Posts filed under “Employment”

NFP: Another in a long series of disappointments

As we expected, yesterday’s NFP was another stinkeroo. The 121k number was significantly below the 200k consensus, and far, far away from some of the myopically optimistic upside outliers.

Let’s delve beneath the surface a bit, first via Barron’s Alan Abelson:

Philippa Dunne and Doug Henwood, our favorite parsers of the monthly
employment reports, put it: "This was a weak report, with few signs of
strength under the surface." They note that the 121,000 slots added
brought the average monthly gain in the second quarter to a meager
108,000, sharply below the first quarter’s 176,000 and even more
sharply below the long-term average of 236,000.

A full 25% of the gain was from government hiring, mostly local and
state . . .

A good chunk of the 75,000 new jobs from private services were
from health care and the bar and restaurant sector. That prompts our
jolly duo to speculate that "maybe our new economic model is one in
which vigorous eating and drinking inspire a lot of doctor visits,
which reinvigorate us for a fresh round of eating and drinking."
drink to that.

Unemployment held steady in June, at 4.6%. But a glance at the data
in the report reveals the percentage of people who want a job but can’t
get one edged up to 5.8% of the labor force from 5.3% in May
. If you
toss in the number of folks who work part time even though they’d
rather be working full time
, the percentage rises to 8.7%, from 7.9%
the month before." (emphasis added)

So not only was the top line poor, but the data points touted as strong — primarily, the low unemployment number — was lousy also.

Jared Bernstein of EPI provides some insight into why employment growth has been slowing:

"An important hint from today’s report, for example, shows that employment in residential construction fell 6,800 over the past two months, the sector’s first back-to-back monthly losses since the spring of 2001. Thus far this year, residential construction employment is up 7,000, compared to an increase of 20,000 over the same six-month period last year. And while employment in real estate was up 5,000 last month, job growth among credit intermediaries and insurance carriers—so-called "downstream industries" from the housing sector—has been notably flat over the past few months. In other words, there are many connections between the housing sector and other sectors in the job market, and the cooling of that sector has far-reaching implications."

Regular readers of The Big Picture will no doubt recognize this line of thinking.

The bottom line is that this cycle — artificially driven by government stimulus — is coming to the end of its unnatural life.  Look for a return to the prior period of flat growth and even weaker job creation — at least until the next round of Rate Cuts restarts the real estate machinary . . . 


Get Shorty
Barron’s MONDAY, JULY 10, 2006

Slow job growth in second quarter reflects pace of overall economy
Jared Bernstein with research assistance from Yulia Fungard
EPI, July 7, 2006

NFP: much ado about very little
The Big Picture, Friday, July 07, 2006 | 06:45 AM

Category: Data Analysis, Economy, Employment, Psychology

NFP: much ado about very little

Category: Employment, Federal Reserve, Real Estate, Wages & Income

The Increasing Pressure on the Middle Class

Category: Data Analysis, Economy, Employment

Employment Slowing in Q2

Category: Employment

When Statistical Measures Fail to Capture Reality

Category: Data Analysis, Economy, Employment, Inflation, Psychology

Chart of the Week: How This Jobs Recovery Stacks Up

Category: Employment

NFP stinks — and Some People Still Don’t Get It

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. 

Yes, Virginia, there is inflation. And yes, Cody, this has been the worst Jobs recovery since WWII. But if you want to believe in Santa, who am I to disabuse you of that notion?


UPDATE:  June 2, 2006: 12: 47pm

Cody and I finish the debate below


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