An Alternative Read on Today's 'Bullish' Jobs Data

Economists and stock bulls cheered this morning's better-than-expected November employment report. But was the data as good as it seemed? Consider the following:

Temporary jobs

Could the nine-month rally in share prices and the positive spin pouring out of Wall Street and Washington have encouraged some owners and managers, who are seeing little direct evidence of a rebound in the economy, to acquire what might be described as a labor call option -- that is, temporary staff (a key factor in the overall increase)?

Otherwise, temporary employees accounted for 52,400 of the hefty 86,000 jump in the professional and business services category. Might this reflect the fact that firms are temporarily taking on accountants, lawyers, and others who can help them further reduce costs (e.g., labor), restructure operations, and maybe even prepare for bankruptcy?

Long-term unemployed

Today's employment report revealed that the labor force participation rate dropped to 65%, it's lowest level in more than two decades; the number of Americans who are unemployed over 26 weeks fell to a record 3.8% of the civilian workforce; and, the "underemployment" ratio improved only marginally, to 17.2%.

Could this set of statistics be interpreted as a sign that employers don't see enough good opportunities to justify taking risks as far as hiring is concerned? In other words, are they are sticking with the safe option -- the job market's "known quantities" (e.g., those who are currently employed or who haven't been out of work too long)?

Category trends

While much of the focus was on the overall number, the breakdown by category was less reassuring. Those areas of the economy that would naturally be associated with a sustainable rebound in activity, including manufacturing, trade, transportation and utilities, and construction, are still hemorrhaging jobs.

Moreover, recent developments suggest that two categories which did see respectable gains, education and health care, face major headwinds in the period ahead. With municipal budgets under growing strain, school budgets -- and education-related hiring -- have nowhere to go but down. And with all eyes now focused on the rising cost of health care, the pressure to reign in spending will only increase.

Comments

[roger]

The trend is unmistakable,labor must give up a greater
share of the wealth it creates.
Increased productivity does not equate higher standards
of living for the masses nor does it create more jobs.
The true basis of exchange is barter,money falsify s value.

[DH]

Think of the bright side. China (emerging markets) is probably screwed up even worse. Just think what their stats will report next. Time to go for the 'get away from it all' play and buy a few blocks of Chinese real estate. In China. Why buy your own island? Just go to the real Chinatown and baronize yourself. Tell BR to eat cake. When China's deflation sets in and overpowers the country in 2011 you might even scarf up some serfs to exploit.

[KRS]

The question begs to be asked, is the marginal improvement in unemployment b/c of those whose benefits have run out and are no longer included in the number? Remember, it was this time last year that jobs were being lost like crazy, that means it's that time this year for those individuals' benefits to be running out and thus excluded from the jobs data.

[Michael R.]

It's the government fudge factor, stupid.

[DougK]

Productivity has risen in spite of all the layoffs, suggesting that most of the lost jobs were actually a burden on the economy. Repeatedly extending UI benefits and expanding SNAP effectively amounts to paying people not to work. Since the fundamental changes needed to provide opportunity are not being made, how will this end? Perpetual "benefits" to placate a large energetic (formerly productive) underclass, or increasing problems of "civil unrest"?

[RTC]

Typo: it's 38% of the unemployed who are long term. This is a remarkable situation, here's a graph comparing it in previous recessions:

http://web.cecs.pdx.edu/~rc/index.html#LongTerm

[John Sipahi]

They find a way to play with the statistics again.
this time they reduced the previous 2 months drastically.
Numbers are too good to be true.
If you look at the latest Monthly treasury statement for october 2009 total deficit is 1.4 trillion dollars.
Receipts (2.1T) - Outlays (3.5T ) = 1.4T
the 1.4T/3.5T= 40% . We borrow 40% of the money we spend.

The deficit in 2007 was around 240 billion
in 2008 it was 450 billion
now in 2009 it is 1.4 Trillion
they estimate next year to be more than 1.5Trillion, who know may be 2T.
This is Unsustainable.

[Mark]

TrimTabs scoffing at the data, says 250K+ jobs loss; they have been far more accurate on initial estimates. US govt usually gets close to TriMTabs about a year or two later.

http://www.fundmymutualfund.com/2009/12/trimtabs-continues-to-dispute-us.html

[Tim]

Canada got hit by the US tsunami early this year. While nowhere as severe because the banking system is sound, local governments responded with some budget tightening while business adopted prudent actions to ride out the storm. At the federal level a $40 billion over 2 years stimulus program was kicked into action.

2009 economic growth is about -1%, but expert forecast robust positive growth by the end of the year. They are dead on. Housing starts jumped healthily Q3, while the economy added some 80,000 new jobs in November, bringing unemployment down to 8% (this is about 5% if calculated using US method). Nationally, residential and commercial real estate price have held steady throughout the crisis years, and did not go down at all unlike the US. In fact big city house prices have jumped a few percent bringing them to the levels of 2007.

So Canada is well on its way towards full recovery. This despite exports to the US way down. Is Canada, traditionally dependent on exporting 70% to the US, has become more de-coupled to the US economy? The answer is yes. Exports to Asia and S America have surged, more than make up for loss of export to the US. By the way, Canada still has the lowest debt/GDP ratio of G8 despite the $40B stimulus program. $20B per year is chump change in a $1.3 trillion economy.

The lesson from Canada is clear and simple:

1) Make sure debt and deficit are sound and reasonable. Canada nation debt percentage is half that of the US.

2) Make sure your trade is balanced, preferably a surplus balance. And if not (70% export dependent is not), have a strategy in place to adjust. This is starkly different from the US.

3) Don't ever let the bank get drunk, or screw the economy. Back in early 2000 Canadian banks wanted to play the same games (derivatives, subprime, securitiztion, mergers, high leverage, insurance, etc.) as their US majors. The government came back and hit them with a 2x4 so hard the CEOs crawled back to their corner offices.

4) Have a central bank that's truly independent of the banks. (The Bank of Canada is owned by the federal government. It has only one mandate - maintain inflation between 2%-3%.)

5) Maintain high national saving rates. Offer tax cuts for savings, and never set interest rate so low as to discourage savings. Without reasonable savings, it is not possible to conduct responsible and effective capitalism.