What's Lurking Beneath The Glossy Veneer Of The Jobs Report?

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The jobs report has little value if we don't peer beneath the glossy veneer.

On the surface, last week's jobs report was glossy good news: the U.S. economy added 288,000 non-farm jobs. Beneath the glossy veneer, however, the news wasn't quite as good as advertised: full-time jobs declined by 523,000 and part-time jobs surged 840,000.


Courtesy of Zero Hedge, here's a chart depicting the the entire job market:

Here's a chart of full-time employment from the late 1960s. After unprecedented intervention by the Federal Reserve and Federal deficit spending since late 2008, full-time jobs (the only ones that count in terms of supporting a household) have reached the level of 2006, while population has risen by 7.5%.

Courtesy of Mish, here is a chart of full-time employment from 2003 to the present:

Courtesy of Lance Roberts, here is a chart depicting full-time employees to population: note that the ratio has been flatlined since 2009.

It's important to note that employment growth is only the first half of a real recovery: real household incomes must also grow. Real (adjusted for inflation) incomes haven't expanded except for the top layer of households.

Expenses haven't stagnated along with incomes. As a result the price tag for the American dream (i.e. a middle class lifestyle) is $130K a year.

This chart depicts the happy story trumpeted by container-loads of superficial analysts and paid cheerleaders: jobs that pay above-average outnumber below-average paying jobs.

Courtesy of Market Daily Briefing, let's dig into employment by sector.

The salient point here is that only three of the nine sectors have expanded since 2000; the other six have declined or stagnated. In those 14 years, only Professional & Business Services, Education & Health and Leisure & Hospitality have gained, and only Education and Health has soared. Note that jobs in Leisure & Hospitality typically pay below-average wages, so the growth of this sector may be one reason why household income has stagnated

Why have Education & Healthcare soared despite the deep recession? Simply put, Education & Healthcare are functional monopolies that can add costs with impunity. In economics jargon, these sectors are largely untradable, meaning they are not exposed to much competition from overseas providers of Education & Health.

They also benefit from immense lobbying of government to protect their fiefdoms from transparency and competition. Consider this chart from the University of California system that reflects the Administrative Bloat at American Universities that is the underlying cause of soaring college costs.

It is not unusual for administrative costs to have exploded higher by 300% while the number of students rose by 15%.

Meanwhile, as college costs have skyrocketed, wages of those with college degrees have stagnated:

As for healthcare (a.k.a. sickcare) The incredible rise in healthcare/sickcare costs in the U.S. since the early 1990s is easily seen in this chart:

Note that Japan provides care for its populace for a mere 36% of what the U.S. spends per person. Germany and France spend about half of what the U.S. spends per person. Our advanced-economy competitors have a global advantage as a result of our inability to control sickcare costs, which act as a hidden 8% tax on the entire economy.America's Hidden 8% VAT: Sickcare (May 10, 2012)

Our Two Most Onerous Taxes: College Tuition and Healthcare Insurance (February 3, 2014)

There are two realities nobody dares mention, much less discuss:

1. The expansion of the Professional & Business Services sector is all about cutting costs and boosting productivity while reducing payroll. How else could the economy expand while full-time jobs and household incomes have both stagnated? By boosting productivity and slashing payrolls.

2. The bloat, waste and inefficiencies of Education & Healthcare mean that these sectors offer the juiciest yields on innovation. As a result, they are the primary targets for transparency, real competition and technological innovations.

By my own reckoning, a college diploma shouldn't cost more than a few thousand dollars for the entire four-year program: The Nearly Free University and The Emerging Economy: The Revolution in Higher EducationReconnecting higher education, livelihoods and the real economy.

The structural changes triggered by the Internet and digital automation, networking, software and robotics have barely begun. The jobs report has little value if we don't peer beneath the glossy veneer.

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Mon, 07/07/2014 - 09:29 | 4931310 Soul Glow
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Mon, 07/07/2014 - 09:31 | 4931314 nmewn
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Mon, 07/07/2014 - 09:43 | 4931335 NoDebt
NoDebt's picture

All the uglyness of U6 plus millions no longer in the workforce (but almost certainly on the government dole).

