The Job Picture Is Not Improving as Much as You Think (Updated)
There was a lot of talk this week about an improving job market. It seems everybody is talking up a turnaround in the labor market. Some CNBC anchors, yesterday, put their usual optimistic spin on the topic of May payroll and unemployment numbers due out today. Guess what? The numbers are already looking pretty good but not that good!
According to a Reiters story today, “The Labor Department said the U.S. economy added 431,000 jobs in May — far short of the 513,000 that Wall Street had expected. The unemployment rate dropped to 9.7 percent in May from 9.9 percent in April.” (Click here for the complete Reuters story.)
But here’s how Reuters reported the job picture earlier this week: New claims for unemployment insurance also fell last week, leaving investors braced for more good news on Friday, when the government’s employment report is expected to show the economy added more jobs in May than at any time since September 1983. “I think these reports show the labor market is in fact stabilizing. (Private employment) was slightly weaker than expected but foreshadows a good number tomorrow,” said John Doyle, currency strategist at Tempus Consulting in Washington. Consumers appeared withhold judgment about the job market, though, as U.S. retailers reported lackluster sales in May. (Click here for the complete Reuters story)
Payroll numbers were expected by many analysts to exceed 500,000 new hires. We of course did not surpass that figure but we got close. How did we get those jobs in the middle of a bad recession? John Williams of shadowstats.com is looking closely at the hiring of census workers, and he says, “. . . close to 420,000 will be from the hiring of temporary and intermittent census workers. I expect payroll gains, net of census workers, to be well below the 80,000 to 90,000 balance needed to meet consensus, perhaps even showing outright contraction. At work here increasingly will be an intensifying economic downturn . . .” In other words, these reports make things look better than they really are. Expect things to get worse before they get better.
Tyler Durden of Zero Hedge put it much harsher in a report he did earlier this week. His headline read “Looking For A Fake 700,000 May Non-Farm Payroll Number.” Durden says the census workers and Bureau of Labor Statistics “Birth/Death Adjustments” are “voodoo math and double counting.” Which brings Druden to this conclusion, “Retaining the same level of statistical adjustment, and the May NFP number will be at 700,000 before even one real full-time person has been added to the economy in the month of May!” (Click here for the complete zerohedge.com story) Of course, it did not even get close, but I feel Durden’s frustration with bogus government jobs numbers almost every month! I feel taxpayers basically pay BLS to lie to us about what is really going on.
I am happy for anyone who gets a job in this economy, even a temporary census job. But a few jobs created by the government or the private sector does not make for a real turnaround in the economy. There are some pretty big anchors holding the economy underwater. Let me remind you of just a few: Cities and states in the U.S. are basically bankrupt. Entire countries in Europe are basically bankrupt. Foreclosures of residential real estate are hitting new records year after year. Nearly 80 banks have failed so far this year, and the FDIC is $20 billion in the hole. The FDIC is also expecting to spend $40 billion more closing banks over the next 12 months alone! Have we all forgotten we are fighting 2 very expensive wars! The newest lead weight is the gigantic mess in the Gulf. Just this week, the President said there was, “damage that could last for decades.” Until all the debt is washed out of the economy, there will not be a meaningful turnaround. All the hype around a glimmer of good news about jobs is just setting the public up for an immense letdown.
I may be wrong here (and someone please correct me if I am) the birth death rate involves businesses that close down. Specifically small business.
If ABC, Inc has 50 employees and closes down (death), the BLS assumes that XYZ, Inc will come into creation (birth) to take that place in the marketplace. XYZ, Inc will need to hire the same number of employees that ABC, Inc laid off.
These numbers are adjusted once per year. The last time they were adjusted was last fall. If memory serves it revised the unemployment number up by 800,000 ish people. The speculation I have read is that it will be well over a million next time around.
Take the latest jobs report. Once the census works are taken out and the birth/death adjustment is removed it was a net job loss. Hence, Dow down 300+ points.
The sheep don’t get it. People who read blogs like this get it – and the smart ones (all of us right…) position themselves to profit. And more importantly protect our families futures.
There are only three ways to wash debt out of economy: pay it off, inflate it out or default. It’s mathematically impossible for us to pay it off so that leaves inflation and default. The amount of inflation that it would take to “wash out” the debt is staggering. I vote for default.
People will say that it will affect the US Governments ability to borrow. I say they should be on a “real” budget like I am and the government should live within its means.
Thanks for the good article. As an underemployed person, whose hours have been drastically cut, I believe your reporting much more than I believe the MSM. You use statistics combined with 8th grade math to reach logical conclusions (that was not a cut-down, it was a compliment).
I am interested in your opinion on U6 unemployment. Why did it go down? I am thinking it went down because of the census hiring and the long-term unemployed losing their UI benefits and off the roles. Again, what do you think.
