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Have We Seen The Peak Of Employment?
Authored by Lance Roberts of StreetTalkLive,
In my November 5th report on employment I stated: "...when taking into account the recent slate of economic weakness, post-election we are likely to see many of the recent job gains revised away as the data aligns itself with overall economic activity. The STA composite employment index is likewise pointing towards higher jobless claims numbers in the months ahead and falling export orders will continue to impact corporate profitability and their need to increase employment." Since that time jobless claims did indeed rise, and with the release of the November jobs report, we saw the previous two month's gains in employment revised down by a total of 49,000. October employment of 171,000 was revised to just a 138,000 advance while September was brought down to 132,000 from 148,000.
What is important to remember is that the BLS only publishes revisions to the prior two months even though it has data for months prior. This is why the annual revisions to the employment data can be significant. Furthermore, given the weakness in the employment components of the major economic surveys, as shown by my composite employment index, we should expect to see negative revisions to the 2012 data employment data next year.
There has been much debate about whether the domestic economy is in a recession. A bulk of the arguments against recession are based on the four primary indicators used by the National Bureau of Economic Research (NBER) who officially date the beginning and end of recessionary periods. The inherent problem with this analysis is that the data is subject to annual revisions, which the NBER waits for before determining recessions, which potentially leads to a significant lag in the final determination of the recession. The chart below shows recessions and the announcement dates by the NBER.
As you can see the bulk of the damage to investors was done prior to the official announcement by the NBER. This is why there is significant debate currently about the economic state as investors try to determine when the next recession may occur. It is the problem of the data lag that requires additional analysis of a variety of other economic indicators which have both; 1) a strong history of recession indications and, 2) are not subject to large annual data revisions. Currently, many of those indicators from the economically sensitive sectors of manufacturing and production (see here, here, and here) are warning of economic weakness and should increase investor caution.
Peak Employment?
Employment, is one of those economic data series that are subject to large annual revisions. Currently, there is little argument that the economy is beginning to slow with even the major Wall Street firms ratcheting down Q4 GDP to 1% annualized growth. This brings into question the sustainability of employment in the future as businesses become more defensive to offset the impact of the ongoing recession in Europe and slowdown in China.
While the most recent employment report showed gains in November this is not necessarily an indication that an economic recession has been avoided. The table below shows every Post-WWII recession and where monthly employment stood prior to the start of the recession. With the exception of 1957 employment growth was positive, and in some cases expanding, prior to the recession.
The point here is that positive net changes to employment are not necessarily an indication that the economy is expanding. It is important to remember that businesses are generally reactionary, rather than proactive, about the current economic environment. Businesses make investment, and hiring decisions, on historical data from the previous month or quarter. This is why businesses are typically the last to hire and the last to fire as they react to trailing demand figures.
The chart below shows the three-month net change of employment.
As you can see employment tends to peak around 1,000,000 jobs. That peak was reached in 2010 and has slowly been deteriorating since. This is why Bernanke has been implementing extraordinary monetary policy in order to stimulate weak employment growth. Unfortunately, businesses do not hire employees due to monetary policy but rather increased consumer demand. The problem is that, according to the NFIB, "poor sales" remains one of the top concerns - not exactly a sign of strong end demand. While employment has grown on a monthly basis, as shown by the inset bar chart, the trend of that growth remains weak.
Commercial lending trends also point to a potential peak in employment. When an economy is expanding businesses need to typically borrow money to increase facilities, production and inventories. That expansion leads to increases in employment. The chart below shows the historically high correlation between the annual changes in commercial lending and employment.
While it is still very early to tell it appears that commercial lending may have recently topped and turned down. This would be consistent with the weaker economic trends seen recently which portends to weaker employment growth in the months ahead.
One of the arguments that we have made repeatedly in recent months has been that the nascent housing recovery is not fueling economic growth and employment as expected. The chart below shows residential construction employment versus housing starts. In the latest report construction employment declined for the fourth month in a row and is now down 7.1% on an annualized basis.
With housing only a small contributor to economic growth, roughly 2.5% of GDP, and the majority of the activity occurring in multi-family properties - the need for expanded employment has not materialized. The issue for housing remains the sustainability of economic growth which is rapidly being called into question.
As the economic underpinnings continue to deteriorate, as witnessed by corporate outlooks during the recent earnings reports, the drive to expand employment weakens. As we have been discussing since the beginning of this year the rising cost pressures into production have steadily deteriorated profit margins as cost cutting measures have been exhausted.
While it is too early to say that employment has peaked for this current recovery cycle - there is mounting evidence that this may indeed be the case. It will be some time before we get the final revisions to the 2012 economic data from which the NBER will be able to ascertain the official state of the economy. However, as history has shown, the damage to investor portfolios will have already been done. It is for this reason that we continue to review reports of underlying economic activity which can provide clues as to the strength, and trend, of economic growth. It is from that analysis that we can avoid a bulk of the recessionary drag before the NBER makes it official.
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funny how Dire Straits songs, twisting by the pool, money for nothing and industrial disease spring to mind
That's about where we are hooligan. All great songs by the way.