I'm so glad I have accepted the fact there won't be anyone left to pay for my SS or Medicare when I reach retirement age (despite the fact I was "promised").  God help anyone who thinks they're going to be getting that stuff 20 years from now.

Mon, 07/07/2014 - 10:26 | 4931431 SWRichmond
SWRichmond's picture

How the fuck does "government" create jobs?

Mon, 07/07/2014 - 10:49 | 4931491 Soul Glow
Soul Glow's picture

They make more beuarchracy, more hoops to jump through.  More paper to print and staples, more telephones to answer.

This does not increase growth however, because the money comes from taxes, so it's just one dollar here going there and not furthering production.

Mon, 07/07/2014 - 10:53 | 4931506 rubiconsolutions
rubiconsolutions's picture

"How the fuck does "government" create jobs?"

The same way "government" creates money. The same way "government" creates liberty. The same way "government" creates safety. The same way "government" creates.....ah shit, who am I fooling?

Mon, 07/07/2014 - 12:10 | 4931757 TheReplacement
TheReplacement's picture

Do a bit of research and you can answer your own question.  Here is a tip:  Look at the size of the military in 1939 versus 1945.

Mon, 07/07/2014 - 10:46 | 4931479 Soul Glow
Soul Glow's picture

5 years from now, maybe sooner.

Mon, 07/07/2014 - 09:29 | 4931311 _ConanTheLibert...
_ConanTheLibertarian_'s picture

There's a big void beneath it.

Mon, 07/07/2014 - 09:30 | 4931312 papaswamp
papaswamp's picture

Rally on bitchez!

Mon, 07/07/2014 - 09:33 | 4931315 firstdivision
firstdivision's picture

Would love to see the Tuition vs real wages done with Masters/PhD's overlayed to see how their wages have performed over the same time frame.

In other news, K-Hen must have not had a full-cup of coffee as he mistakenly hit the Sell $NG/$WTI instead of the Sell Vol key.

Mon, 07/07/2014 - 09:33 | 4931316 Ghordius
Ghordius's picture

excellent article, CHS. makes me think it's time to re-read some of the other excellent articles you were writing earlier. I can now gloss over the mediocre ones you have produced in between, from time to time

yes, Japan, France, the UK, and many others have adequate care for the sick at a fraction of the costs in the US. and don't get me started on education...

Mon, 07/07/2014 - 09:37 | 4931327 yogibear
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The Federal Reserve's economic model is Zimbabwe. Print until the currency is dead.

Mon, 07/07/2014 - 09:40 | 4931331 pods
pods's picture

This "veneer" is not even seen by the bottom 80%.  The Ministry of Information is losing, simply because a quick trip to the store costs $100 bucks, gas is $4 a gallon, and every single entity you come into contact, from government goons writing tickets to power companies are asking for more.

Something is going to break, and it is going to be soon.


Mon, 07/07/2014 - 09:44 | 4931343 Cattender
Cattender's picture

pods is correct..

Mon, 07/07/2014 - 09:48 | 4931349 yogibear
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More and more price increases it's why the government wants minimum wage increases. The Federal Reserve banksters and the government wants huge price inflation. It supports exponential debt. 

Mon, 07/07/2014 - 10:13 | 4931408 drstrangelove73
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They want to raise the minimum wage because union pay contracts are keyed to the minimum wage.

Mon, 07/07/2014 - 10:00 | 4931372 Ghordius
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pods, no idea if you are correct or not. yet every time I read "gas is $4 a gallon"... I am thrown in a fit of despair

besides quick calculations in the head, conversions to litres (and european prices being up to five times higher, on average)

because I remember how in the last three decades of the 20th Century every time the gas price at the US pump went higher, some european elder was muttering: the Americans will go to war. the gas price is their golden calf. if it rises, their pols get cold feet and "do something"

and so I also despair at your casual "something is going to break"

Mon, 07/07/2014 - 10:01 | 4931383 pods
pods's picture

Ghordius, you mistake my acceptance for casual.  I have two young children, and am not looking forwards to this at all.

