Newsflash From The December 'Jobs' Report - The US Economy Is Dead In The Water

Tyler Durden's picture

Submitted by David Stockman via Contra Corner blog,

Here’s a newsflash that CNBC didn’t mention. According to the BLS, the US economy generated a miniscule 11,000 jobs in the month of December.

Yet notwithstanding the fact that almost nobody works outside any more, the BLS fiction writers added 281,000 to their headline number to cover the “seasonal adjustment.” This is done on the apparent truism that December is generally colder than November and that workers get holiday vacations.

Of course, this December was much warmer, not colder, than average.  And that’s not the only deviation from normal seasonal trends.

The Christmas selling season this year, for example, was absolutely not comparable to the ghosts of Christmas past. Bricks and mortar retail is in turmoil and in secular decline due to Amazon and its e-commerce ilk, and this trend is accelerating by the year.

So too, energy and export based sectors have been thrown for a loop in the last few months by a surging dollar and collapsing commodity prices. Likewise, construction activity has been so weak in this cycle—-and for the good reason that both commercial and residential stock is vastly overbuilt owing to two decades of cheap credit—–that its not remotely comparable to historic patterns.

Never mind. The BLS always adds the same big dollop of jobs to the December establishment survey come hell or high water. In fact, the seasonal adjustment has averaged 320,000 for the last 12 years!

For crying out loud, folks, every December is different—–and not just because of the vagaries of the weather. Capitalism is about incessant change and reallocation of economic activity and resources. And now the globalized ebbs and flows of economic activity have only accentuated the rate and intensity of these adjustments.

Yet the statistical wizards at the BLS think they can approximate a seasonal adjustment factor for December that at +/- 300k amounts to just 0.2% of the currently reported 144.2 million establishment survey jobs, and an even smaller fraction of the potential adult work force which is at least 165 million.

But that’s a pretentious stab in the dark. The December seasonal adjustment (SA) could just as easily be 0.3% of the job base or 0.1%, depending upon the specific point in the business cycle and structural trends roiling the economy.

Indeed, these brackets alone would vary the headline SA number by 150k to 450k. The fact that the seasonal adjustment factor for December has oscillated tightly around 300,000 for the last 12 years proves only one thing—–namely, that the bureaucrats at the BLS have chosen to invent the same guesstimate year after year; its not science, its political fiction.

The fact is, the seasonal adjustment factors are about the closest thing there is to pure noise among all the dubious “incoming” data that the Fed and Wall Street obsess over.

Here’s a better take on the matter. We are now in the 78th month since the June 2009 recession bottom, and are reaching the point where this so-called business cycle expansion is getting very long in the tooth by all historical standards.

Historical Length of Recoveries - Click to enlarge

Historical Length of Recoveries

So what happened to the non-seasonally adjusted (NSA) job count in December at similar points late in the course of prior cycles? Well, in December 1999 about 140,000 jobs were added and in December 2007 there was a NSA gain of 212,000. This time we got the magnificent sum of 11,000, and by the way, last year was only 6,000.

The real news flash in the December “jobs” report, therefore, is that even by the lights of the BLS’ rickety, archaic and virtually worthless establishment survey, the domestic economy is dead in the water. We are not on the verge of “escape velocity”, as our foolish monetary politburo keeps insisting; the US economy is actually knocking on the door of recession.

And that’s why the retail sheep have been led to the slaughter once again in the Wall Street casino. The cats who run it have embraced the nonfarm payroll report as the primo macroeconomic indicator because they know that it drastically lags the real drivers of main street activity and has an abysmal record of forecasting turns in the macroeconomic cycle.

Stated differently, these fictional monthly SA jobs numbers are extremely useful to the Wall Street sell side. They keep the rubes hitting the “buy” button until the fast money can slowly dump its holdings and get out of Dodge; or even pivot and reload to the short side.

That’s right. We are not talking tin foil hats here. It is plain as day that the BLS’ seasonal adjustments are a completely stupid waste of time. During the winter season especially, it might as well just use a random numbers generator.

Indeed, here’s what the Steve Liesman’s of the world never tell you—–undoubtedly because they don’t know. Fully two-thirds or 200,000 of the 300,000 December seasonal adjustment is in the construction sector!