Peak union employment
Peak employment for everybody but government workers and firearms manufacturers - for completely different reasons. The economy is circling the drain.
Would you be surprised to know that the per capita rate of gvt. employees has been in secular decline since 1962? Or equivalently, as a %age of the workforce...
Naw, stuff like facts really gets in the way of your version of reality....
http://www.opm.gov/feddata/historicaltables/totalgovernmentsince1962.asp
Tell Jessie at the rally when you see him
No comment on the data, you know, the facts; I learned to expect as much from the likes of you...
Communist
My vote for the lamest comeback *ever* after being pwn'ed....
or as that other, even better known communist john hussman notes: our massive Federal deficit has temporarily driven corporate profit margins to historic highs about 70% above their norms even while wages as a percent of GDP have reached a record low.
http://www.hussmanfunds.com/weeklyMarketComment.html
Federal government employment is only part of the government employment picture.State and local government employment have grown significantly since the mid-1950s.
http://research.stlouisfed.org/fredgraph.png?g=dIC
Sounds like you have an issue with you local legislators.... The point I wanted to make is that the number Federal gvt. employees have been in secular decline for a long time....
And as for all those bullshit rightwing calls for "Law and Order" in 80's and 90's, well, the bill has come due...
That's right, one ex union job should now be good for two at half price in Michigan.
Can you say living wage.
You do know that Union rates were over 30% when we had the strongest middle class in the history of the world - since the reagan mantra of Kill those demon unions the rate is now under 10% of the labor market.
Funny how delivering 90% of all new income to the top 1% doesnt drive Demand!
Who would have thunk that?
Eat the Rich - I hear the old buzzards taste quite nicely when simmered for a day or two.
Funny how that works, eh?
Jobs will eventually have to return.
There is hope.
Who will wash President Obama's car?
Who will clean Michelle's house?
Let's be optimistic.
http://www.angrysinner.blogspot.kr/2012/12/yesterday-dragon-lady-made-oysters-and.html
I'd pay someone to piss on your stoop....
Just another idiot plugging his shitty blog.
I'm heartbroken at the fluff, each day I see crap like this I ask myself if the best blog sold?
It was top-tier not so long ago... The election cycle brought out the John Bircher moonbats....
Employment is a lagging indicator - duh.
Use capacity utilization for a concurrent indicator. Going back 45 years, whenever it's been below 80%, we've been in a recession - except for one false indicator about '88.
We hit 67% in 2009, peaked at 79.2% in July, and subsequently turned down.
Turn out the lights; the party's over.
The party's over
It's time to call it a day
They've burst your pretty balloon
And taken the moon away
It's time to wind up the masquerade
Just make your mind up the piper must be paid
--Nat King Cole
One of the terrible consequences of the government spewing out incorrect and unrealistic numbers on employment and a host of other pieces of the economy is this, no way to tell what's really going on.
IMHO based on my observations we never left the 2008 recession, in fact things have generally gotten worse and deeper. An entire shitload of companies have gone or are going out of business. I think many of you guys would agree with me, especially if you do b2b.
you make several useful points. also please note that the lags until recessions are declared and, hence, losses until, are generally expanding over time. next one could by a doozy.
We only 'left' the recession - aka positive growth - due to continued Financialization of the economy - take out the increase in the banking sector and I'm sure we'd still be officially in a recession.
In fact we probably never came outof the 1st bush recession - back then Banking used to be less than 10% of the economy -now over 40% - that extra 30% of gdp is Malinvestment - meaning not only are the numbers not accurate as Real Growth but its actually Negative growth as it incentivises Malinvestment, Financialization and FASCISM. Heck that makes our gdp actually around 10 trillion - which is what we Feel and Know on Main street.
At the rate we are going there will NEVER be enough jobs for those that need it to survive - the truely big question for our day is what to do woth the Excess idle Labor - Historcially the answer is to start up a nice WW and fertalize the soil with 50 to 100 million Muppets.
Employment will not recover. The "temporarily embarrassed future millionaires" have been replaced with permanently cocky future homeless.
Who would ever had thunkit that Peak oil would imply peak jobs...
Union or otherwise....
And who would ever had thunkit that oil hasn't peaked, but prices haven't gone up like Peak Oil extremists. Instead, we still have oil prices below its peak. In other words, the market is telling peak oil extremists, you are wrong. But you hold on to your doctrine, can't accept truth or reality. That is one huge character flaw of liberals - not being able to admit they are wrong, which is why they repeat their mistakes, even when historical and current facts tell them they are wrong. Man made global warming extremist also fit in this group. Currently we have the fiscal problem and the bigger government to solve everything falacy.
Do you even know what Peak oil is? Because it sure as hell ain't clear from what you just wrote....
As for AGW, it is pretty clear that any science at odds with your ideology has to be wrong...
And I can hear it already...how "surprised" The Street will be when the actual recession is officially announced. Of course, and by then, the market will have already "priced in" most of it.
Put me down for economic contraction, official style, by the second Q. Put me down as selling short/scaling in now, however.
Gonna be a good day to be a grizzly crashing out of the scrub....especially tomorrow, I suspect.
