-fives and the White House cheering over what the unemployment rate did in September — falling to 7.8% form 8.1% in August and 8.3% in July. That the 7.8% jobless rate takes it to the level that prevailed when the President took office in January 2009 has raised many an eyebrow. I don't believe in conspiracy theories. But I don't believe in the Household Survey, either. This notoriously volatile indicator has become even more so in recent months. It showed a 195k slide in July and a 119k decline in August, to only then reveal a massive 873k surge in September. So based on Household employment, the economy was in recession in July and August and then miraculously boomed at its strongest rate since January 1983 (is Obarna really the new Reagan)?
If it's too good to be true, then it probably is.
But this is why the headline unemployment plunged, and that is what is very likely to make the front pages of the Saturday newspapers. Digging beneath the veneer, the quality of these so-called Household jobs is called into question, seeing as part-time work for 'economic reasons' dominated with a 582k run-up in September. And upon closer inspection of the actual amount of slack in the labour market, the more inclusive U6 unemployment rate that does a much better job at capturing underemployment, remained stubbornly stuck at 14.7%.
It is not just fringe blogs, and deeply skeptical economicts, or ex-CEOs of mega corporations, who call out political shennanigans on yesterday's number. From Jefferies:
The household survey has been very erratic throughout the recovery. To-date in 2012, household employment has increased by 2.184 mln, but 1.72 mln of those jobs, 78.8%, were generated in two months with a January increase of 847k and a September increase of 873k. The cumulative job increases in February through August were 464k, or 21.2% of the total.
So take your pick, or choose something in between. We find the establishment survey to be more consistent with the overall economic and labor market and, therefore, to be more believable.
The unemployment rate declined to 7.796% from 8.111% in August. The decline in the unemployment rate reflects a 0.1% rise in the labor force participation rate to 63.6% from 63.5%, which is good news. There was also an 873k increase in household employment, the largest increase since January 2003. There was also a 456k decrease in household unemployment.
Taken at face value, the household survey would suggest that economic activity has been rocking-and-rolling and the labor market is bursting at the seams with jobs. We know that has not been the case, hence, the household data is difficult to believe and we are dismissive to the universal strength of the household survey data.
It would truly be wonderful if these numbers were believable, but they are not believable.
And as a bonus here is another nugget from Rosie, showing how all forward looking economic expectations are now a total joke courtesy of pervasive central planning.
Even though the chain store sales results for September were nothing to write home about, the U.S. retailing community apparently is bracing,for a holiday shopping spree. They added 9,000 workers to the payroll in September, bringing the cumulative increase to 20,000 over the past three months. And it doesn't appear that they are stopping there, because what stood out in the Challenger survey of hiring intentions for September was the 413,700 surge in the retail sector in September. That number is so big it actually matches the entire payroll in the electronics and appliance store segment. I love charts that are unusual, even if they don't comport to my view, but once again, we are probably witnessing a Ripley's moment.
The chart below does indeed point to upside risk to my near-term employment view, for sure for sure. But it begs the question for early 2013 ... what if the retailers are too optimistic? The answer — an early-year hangover, just as the economy confronts the fiscal cliff.
Anyway, being Canadian, I like graphs that remind me of hockey sticks, especially since I'm going to be seeing purple spots this year with no NHL. As an aside: my forecast, seeing as there is zero hockey on Saturday nights this year, is that come spring and summer, Canada is going to be in the midst of a new baby boom? :o)
As always, the best advice is just to sit back and laugh...