Posts filed under “Employment”
The dismal set has gotten all hot and bothered over the preliminary ADP data, thought by some to be an early read on the NFP report. According to National Employment Report from Automatic Data Processing, the "private sector added a seasonally adjusted 368,000 nonfarm jobs in June."
It turns out that the ADP data is compiled, seasonally adjusted, and massaged in a very different manner than BLS does.
Regardless, its actually much ado about very little. Although NFP is eagerly awaited each month by wonks of all stripes (present company included) today’s number is unlikely to represent a significant departure from the well established trend that has developed since the 2001 recession ended.
One point does not a trend make. And even if today is a killer number, we have seen what’s been in place for nearly 5 years — and it has been none too encouraging.
Why? The simple fact is that this recession recovery cycle has been historically very weak in terms of private sector job creation. Indeed, depending upon how you measure it, this is the first or second worst cycle since WWII.
The present cycle is overly dependent on government jobs. Its seen a hugely disproportionate number of private sector employment overly Real Estate reliant. These positions are more the product of government stimulus — i.e., ultra low rates — than they have been of an organic nature. Further, many of the remaining non real estate jobs have been disproportionately of the lower paying / weaker benefit variety than the jobs they are replacing.
And as the recent spate of layoffs in construction, mortgages, and real estate brokerage reveals, as rates rise the new jobs turn out to be somewhat more temporary in nature than originally believed.
So regardless of the outcome of today’s report, it is but one number in an ongoing series. And the prior series has been rather disappointing from a macro perspective.
Prior to the ADP report’s release, the consensus was for 170,000 nonfarm jobs; that’s now been bumped up to 200k.
I’m sticking with the under.
Today’s NFP number stunk the joint up: 75,000. That’s half of the monthly population growth, meaning the percentage of people working (relative to pop) actually went down, if we are to believe this data.
Astonishingly, some people STILL do not understand the data or the context of the weak job growth within this recovery. To wit, my friend Cody Willard – a telecom strategist – writes:
"Surely, Barry, you’re not seriously trying to rekindle your argument about "job creation is not what it is typically at this phase of a recovery."
That statement has been a cornerstone of your bearish rants for the last couple years. Yes, I know you’ve been a "trading bull" and what not, and rightly so, but this economic argument of yours has been, in my view at least, wrong for the last few years and now that job creation is finally starting to slow — years after your repeated flagging of how this "recovery" (You still call this a "recovery" btw?)"
Ahhh, poor Cody. He is lost in a sea of data, unable to see the truth. He believes the spin.
Rekindle? Just because you close your eyes, the boogie man doesn’t disappear.
Hey Cody, please cite me some data revealing this to be an above-average private sector jobs creation recovery. Hell, I’ll take average.
You won’t, because you cannot.
Cody is engaging in several analytical foibles, but the best way to describe it is "ignore reality." But his subjective error does not change the objective reality for the rest of us: By any honest measure – e.g., NY Federal Reserve or Cleveland Federal Reserve research — this has been the worst modern jobs recovery on record.
This is not a meme I am pushing or a Bear story I fabricated.
It just “is.”
This doesn’t mean you run out and short everything; as I wrote last December, one should Never Confuse Economic Analysis With Trading.
But comprehending the reality of the economic situation is important. Why does this matter? What Cody fails to consider is the importance of understanding the specifics of how a recovery comes about, and how it compares to prior recoveries. What it means as the massive government stimulus that goosed the economy begins to fade. What happens when the Pig is finally thought the Python?
I expect that as we begin to slow, there ain’t a whole lot of fat to get sliced. As unemployment starts ticking up, it will not be pretty. It suggests the next recession will be more severe than the last one.
UPDATE: June 2, 2006: 12: 47pm
Cody and I finish the debate below