But, I have looked at the math long enough to come to accept this outcome.

A fiery rebirth is, to me, still a better outcome that some supra-national currency and futher serfdom.


Mon, 07/07/2014 - 10:20 | 4931423 Ghordius
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I take my "casual" back, with apologies and the hope you accept them

meanwhile, I don't see how a after-USD-Hegemony global supra-national currency could be ever achieved. Russians and Chinese might push it... though only if the US is willing to cut a deal with them. which would leave us eurozoners in opposition, and wouldn't that be hilarious

godspeed and blessings on your family

Mon, 07/07/2014 - 10:56 | 4931521 pods
pods's picture

Apologies never needed Ghordius.  This one, when it goes, is going to be a big one and godspeed to you and yours.

I see the supra-national currency idea being pushed for two main reasons. The first is that many nations will be leery of trying to wield the ring of a reserve currency, and second, it will give the globalists more power.

If the breakup is bad enough, many will run to a new currency that proposes stabilty, justice, etc.  Kind of like the banking panic of 1907 did for the FED.


Mon, 07/07/2014 - 11:12 | 4931573 Ghordius
Ghordius's picture

I forgot the rules. ah, I think I'll never achieve that Tyleresque ethos. it triggers the wrong cultural responses in me

the ring of power is only handy if you use it. in a Triffin-way. if the FED loses it, as you say yourself... the elfs and the dwarfs won't fight to have it or use it. in fact, up to now (since 1971) most was just complaints, no real attacks

be very, very careful with that word, "globalist", btw. it's... sloppy and ill-defined. it even includes, up to a point, an international bona fide tourist, or a Miss America wishing for Peace in Our Times in the World, or Mother Theresa, or a peanut exporter or a BMW importer. it betrays an isolationist point of view which has not been updated to the modern realities, yet

Mon, 07/07/2014 - 11:29 | 4931635 pods
pods's picture

Very true that Globalist has merely become a pejorative lately.  
I speak in terms of those who view nation states as secondary to whatever interest they have, be it economical, environmental, etc, or those who seek to centralize power.  

Basically the same line of thinking of those (in the US) who wish to have federal laws make living in a different state meaningless.  A globalist wishes to have nations subservient to a supranational organization.  Some might have the best intentions, but they will always be rooted out in favor of sociopaths and megalomaniacs.

I am all for Fight Club, but we have talked for some time Ghordius and I know when you say something how it is meant.

(To all you fuckers who are gonna say get a room, blow me)


Mon, 07/07/2014 - 14:04 | 4932241 Miffed Microbio...
Miffed Microbiologist's picture

Great conversation and points presented from both of you. Sometimes Fight Club is not all about fighting for supremacy or a wailing wall for frustration. Occasionally, the simple civil discourse found here is a treat.

Mr Miffed and I accept the " Get a Room" label because it is deserved.


Mon, 07/07/2014 - 10:21 | 4931424 Government need...
Government needs you to pay taxes's picture

I'm down for the fiery rebirth.

Mon, 07/07/2014 - 10:00 | 4931380 Boondocker
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Not for 6 more years according to a previous article.....

Mon, 07/07/2014 - 10:38 | 4931458 oklaboy
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not suuunn enufffff....

Mon, 07/07/2014 - 11:11 | 4931567 Shizzmoney
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This "veneer" is not even seen by the bottom 80%.

Its because they don't WANT to see it.  When I talk to people and tell them whats going on (i.e. real estate and car sub prime bubble 2.0), they either deny or act shocked.  The cognitive dissonance exhibited is fucking scary.

Mon, 07/07/2014 - 10:00 | 4931379 pakled
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The only thing I can think clearly enough to say this post July 4th Monday morning is that the chart with the flags is really cool.


I like that chart. More please.

Mon, 07/07/2014 - 11:19 | 4931602 Luapnor
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'Merica is great!!

Mon, 07/07/2014 - 10:03 | 4931387 BobTheSlob
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So does Leisure and Hospitality include hookers and strippers? If so I can see why it's undervalued at 207,000. An area that needs to be more free market and less pimp reliant.