So the whole December SA is essentially a weather proxy designed to adjust a survey taken during the middle week of the first month of winter. Could weather fluctuations impact the number of construction workers on the job by a mere 2% (150,000) around the week of December 15?

Well, yes it could. And that means we really don’t know whether 292,000 “jobs” were created in December or whether it was only 142,000.

Once again, loose the SA noise in the construction sector job count.  This category alone accounted for 45,000 of the headline gain, but that was owing to the fact that the 6.538 million figure reported for the construction category was flattered by a 196,000 seasonal adjustment.

Instead, look at the non-seasonally adjusted (NSA) number compared to the same point in the cycle from prior history. Thus, at the December 2006 peak the number of construction jobs was 7.585 million, meaning we are still down by 1.1 million jobs or 15% from the prior cycle high.

And in December 2000, there were actually 6.7 million construction jobs. That is, we have not yet returned to the cyclically comparable level that prevailed at the turn of the century.

In short, the December jobs report was not evidence of a “strong” economy. It was just another emission from the government’s SA noise factory that obscures the actual state of the main street economy.

So here’s the real truth. Construction jobs are breadwinner jobs. The average annualized pay rate for the category is $57,000, but the US economy is not actually generating new construction jobs any longer.

What’s happening is that the BLS is simply reporting “born again” jobs and thereby enabling the Keynesian chorus to claim “progress” and “strength”, and for its Wall Street section to blather about “blow-out numbers”. Indeed, the latter has embraced the Keynesian model lock, stock and barrel precisely because its so useful in the stock peddling business.

The Keynesian model is about deltas, not levels. For reasons we will amplify below that’s almost always misleading in the context of monetary central planning and the bubble finance cycles that flow from it.

In fact, the only valid measure of economic strength and the main stream economy’s capacity to support sustainable profit growth and higher stock prices is the change in levels over time at cyclically comparable points.

That gets us to the larger story embedded in the above observations about the construction sector jobs series. Namely, just as there have been no trend gains in the level of construction jobs since the turn of the century, the same is true of the much wider swath of what we have called “breadwinner jobs”.

These jobs in construction, energy and minerals, manufacturing, FIRE, the white collar professions, business management, information technology and trade/distribution account for 50% of all nonfarm payroll slots, pay upwards of $50,000 per year on average and account for more than 66% of total wage and salary disbursements.

Yet the December 2015 number of breadwinner jobs was still 1.1 million jobs below that posted for the first month of this century!

Breadwinner Economy Jobs - Click to enlarge

Needless to say, that’s not “strength”. It’s actually a profound indictment of the archaic convention embedded in the monthly employment report that counts job slots, not the variable gigs and hours on which employment in the contemporary US economy is actually based.

Indeed, all the Jobs Friday hoopla is based on your grandfather’s BLS survey, which arose at a time when everyone punched the clock at the Ford factory 40-50 hours per week, including overtime. By contrast, now the greeters and cash register operators at Wal-Mart are computer-scheduled in 15 minute increments.

Since average pay for the bartenders and waiters category is less than $20,000 on an annualized basis owing to an average of 26 hours per week and $13/hour pay rates, you need 2.5 of these gigs to get the equivalent of one breadwinner job. Yet on Jobs Friday its all one job, one vote.

So what is actually happening beneath the surface is a great swap out. The very highest productivity jobs in goods production are disappearing on a trend basis; the monthly deltas reported so breathlessly on bubble vision actually embody purely “born again” employment slots that represent the partial recovery of jobs lost during each crash of the Fed’s serial financial bubbles.

But the cyclically adjusted trend is down, not up. It represents economic weakness and reduced capacity to generate productivity, income and profits, not strength.

In fact, not withstanding the “blow-out” December numbers, the US economy still has 11% fewer jobs in goods production—-mining, energy, manufacturing and construction—–than it did at the December 2007 cyclical peak, and 21% fewer than at the turn of the century.

Goods Producing Economy -Click to enlarge

By contrast, what is being swapped in are what we have called Part-Time Economy jobs, where there have been modest cyclically comparable gains in job levels during the past 15 years. Needless to say, however, the average annualized pay rate in this category is less than $20,000.

