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Friday, June 05, 2009

Jobs For May

By M_O_M metrics, which are often a bit different than the standard, this was one very depressing employment report. There was one bright note - temporary employment improved:
The temporary help services industry, which had been dropping an average of 73,000 jobs per month over this period, saw little employment change in May (-7,000).
Let's hope that is real.

Most analysts pay attention to the establishment survey numbers, considering them more reliable than the household survey. I do the reverse. It is true that the household survey pops around from month to month, but the establishment survey has the Birth/Death issue, and its seeming continuity is, IMO, a fake produced by those adjustments. This is not intended to be an indictment of the establishment survey - I think BLS does a good job. However those numbers are heavily revised, because the B/D adjustments are based on data from about 3/4 of a year ago. Ultimately these numbers end up being reliable, but they aren't that reliable when first released when the economy is in a period of rapid change.

Last month there was tentative hope on the household survey (as Mark noted, total employment rose by 120,000). This month that reversed to a loss of 437,000 jobs. Household survey unemployment rose by 787,000, giving us a March to May rise in unemployment of 1.35 million. Slightly less than half (667,000) of that was due to a drop in the "not-in-labor-force" cohort. BLS figures 792,000 discouraged workers (not looking for a job because there are none). That would take total real unemployment to over 15 million even allowing for substantial error.

The establishment survey reported only 345,000 jobs lost in May, which is leading to a lot of optimism. But I am highly skeptical - the two surveys are showing opposite results for the last two months, and therefore I find it hard to accept today's report as demonstrating a trend.

I would be pretty certain that we were well into the readaptation phase of a recession, in which enough businesses have retracted and pulled out to create opportunity for other, stronger businesses to expand, except for two factors. One is retail store traffic, which just seems dismal and degenerating. The second is that the impact of the auto industry reorganization has yet to truly show. I doubt we will know until August how successful we have been at forming a floor in the business segment of the economy. Consumer spending will probably continue to drag after that, but at least we'd know that most of the restructuring was over (aside from government policy changes) and then we could effectively project a date at which we were certain that consumer spending would stop falling because of the debt trajectory.

I think retail/mall/hotel/resort/government job losses are going to continue to mount regardless. One of the differences in this recession compared to the recessioins of the 90s and early 2000s is that it is not just a private restructuring but a state and local government restructuring that must occur. This recession will be more similar to the 80s than the last two.

Only this time, it will not be Bruce Springsteen singing about steel mills shutting down. The Bruce Springsteen of this recession will be declaiming poetry in a Berkeley coffee house about the loss of government and education jobs. This time, the professors, teachers and government-union workers will feel it. The social changes that will eventually emerge from this recession will be immense. Our national ways of doing things are going to change quite radically, and it will not be in the direction that our president has promised. Regardless of which party eventually gains nominal hold of the federal government, the dual trend sof increasing government share of the economy and increasing consumption share of the economy are gasping out their last breaths. The only way to increase government share is to hike taxes massively on more than half of the US population. This will not sit well.

Consumer credit is due to be released this afternoon. That is the report for which I am holding my breath.

Update: Also see Across the Curve's post on the DB analysis, which includes more of the negatives in the establishment survey.

Comments:
MOM,

"Last month there was tentative hope on the household survey (as Mark noted, total employment rose by 120,000)."

Well, if nothing else, I can't be easily accused of being a pessimist. Sigh.

When I turned bearish in 2004, I figured we'd mostly just stagnate. Using hindsight, that was WAY too optimistic.

I should be more bearish now than I was then. My reasoning was that it seemed like we were just trying to borrow a recovery. There's no "seem" this time though. We're borrowing like there is no tomorrow. Literally!
 
"Our national ways of doing things are going to change quite radically...the dual trends of increasing government share of the economy and increasing consumption share of the economy are gasping out their last breaths."

I think the political class knows that. I think that somewhere in the backs of their minds they know it, and the feeding-frenzy over the "stimulus" bill was an attempt to have one final splurge on the taxpayer's dime before last call.

My real fear is what comes after the crash.
 
Neil - well, that's where the common sense of the common people is going to have to kick in. The post on consumer credit is describing a very real change in consumer behavior. I think some of that will carry through to elections.

Mark - I try to console myself with the thought that one of these days, all these reports and headlines will match. Do you remember last year when we were both laughing about the difference between the data and how it was described? I think we'll know this thing is over when the data no longer gets the spin.
 
I work deep within the bowels of a Fortune 500 company that produces industrial gases. Management is absolutely panic-stricken about the future.

My job is to schedule deliveries in the south and southwest U.S.. Though business is dead in the north and midwest, activity is actually growing in my region. Since January, I have been screaming for the hiring of more delivery drivers and, though everyone agrees with my numbers, no one dares make the decision to actually put a new person on the payroll. It has come to the point that regional vice-presidents (virtual gods from my low position) have to sign off on any new-hires.

I suspect that I will get my way -- eventually -but, in the meantime, I'm also fighting a Six Sigma initiative to reduce the number of tractor-trailer combinations [leased] that we have available at each plant. So, when I do get new drivers to handle the business, they may not have trucks to drive.

Consumer confidence may be on the rise, but my admittedly-anecdotal survey of capital-goods-producers' confidence is still quite low.
 
Very interesting, Craig. Thank you for the info.

Restaurants appear close to stabilization, at least in some areas.

It sounds like you are working in an atmosphere of fear of the future, plus a management too remote from the lines.
 
"Neil - well, that's where the common sense of the common people is going to have to kick in."

Oh, in that case
WE ARE SO F*CKED!
 
Ok, in all seriousness

"The Bruce Springsteen of this recession will be declaiming poetry in a Berkeley coffee house about the loss of government and education jobs."


MoM, what is your reasoning for this?

Does anyone think this administration won't keep "stimulating" the economy? And what jobs will the armies of non-scientifically trained people go? They HAVE to get gov't jobs. Paying for it won't be a problem as long as the dollars are worth less.
 
MOM,

"Do you remember last year when we were both laughing about the difference between the data and how it was described? I think we'll know this thing is over when the data no longer gets the spin."

Oh oh. I have this uneasy feeling I'm going to be a permabear! ;)
 
YT - that's a good question.

The US imports too much to safely inflate the dollar heftily.

Take medicine - every time the dollar goes down, the cost of antibiotics, antivirals, BP & all those other heart medicines, for example, goes up. We don't manufacture much of that stuff any more. Then there's fuel. And clothing.

If the value of the dollar is denigrated very heavily, the living standards of the average person will collapse, much less money will be spent on discretionary items and big-ticket durables, and corporate profits will decline rapidly. Nor can you tax persons so heavily that you kill them in a democratic society in which one house of Congress faces elections every two years. The result is an electoral massacre. Local and state governments have to cut now heavily, and they will tend to cut to maximize the votes left. College professors are relatively expensive. The number of professorships in feminist epistemology is due to fall off a cliff over the next ten years.

Just as the economy could not withstand the run-up in oil last year, it cannot withstand a massive fall in the value of the dollar versus the currencies of the countries manufacturing our necessities.
 
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