Mon, 07/07/2014 - 10:06 | 4931396 BobTheSlob
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"Our advanced-economy competitors have a global advantage as a result of our inability to control sickcare costs"

Not to worry, the death panels are going to fix all of that.

Mon, 07/07/2014 - 10:24 | 4931428 Government need...
Government needs you to pay taxes's picture

Will processing corpses into soylent green be inherently deflationary or inflationary?  And should I put this economic activity in the 'healthcare' sector, or 'service' sector?

Mon, 07/07/2014 - 10:08 | 4931400 vote_libertaria...
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...and the birth\death spreadsheet plug-in in has been about 80% of the 'jobs' they reported the past 3 months. 

Mon, 07/07/2014 - 13:52 | 4932173 jsmfr
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The b/d adjustment is applied to non-seasonally adjusted private payrolls. As such, the b/d adjustment must be viewed against the reported non-seasonally adjusted change in private payrolls.  This relationship in the latest three months is as follows:

April:  b/d adj = +234K, nsa private payroll ch = +1074K

May:  b/d adj = +205K, nsa private payroll ch = +960K

June: b/d adj = +121K, nsa private payroll ch = +978K

Sum these up, and b/d = +560K for the three months, and nsa private payroll change is +3012K, with b/d adj accounting for less than 20% of reported private payroll growth in the three months.

Mon, 07/07/2014 - 10:52 | 4931505 itstippy
itstippy's picture

It jerks my chain that mainstream media economic coverage does not highlight the fact that we lost 523,000 full-time jobs and gained 840,000 part-time jobs.  This is very basic analysis of the jobs report numbers.  

Why do people even read the NYT Business Section, Wall Street Journal, Money, Fortune, Barrons, etc.?  Why do they watch CNN or FOX Business News?  Obviously it's not to get any analysis.  I suspect it's just so they'll feel good about their investments and the economy.  Since that's what the audience wants, that's what the content providers deliver.  And the simpletons in the audience feel that they're "informed investors" because they read and view all this tripe.

This horrible pattern of hiring mostly part-time, non-living-wage, no-benefit jobs that require the employees to file for government subsidies just to make ends meet has been going on for five years now.  At first the mainstream media acknowledged the trend, and claimed that as the economy improved the newly hired part-timers would be moved to full-time positions.  It isn't happening, so now the media just ignores the trend and hypes the "great" job numbers without any further comment.

The recent jobs report is highly alarming.  It's not "great".  Thank you Zerohedge and CHS for pointing this out.  

Mon, 07/07/2014 - 12:23 | 4931809 Pareto
Pareto's picture

Disconcerting.  I think the best source of information on how well an economy is doing (local), is to talk to cab drivers, store owners, etc.  They, in a addition to love talking about their business, also provide their forward perceptions - what their gut tells them.  I find this useful andit seems consistent with the data illustrated by ZH which is "It's not terrible, but, it sure aint great." - which is a little bit like saying, "you could do better, but, you might do worse".  The latter statement offers little hope to single income households and I wonder just how long before the "could do better might do worse" crowd snaps and tells the college professors, and healthcare professionals to go piss up a rope.

EDucation has been overpriced relative to what the market will actually reimburse you for.  Even if you are lucky to get something (teachings) other than the watered down pissy government mantra where you actually learn something valuable and useful - the market will not compensate you for it because it cannot compensate you for it.  Unless of course you follow the FED's money.

The market wants to cleanse the malinvestment.  The FED wants to keep it going.  Real incomes will not rise - real wealth will not endure unless and until the FED and government allow the market to rid itself of overinflated asset prices, education prices, health prices, food prices, fuel prices, etc.  Its nominal v. real.  And the only thing that matters to a single income family household is the latter.

The FED can change what things look like, but, the FED can never change what things are. (Grant, 2013).

Mon, 07/07/2014 - 11:17 | 4931593 senrab40
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Just love Mr Hugh Smith. Always thorough, insightful and compelling.

Tue, 07/08/2014 - 11:46 | 4935514 bvrulez
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you americans have high healthcare costs because you are a sick people.

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