U.S. Payroll Stunner, Full ‘Pathetic’ Jobs Report Analysis

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Recently by Mike “Mish” Shedlock: Despite Stimulus, 6 Million Benefit-Paying Jobs Vanish in OneYear

     

Thoughts on the Jobs Report

Last month I commented things are awful at first glance and simply bad beneath the surface. This month things took a huge turn for the worse.

Three months ago I commented “It is very questionable if this pace of jobs keeps up.” Clearly it didn’t, for the second straight disastrous month. Certainly this cannot all be blamed on the Tsunami in Japan. The entire global economy is slowing rapidly as I have commented numerous times.

Economists projected a drop in the unemployment rate, I called for a rise to 9.2%.

Few were prepared for today’s grim numbers.

  • US Payrolls +18,000
  • Last Month Quietly Revised Lower to +25,000 from +54,000
  • US Unemployment Unexpectedly Rises +.1 to 9.2% Despite Drop in Participation Rate
  • Since March, Number of Unemployed Rises by 545,000
  • Household Survey Number Unemployed Up 173,000
  • Household Survey Number of Employed Down 445,000
  • 272,000 people dropped out of the labor force, reversing the labor force gain of 272,000 last month.
  • Average Weekly Workweek Drops by .1 Hours
  • Average Manufacturing Hours Drops by .3 Hours
  • Average Private Hourly Earnings Decrease 1 Cent
  • There has been virtually no improvement in part-time employment in a full year. 8.5+ million workers want a full time job and cannot find one.

Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.

Digging deeper into the Household Survey, we see some more interesting data. In the last year, the civilian population rose by 1,799,000. Yet the labor force dropped by 263,000. Those not in the labor force rose by 2,063,000.

Last month the labor force rose by 272,000. This month the labor force fell by 272,000. How’s that for symmetry?

The 6-month labor force total for 2011 is +4,000.

Many of those millions who dropped out of the workforce would start looking if they thought jobs were available. Indeed, in a 2-year old recovery, the labor force should be rising sharply as those who stopped looking for jobs, once again started looking. Instead, the labor force is not expanding at all.

Were it not for people dropping out of the labor force for the past two years, the unemployment rate would be well over 11%.

June 2011 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) June 2011 Employment Report.

Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down.

Unemployment Rate – Seasonally Adjusted

Nonfarm Employment – Payroll Survey – Annual Look – Seasonally Adjusted

Notice that employment is lower than it was 10 years ago.

Nonfarm Employment – Payroll Survey – Monthly Look – Seasonally Adjusted

Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.

Ignoring the effects of the census, in the last 9 months of a recovery 2 years old, the economy is averaging 130,000 jobs a month. That is very poor as recoveries go.

Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat.

Nonfarm Employment – Payroll Survey Details – Seasonally Adjusted

Average Weekly Hours

Index of Aggregate Weekly Hours

Average Hourly Earnings vs. CPI

“Success” of QE2

  • Average hourly earnings of all private-sector employees declined by 1 cent in June to $22.99; over the year, the series has increased 1.9 percent.
  • The consumer price index for all urban consumers (CPI-U) was up 3.4 percent over the year ending in May.

Not only are wages rising slower than the CPI, there is also a concern as to how those wage gains are distributed.

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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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