Part Time Economy Jobs - Click to enlarge

But even these trend level gains are heavily concentrated in the lowest quality quadrant. That is, in what we have called the “Bread and Circuses Economy”—–bartenders, waiters, bellhops, maids, parking attendants, hot dog vendors and the like.

The fact is, this category accounts for full 70%, or 1.8 million, of the 2.59 million gain in Part Time Economy jobs since the pre-recession peak in December 2007.

Bread and Circuses Economy - Click to enlarge

Another factor obscured by the BLS’ archaic job slot counting convention is the root wealth and productivity contribution of the job count at any point in time. Generally, private sector jobs financed by consumers add to wealth and productivity at varying degrees, depending on the sector.

By contrast, taxpayer financed jobs—–directly through government outlays or indirectly through heavy tax subsidies and preferences—–do not add to wealth, and, not to put too fine a point on it, may well subtract from it. And that gets us to the HES Complex (health, education and social services).

This is the fastest growing job category since the turn of the century, yet it now depends upon more than $2 trillion per year of Medicare, Medicaid and other government health spending—–plus another $250 billion or so of tax expenditures for employer health plans and tax credits for education.

HES Complex - Click to enlarge

Yes, it can be argued that a some part of the current 32.6 million jobs in the HES Complex add to long-run productivity via education and health status improvement of the working age population. But that point does not get you too far if you recognize the abject and worsening failure of public education in the US and the gross inefficiency of our third-party payment dominated health care system.

Far more relevant is this fact. For the entirety of this century there has been only a 3.7%  net gain in even the gross number of job slots in the US economy outside of the HES Complex, and that measurement includes the Part Time Economy and its Bread and Circuses subset.

Stated differently, on a trend level basis, the US economy has only generated 21,000 jobs per month over the last 15 years that were not funded by the public fisc, and therefore indirectly by the $10 trillion gain in public sector debts since the turn of the century.

Nonfarm Payrolls Less HES Complex - - Click to enlarge

So whatever is embedded in the BLS payroll count, don’t call it recovery, strength or progress. Instead, call it a propaganda cloud that serves the interests of Wall Street and the monetary central planners, alike.

Here’s the thing. You can not sell stock if you tell customers that a recession is coming and earnings are going to be heading sharply in a southerly direction. So Wall Street never does.

By the spring of 2008, for example, after the subprime mortgage implosion was already well underway, Countrywide Financial had already failed, AIG was hitting the rocks, Bear Stearns was gone, and housing sales and starts were sliding rapidly from their towering peaks, the Wall Street consensus ex-items hockey stick still pointed to S&P earnings of $115 per share.

As it happened, the actual result was $15 per share. And the homegamers who stayed in the market on that assurance were treated, instead, to a bloodbath in which they lost trillions in the 401k and brokerage accounts.

Likewise, the monetary central planners at the Fed and their economist cheerleaders have never forecast a recession. That’s because they embrace the cardinal Keynesian Error, which holds that private capitalism is inherently unstable and prone to extreme cyclical swings—-even a tendency toward depressionary black holes.

So they assume that their policy tools and maneuvers are not only doing gods work of keeping private capitalism on the straight and narrow. Indeed, the arrogant and foolish professor from Princeton, Ben Bernanke, called it The Great Moderation in March 2004 just as the greatest bubble and bust in modern history was working up a head of steam.

Notwithstanding the thumping repudiation of that conceit which occurred during the great financial crisis and recession, the predicate remains that this time is different. To wit, the monetary central planners now have it right and will steer the US economy deftly to the nirvana of permanent Full Employment, world without end.

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Winnipegger's picture

Tickle me shocked...

knukles's picture

If it's a BLS Number, it's Got to be Good!

ebworthen's picture

Did you notice how the MSM on radio, T.V., and Internet all said "Great jobs numbers today showing a strengthening U.S. economy!".  Because this Ponzi is 99% perception, 1% reality! (kinda' like the income distribution).

DeadFred's picture

Did I really just spend all that time to have someone tell me the BLS cooks the data?

