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Friday, July 02, 2010

Nearer My God To Thee

Oh, no. I thought the employment report would be bad, but not this bad. I mean, the headline number looks great, but you head for diapers when you look at the household survey:
If you go to Table A-8, seasonally adjusted wage and salary jobs in private industry dropped by 166,000. This can't be good, and it is very hard to explain this away as a statistical aberration given the size of the changes. Here we might be seeing the Gulf effect.

There is some good stuff in here - those who are working are less likely to be working part-time due to slack work or the inability to find full-time work.

The establishment survey reports average weekly hours down .1 (33.2>33.1). All of that is in goods-producing; service industries are stable.

There is a severe temptation to just cuddle up to the establishment survey, because the numbers there look so much better - only a loss of 125,000 jobs, of which all were in government (mostly Census), and private industries gained 83K (-8K goods on 22K construction loss, +91K services). But the reality is that the household survey is generally far more accurate in these conditions in the first month.

And then, one must deal with the last month's higher initial claims. The household survey and initial claims sync very well. Also, one cannot really explain this away as a wave of retirements, because Table A-16 shows that U-5 did not decrease. U-6 edged down, but that is because more employed people are working full-time. The only difference between U-5 and U-6 is that U-6 counts involuntary part-time workers as well as discouraged, etc. U-5 is still at 11%, and last June it was at 10.8%.

This is a totally sickening employment report. The NSA birth-death adjustment for the establishment survey for June is 147K. Scroll down to see the tables.

I have to rethink my second-half forecast now.

Update: And this just puts the icing on the cake. Manufacturers' shipments, inventories and orders full report for May. Bottom line: New orders dropped 1.4%, shipments dropped 1.3%, durable goods inventories rose 0.9%. When you look at the inventories page, you see that value of inventories only really dropped for non-durable, and when you go through that category, it's petroleum.

So this is the end of the inventory cycle. From here, it's sales. And if people are out of the workforce because they have lost hope of finding a job, final sales aren't going to be roaring ahead. Graph published so obligingly by Census:

I really do have to rethink my second half forecast, but it is face-slappingly obvious that whatever else is true, a sustainable 1.7-2.0% growth is not in the cards.

Ugh. I was really hoping you were right about some growth during the second half.
Neil - there will be some, but at this point sustained?
Christina Romer interviewed today on
NPR thought things were hunky dory,
"We are on the expected trajectory"
I'm reminded of Stagflationary Mark's "Stimulus Physics" posts when you mentioned Romer's remark about being on the expected trajectory ...
This is not her field - she doesn't read these reports.

I guess we are on the expected trajectory if you are expecting a double dip.

Oh well. I don't care. I feel normal for the first time in almost 31 years. It's odd but very pleasant.
It was a sobering report, expecially considering this graph from a post on the Political Calculations blog on workforce participation, which really makes the pain clear. Their forecast for 2011 is also very sobering.
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