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Friday, May 06, 2011

Oh, Lord, That's Not Good

Unemployment rate rises to 9.0%; Household survey shows 190,000 lost jobs in April, participation rate stays at 64.2%; employment/pop ratio drops .1 to 58.4%.

In the distance, I hear violins for commodities.

Not-in-labor-force grew by 131,000.

The establishment survey shows growth by 244,000; it is not reliable. One of the puzzles has been why gas consumption should be down if payrolls are rising; that puzzle is now solved. Rising initial claims, gas consumption and what I've been hearing from small businesses confirm that there was a notable change in behavior in April.

This is a negative surprise for me; I expected it to be better.

The Household survey is the one to look at right now; the establishment survey doesn't ever pick up sudden turns in the economy well, and in this case, because it is a sudden turn, it really misses. Next month the establishment survey will pick up far more than this, but it will lag what is actually happening for months.

There is effectively no floor on oil before $80 in the near term, $70 in the longer run. The tide just went out.

I will write more in a few days; I am scheduled to go to SuperDoc's and work on his computers. It is a beautiful, sunny day on which to listen to the low agonized wails of the silver traders begging for morphine.

PS: What happened is what the NACM surveys have been hinting for a couple of months; almost all of this is in small service businesses. And NFIB's recent employment flash shows that more small businesses cut employment than hired in April - that's how you get these numbers. See CR's post on the NFIB flash. The bottom line is that gas prices just got to the tipping point; in late March my aisle count at grocery/lower end retail showed the impact, but I didn't expect it to show up this quickly in the surveys. The lower margin and the smaller the business, the worse shape they are in and the bigger the impact now.

The small low-margin businesses are always undercounted in ADP and establishment surveys in a turn. Establishment gets a lot of its numbers from imputation, which works very well indeed in stable circumstances. In either a sudden uptick or a sudden downturn, the imputations are all wrong and then the survey can be way, way off.

Update:
To make Euro life even more special, the Greek kaka is hitting the fan.

Comments:
So I'm guessing you wouldn't agree with the tone of this post...
 
Couldn't be further off, David.

This is real, the last six weeks of carloadings have told the tale.

The forward impetus of the economy was weakening even in February. In April, it dropped out.

The last two weeks of carloadings have been -0.3 and +0.0 YoY; we are now going to see an accelerating drop in intermodal to match.

The sudden problem seems to have come from sharply declining incomes for the lower third of income earners, layered first by the impact of the Japanese tragedy and in May, about to be accentuated by the impact of the flood/tornado disaster in the US heartland.

This a sudden downturn, but since the 2007 recession the economy has been very precisely calibrated on prices; the rise in food and fuel costs is just too much for US consumers to bear.

Usually when the economy improves the unemployment rate goes up, but that's because participation spikes. We are just losing jobs; that is all there is to it.
 
There is no money on Main Street. Wall Street and
obsolete tax an trade policies have done their damage.

Sporkfed
 
I agree with Sporkfed about the lack of money on Main Street. Small business never got a chance to rebuild reserves, so when the turn came, they had to cut immediately.

This also shows up when you look at where job gains were coming from prior to this ... not from small business, which tells you who was getting squeezed.

The two parties do an excellent job of punishing small business in favor of established party interests.
 
So the real question I have is, does the Fed stick us with QE3? (Is Ben's last name really Dover, not Bernacke?)
 
MOM,

I stayed up all night (again) so I could see the employment report.


On the one hand, I saw 244,000 jobs created.

On the other hand, I saw those 190,000 jobs destroyed.

On the one hand, I saw hourly wages rise.

On the other hand, I saw real hourly wages fall.

On the one hand, I saw the "Stocks rally as hiring spree surprises Wall Street".

On the other hand, I saw stocks fizzle while I slept.

@#$% that "other hand". Let's just cut it off, lol. Sigh.

My word is "plimlfix".

I think it is like a permanent fix, with just a bit of flim flam.
 
I "Kaka" the name of the new Greek currency? Are they not going back to the Drachma?
 
Well, it's just a rumor and the rumor is being denied, but I assume that if it happened, the currency would be the drachma.

In German, that would be translated as "Scheissdreck", because after all, Europe has guaranteed a lot of the debt.

However no matter how often everyone denies such rumors, the reality is that Greece cannot pay their debt. It will have to be written down. I would think the current rumor is an attempt to make that happen.
 
Mark - I find that if I go to sleep, morning and bad economic reports show up very reliably.

Sometimes I stay up to watch the Asian trading, and sometimes I get up very early to watch it.
 
The employment report and the news reports of the hiring spree inspired me to create a few charts of civilian employment.

Enjoy.
 
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