OldPhart's picture

BLS = Bullshit, Lies & Statistics

herkomilchen's picture

I wouldn't knock deep dives into the facts backing up our belief that BLS numbers are BS.  Even if tedious to plow through.  Solid backup is what separates us from them.

Tyler only offered some beside-the-point wage-growth hand wave to try to explain away the seemingly strong job numbers.  Stockman provided a much more specific rebuttal to the number, with clear, citable stats and reasoned argument.

Xscream's picture

i Watched cnbc,bloom, and fox b all day. Not one person came on any channel to say bullshit, or challenge the internals. All the talking heads said it was a great report. The only slightly negative i heard was that the average hourly earnings was not increasing as expected. If it's all a conspiracy to decieve .... its a damn well run one.  Went to see the big short this week. Worth watching if your interesred in these things. It will piss you off. Dont take your girl or wife. They will be bored unless they are in realty or banking.  

 

Truther's picture

The BLS: Bullshit Loving Shitheads.

Did you ever think that these numbers were true?

Fuck the FED.

bamawatson's picture

(SAR) suspicious activity report ----- http://www.wsbtv.com/news/news/local/rapper-handcuffed-atlanta-bank-park...  such audacity, i mean, the man actually wanted his "money"

who does he think he is?

OldPhart's picture

What?  No Civil Asset Forfeiture?!  No forty cops firing a thousand rounds each?

What have we come to?

JRobby's picture

Anything with the word Bureau in it should be immediately shut down, forever.

BullyBearish's picture

Unfortunately the point is being missed...The BLS jobs numbers are the proxy to cover the fed's capitulation of a failed (for us, not for their friends) strategy.  As long as the jobs numbers keep coming out "good enough", the rates will rise...faster and more continuously than they would have you believe...GOOD LUCK

Wulfkind's picture

I'm not about to give you the Shocker. Not that there's anything wrong with that.....just sayin'

WTFUD's picture

That's strange , in CA they're dead in the lack of water. Go figure!

_ConanTheLibertarian_'s picture

They do have plenty of gas (leaking)

OldPhart's picture

That's due to all the Del Taco's and we're an aging society.

yogibear's picture

Sure we produce. Production of debt accumulation has been increasing every year.

 

ebworthen's picture

The great recession never ended.

1913, 1934, 1972, 1996, 2001, 2008, and now.

A downward spiral of:  establishing the FED, Gold confiscation, ending the Gold Standard, repealing Glass-Steagall, tech-bubble, and then the wholesale bailout of banks/corporations/insurers and 11+ Trillion of debt to prop it all up.

Done at the expense of:  sound money, the rule-of-law, the Constitution, and morality.

KesselRunin12Parsecs's picture

...& done for the BENEFIT of??? (no, don't say it, you'll just draw junks)

Arnold's picture

The Junks will come, the closer you come to some sort of non Psyco thought.

KesselRunin12Parsecs's picture

the junks come 24/7 notwithstanding because of the endless staff of sheckel earning employees who erroneously project that the bullshit they've heaped on humanity will continue unabated.

 

They simply don't understand the 'ON A LONG ENOUGH TIMELINE' prophecy.

Muse minus Time's picture

EB- In reading this article; this writer has accepted your facts and is presenting the potential if any, up side.

"Step-by-step, Russia, China and other emerging economies are taking measures to lessen their dependency on the US dollar, to “de-dollarize.” Oil is the world’s largest traded commodity and it is almost entirely priced in dollars. Were that to end, the ability of the US military industrial complex to wage wars without end would be in deep trouble."
First appeared: http://journal-neo.org/2016/01/09/russia-breaking-wall-st-oil-price-monopoly/

 

OregonGrown's picture

Hmmmmm....... 

 

I encourage everyone to move to Oregon and/or invest in the marijuana market!  I hired 11 people for my dispensary AND plan on building out and utilizing my www.MarijuanaShares.com , www.GrowFundMe.com and www.GroFundMe.com to crowdfund CannaKing recreational grows in which we intend to hire 100's if not 1000's more people!

Any investors wanting to get in on the Green Gold Rush bottom floor?  