WTF is this crap? 1,113 words to say this:
Unemployment 22.8 percent, last depression 25 percent and government workers then classified as unemployed.
PS and just fucking maybe, if you want to talk unemployment it "might" be a spectacularly fantastic idea to mention what the employed are raking in. After all, consumers need money and to get that they need a.) jobs or b.) title/payday loans since the banksters aren't giving out HELOCs today.
Who the fuck are you, ilene's brother?
From Jim Quinn's fine blog The Burning Platform some great Charles Hugh Smith work.
http://www.theburningplatform.com/?p=44394
38 million earn less than $10,000 per year.
50 million earn less that $15,000.
61 million earn less than $20,000 annually.
Simply put: 100 million wage earners, or 2/3 the entire workforce, earn less than $40,000 per year.
This doesn't sound too good
Bullish canned dog food.
Canned dog food, cardboard signage, used tents, and rusty razor blades---FY2009 37,000 people committed suicide, first time it beat out vehicle deaths since cars became popular.
Our suicide rate is now 10 per 100,000, in the last Great Depression it was 22 per 100,000. And if this fucking clueless dickhead wanted to talk bogus numbers he'd have done an article on suicide rates. Poisoning is up 128 percent, many prescription drug OD's are suicides being swept under the rug. Chances are our suicide rate is 2x published.
Fucking pathetic.
The Federal reserve members are mass murderers, war criminals.
The world is a dangerous place to live; not because of the people who are evil, but because of the people who don't do anything about it.~Albert Einstein
Peak oil will cull the herd....
"Peak oil will cull the herd...."
+1
Likely, the more I give this thought---with water poluted and pissed away in fracking nat gas wells to make up for the lost easy to get to oil and Asia's demand on oil.
I can just imagine you during the 14th century.
Flakmeister "But dear sirs, the world will come to an end because of peak oil"
Reply from the king or queen "What the hell is oil?"
In other words, you peak oil extremist, the world CAN actually survive without oil. I know it is hard for you to imagine because you have lived with oil products all your life, but for thousands of years, humanity didn't have oil and SURVIVED and even PROSPERED.
I strongly you suggest you change your erroneous argument to peak clean water. At least then, you might get some respect. Otherwise, each of your posts is just a joke, characteristic of the poster.
Hey dingleberry, what fraction of US oil consumption is a direct input into the Ag sector? Do you have any clue?
And yes, the world will definately survive PO and AGW... A large part of H. Sapiens will have their work cut out for them though....
However, as history has shown, the damage to investor portfolios will have already been done
I believe if you check the market indexes back a year you will find that the relationship of market indexes to fundamentals is now meaningless. If you care not then check out the market tomorrow as the words of the annointed are bestowed upon mechanical algos.
Me peckers gone limp. I've lost confidence in the markets. Prosecuting fraud is my goal.
The power of mass prayer shall be tested against the ChairSatan on January 20, 2013. Join in to fight fraud with fire and brimstone. Praise be to the Lord.
Great article and great work behind it.
If you could see the shit-students my public university is producing, you would answer this headline with a definitive yes. We got openings but no geniuses to fill em. The average american worker's skill is diverging from the rest of the global citizens at an exponential rate.
American workers? We don't need no stinkin workers.
Uncle Bam is gonna pay off our mortgages and send us all a check every month. By quitting our jobs, we'll be able to spend more time spending money ... 'cuz thats what makes a strong economy.
You should all get more edumacated. /sarc off
That money is not for us, it's for our corporate masters. Now those higher prices for everything you need (bilfation), that's for you.
Another recession coming? Shocking. Wake me when something interesting happens.
What relevance to the markets? Surely by now we can all see there is none.
'Employment' is a meaningless STATISTic. What matters is production and purchasing power. Govt can create 'jobs' for awhile but will have not only nothing to show for it, but to even do so it had to confiscate capital that would have been used efficiently in the process.
I hunt a 57 acre parcel grain field woodlands 45 minutes by freeway west/northwest of the Chicago Loop. Yesterday from the treestand I notice a blue tent in the woods between me and the Metra train station. Two men, fireplace, big beers and temporary housing it seems. Or not so temporary. Tent cities coming I think and if you have eyes to see much more than that as well. My wife and I used to kid about how skinny we would be if we had to depend on my hunting and fishing skills to survive. Hmmm?
Here is an interesting article about how to survive while homeless - advice by someone who did it. It's not a feel-good article.
http://www.donrearic.com/homeless.htm
Tent cities have been around. It's just that most people don't know about them for various reasons such as:
1. Tent cities are typically in places that are not highly populated and are away from people that have money.
2. Cities tend to discourage their uprising and when they can't prevent them, they push them into areas not highly populated and away from people that have money (voters)
3. Temt cities don't work well in urban areas, work better in more rural areas
4. Most local news outlets do very little in reporting of tent cities unless some tragedy occurs
5. Tent cities get very little national attention.
Just do a google search on tent cities and you'll be quite surprised.
Does it count as employment when you're working for the state for no pay.... only to payoff your overdue tax bill ?
A little tidbit on Egypt:
Egypt Importing Gas for First Time as Exports Disappear