Table B-1 looks sick. Gubmint employment is increasing. Transportation is up, but if the retail numbers don’t pick-up, those numbers will decline. If retailers continue their renewed deep slump, will manufacturers keep producing goods?
I don’t know…I keep looking for the silver lining, and can’t find it.
I believe the unemployment rate went down because something like 322,000 people left the job market.
That skewed the ratio downward when combined with the census hiring. IOW, there were 400k+ census workers hired while 300k+ took themselves out of the job market. Net effect was 700K+ people became employed.
Please tell me I’m not making sense of these B.S. numbers – I need beer.
Heard just this week of 1700 people being laid off in Nashville. They are employees of Gaylord, which is Opryland. Probably a result of the flood devastation. So sad. They are nuts if they think the job market is improving.
Well Greg, once again you are right on. What a mess this country is in. I have a small brokerage business. Times are tough …. the banks have simply quit lending money to our potential buyers, making the present owners either finance part of the sale, or not sell at all.
What an awful jobs report, thank God I have one. All you can do now is prepare for the worst and hope for the best! The problem I see with all of Obama’s stimulus is it went to the wrong places. I’m sure it saved many many city, county and state employee’s jobs, for this year, but what about next year? And those aren’t “real” jobs anyway. It takes 4 or 5 Public sector jobs and the taxes they pay to support each government employee job. Hello!?! The only way to save our ship from sinking is to elect a new President, someone like Gov. Christie of New Jersey!! Who isn’t just cutting budgets, he’s taking a chainsaw to them, AND fighting the Unions and their insane pension plans. Good for him! The problem is we’ve got to put up with Obama’s change for another 2 and a half year. God help us all!!!!
Wow. The overwhelming majority of these new jobs are governmental. And it seems clear that investors have seen right through these skewed numbers. Having more jobs rather than less is always a good thing, even if they are temporary. But these temporary jobs are specific to a governmental activity – an instance activity – not the result of projects or initiatives. Good? Not so much.
The Euro at a 4-year low (not too long ago that the Euro was valued at twice the American dollar). Hungary in crisis.
It’s sunny outside where I live. It’s tough to think that things are really all that bad. Showers in the forecast for tomorrow, I think.
This article is too true, unfortunately there are many on the left and far left who are deep in denial. They will take any report and any government analysis as gospel and act accordingly. I have noticed a disturbing trend among those who comment on liberal blogs: their willingness to encourage violence against those who disagree is getting more prevalent.
Those views tie in with an article you published in which predictions of martial law were made. I guess they are reading the same blogs.
Dow jumped up at the end of the week based on the jobs report proving my CNBC talking heads point from before. Profit taking will take hold at the beginning of the week and those “suckers” who bought will now watch all of their returns disappear. Bringing in new investors to payoff existing investors and keep our Ponzi scheme going is the name of this game. Mr. Madoff would be so proud.
I’ve been thinking (sometimes that in itself is dangerous) about this unemployment/union workers/state & city workers, etc. Eventually the truth, and the result of that truth, will be realized by these people and the public in general; then, I would expect it to ‘hit the fan’. What else could we expect when these union works and the others discover the truth that their ‘pensions’ are no longer in existence; or, when the amount they have remaining for their retirement will cover them for perhaps, a couple of years?! I would guess that we shall see civil disobedience in the order of Greece, and soon Hungary, Spain, Italy, et al.
Correction. Profit taking happened on Friday. Dow jumped for one day then crashed the next.
The equation is quite simple boys and girls…. organized Money floats the concept of a recovery to lure available equity back into the market before it fleeces the “investors” one last time before the crash Money expects. It is consolidation of wealth at work… Money’s only true goal, more.
Unemployment figures are tossed around to reinforce that faux recovery, but are those jobs equivilant to those that have been lost? Without dramatic manufacturing gains, no recovery is possible. The banks won’t lend because they know what’s ahead and are hording our gift (baliout) in preparation. You don’t need a degree in econ to connect these dots.
As for the media, does anyone really expect candor from those who report the position of Money? How many men control the media and what banks own these men? People need to think for themselves and trust the simplest of instincts, survival.
Can you explain birth/death adjustments? To sum this article up, it would seem that the government will report the economy adding 500,000-700,000 new jobs when 420,000 of those jobs are temporary Census workers. Is that correct? Basically the private sector has to add the same amount of job for us to be at zero?
It would seem every time I turn on CNBC during the daytime they are constantly touting the economy improving and then telling everybody where to invest. Call me paranoid but it would seem the only reason the talking heads are up there are to sell us on the illusion of improvement so we can part with our last few savings dollars to prop up the Dow, Nasdaq, S&P etc. Individual stock promotion (pump and dump) schemes are illegal but when the networks pump up the market it seems to be completely okay. Am I crazy paranoid or dead on accurate?