Contact me directly at Dennis@cannaking.com and lets talk!  

The Merovingian's picture

Where are you banking at, Dennis? Banks won't touch MJ related businesses.

OregonGrown's picture

Ohh contrare...... It sounds like you have been reading too much main stream news and their false propoganda!

 

If you truly want to know what is going on with banking and marijuana, i suggest asking a person who's in the business.

 

Wells fargo is the bank i have been banking with for the last year and used bank of america for the 3 years before that!

Chupacabra-322's picture

Well , of course Wells would take the drug business. They launder most of the drug money to prop up their balance sheets anyway. As do all the other TBTFBANKSTERS.

OregonGrown's picture

LOL..... cant we just call it "business"?  

 

Dont tell anyone but, guess what...... it's legal now!

The Merovingian's picture

^^THIS!!

I guarantee you that no bank accounts for marijuana related businesses are being opened at Wells Fargo or any other FDIC insured bank due to the AML-KYC (Anti-Money Laundering-Know Your Customer) policies.  Absolutely UN-possible unless the account holder is blatantly lying about the nature of the business enterprise.  More to the point, whenever the bank doed find out (and they will due to the high volume of cash transactions) the accounts will be frozen and closed.

OregonGrown's picture

LOL.... love how adamant you are, while being completely obtuse about the reality of the situation....This is clearly the difference between people that THINK they know what is going on (let me guess, government employee?) opposed to what really happens in real life.

 

I dont have to lie to you or anyone else to hang out at the hedge... and i wont!  

 

When i go make my drop.... I am wearing my bright red CannaKing work shirt when i approach the teller (my big logo on the front and back) and drop off my bundle..... and no one says a thing about it and nothing has ever got frozen!  

.... and that is real life, in the real world!!!

That being said, dont threaten me with being a cash only business... FOR I DONT KNOW ANYONE that accepts cash anymore....

/s

Misean's picture

But this is from your website:

 

"At this time we are cash only. Sorry for the inconvenience."

 

Please square that hole for me.

Curiously_Crazy's picture

I think that's what he meant.. don't accuse him of the bank having issues with his company based on the fact at this stage he's cash only.

Misean's picture

Ah, the /s at the end is an edit.

Automatic Choke's picture

Thanks, Dennis, but I'm making $8400 daily at home on the internet using the same technique as my sister-in-law's hairdresser's pimp's plumber does, so I'm set.

OregonGrown's picture

NOW THAT....... was funny!   I hate that guy too... hopefully i didnt sound too much like that!

Scooby Dooby Doo's picture

Yea thanks a lot Denny but I'm a glamorous movie star and don't need your drugs or drug money.

Any idea how the brits attempted to take over China back in the day? I'm sure you're too stoned to figure it out so I'll tell you. Heroin.

Thanks for helping to devolve this country.

OregonGrown's picture

LOL..... what a coincidence.... One of my business partners is a HUGE/BIG NAMED hollywood scarlet.  Her and her husband couldnt WAIT to invest in what i am doing.  Thank you for the irony and the chuckle.....  

....glamorous....too stoned.... devolve......you crack me up!

bamawatson's picture

man mr oregon, i hope you are very very knowledgable of the specifically relevant state and federal tax laws. learn it live it love it

https://www.youtube.com/watch?v=tnYtCKE1OcI

OregonGrown's picture

Thanks for the link Watson.....

 

I dont know SHIT about it..... but i am smart enough to hire the people that do!

Love the background music by the way!

roadhazard's picture

I agree with the youtube commenter that called bullshit.

City_Of_Champyinz's picture

Wait a minute I thought everything was fine???

Arnold's picture

Good thing you are still on the down low, David.

two hoots's picture

Counting jobs is like chickens in grandma's yard, they're hard to count as they keep moving around. 

The Saint's picture

The excellerated decline of America started with Bush and accelerated with Obama.  Can Trump turn the ship?  We already know Hillary doesn't have a clue.

Winston Churchill's picture

Only if the ship is a pig boat.

The water is lapping on the canvas of the deckchairs and the lifeboats have already launched.

crossroaddemon's picture

Nope. If he's not a puppet he won't get near that office.