Friday, August 07, 2009
Back Posting Sunday/Monday
Don't bother to get excited about the employment report. It's not all that.
The next wave is coming - take a look at this graph of the percentage of unemployed workers who have been unemployed for 27 weeks or more.
According to the household survey of the employment report, we lost 155,000 total jobs in July and unemployment rose 267,000. So how'd the unemployment rate drop? Well, the "Not in labor force" cohort grew by 637,000. There are 8.8 million people working part-time jobs because that's all they can find. There are 14.5 million unemployed.
The establishment survey shows the heartening uptick expected from the shipping data in June - private hours worked in manufacturing rose .3, which is a heck of a nice change. The downside, as the ISM and NACM surveys show, is that services are still weakening. Unless the government gets around to passing more stimulus bills with actual stimulus in them, weakening private incomes and declining sales of consumer goods - not to mention the effect of collapsing small businesses - will overcome this uptick in manufacturing.
The seasonal adjustments for June/July were somewhat distorted by the odd patterns in the auto industry. I had expected to see very similar numbers to this report in June. Just swap the two reports, and you get an idea of what's coming down the pike.
Retail sales continue to be depressing, as Bloomberg's summary of retail shows.
One of the most interesting things out there is to watch the trends for older employment (See Table A-6) and compare them to younger employment. The number of employed persons 55 or older has increased over the last year:
July 2008: 26,886,000 July 2009: 27,158,000But the number of men in that age bracket who are working has declined. The increase comes from women who are 55 and older:
July 2008: 12,580 July 2009: 12,929I bet a lot of men have taken early retirement, and their wives have taken part-time jobs to try to cover the income loss. Table A-7 gives you unemployment rates by age.
20-24 years: 15.3% 25-34 years: 10.0% 35-44 years: 7.9% 45-54 years: 7.4% 55--> years: 6.7%Here's another perspective on how deeply this is cutting. This is the unemployment rate for those with bachelor's degrees or higher:
If it were not for the relief valve of early retirements we'd really be looking at some ugly numbers.
Here's the employment to population ratio:
Between 79 and 83 3 percent of the population lost their jobs. We've now managed to top that handily - by about 1%. The critters have been complaining about the teabaggers - one can only wonder how they will react to the rocksalters.
And then, just to top it off, let's all remember about this:
Wait for August - I suspect the figures will change a bit. The wild card is the early retirements. How many people hang it up?
We saw an uptick in activity in late spring, but now our customers are back to wait-and-see mode.
Have you heard anything about the 5- and 7-year Treasury auctions this past week? According to this article, the 7-year auction only succeeded because the Fed bought half the offering.
I'm not sure what to make of this, really. The environment is deflationary enough that if the Fed wants to monetize the national debt, I guess they can probably get away with it for now. There's going to be consequences for creating money and just forking it over to the President's cronies, of course, but I doubt it's the first time that's happened.
Like I said, I just don't know what to make of it.
What's going on with NACM lately? It would make for an interesting post.
I still think we see a services-led recession here, and that the real story is service-sector income declines, especially in the small business area. Seems to me that traditional economic models have services as a lagging indicator that is driven mostly by manufacturing. I can't imagine that reflects reality in 2009.
Real wages have to come down before this is over. We either get it through deflation of incomes or inflation of prices. Either way, the adjustment will fall more heavily on the rentier class, just because of what Willy Sutton said -- government will rob from where money is, and real median incomes have gone nowhere for decades. That leaves the rich, and it tells us something about the direction of policy. I'm not making a value judgment -- just a prediction.
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