Friday, September 02, 2011
August Employment - Dirty Jobs!
The two month total is now +293,000.
This doesn't mean that the economy is strong; the YoY is now pathetic. On a seasonally adjusted basis, the Census/BLS household survey now reports 139,267 people employed in August of 2010, versus 139,627 employed in August of 2011. These are levels of job gains that are consistent with recession (although not requiring recession):
This data is only through July, but it gives you an idea. Close to zero YoY isn't good.
Unemployment would have risen over the summer if it weren't for continued declines in the labor force. On a YoY basis, the US labor force has declined by 523,000, and the participation rate has declined from 64.7 to 64.0.
One indicator of the relative strength of the July-August period is that the US labor force grew by 366,000 in August. So really, this is a nice patch amid the general economic clouds.
As to where and how the jobs are being created, August looks less healthy. The number of part-time workers for economic reasons grew by 430,000. There were 122,000 reentrants in August, which is a good sign.
Not a good sign - the long-term unemployed number (six months) dropped by 151,000, but the number of unemployed in the next bracket (15-26 weeks) rose by 274,000. You hate to see this bracket rising because it means that the next wave of the economically dislocated are moving through the system without having been able to find jobs.
Why are the Household Survey and Establishment Surveys so different this month? One probable answer is that the Establishment survey has slightly different timing, especially for payrolls at large companies. A second clue can be found at ADP, which showed job growth at a standstill in large corporations but clipping along at small businesses. That could easily bias the Establishment Survey negatively.
To show just how flat job production has been, here is the unadjusted series for employed persons with no disability 16 years and older ( LNU02074593 access here):
Frightening, isn't it? We really have barely gained jobs at all since the end of the recession.
Six months ago this wasn't so - there was a clear positive trend. But over the last three months we dumped that positive trend and at best are stalling out.
I'll have much more over the weekend. I was waiting for this pop before I felt like one could fairly get a reading on where we were and the leading edge.
One final word on the leading edge - the growth in part-time for economic reasons this month does not bode well. There was a minor jump in employment by temporary help services of 5 thousand (fixed), probably correlated with the end of the Japanese supply shortages. But probably larger companies are refusing to hire permanent workers, also. Margins are not good, and failures/credit demand is increasing.
Once the August Treasury Monthly Statement is published I'll have more, but my guess is that we are adding lower-paid jobs and shedding higher-paid jobs. We're in the Campbell's soup economy (as in "can't afford it"), and growth over the next six months will be hard to find ex-export strength. Export strength will be increasingly hard to find also!
"Upon examining the unfavorable factors, it is striking that the problem is primarily one of sudden business stress and
failure. The biggest declines were in accounts placed for collection and dollar amounts beyond terms."
"There is strong evidence that many companies are struggling with the almost flat growth of the
economy and that many of them had bet on better conditions by now. They invested in the equipment and expansion they thought they might need and are now struggling to pay for that investment."
Yes, that's EXACTLY the relevant portion and precisely why I included that link. The "sales" number, although declining slightly, is supported by higher input costs which increase the need for credit relative to the same volume of goods changing hands.
But the collections number (the unfavorables) point toward the financial stress of companies and are a better future predictor of investment and job creation.
In short, the Mr. Packaging Guys who took the risk are now getting their gonads severed and handed to them. We're looking at the margin compression effect, and QE3 isn't likely to help it at all.
This report makes QE3 almost inevitable, and QE3 will kill any chance at a milder downturn (what I call a "skipping recession"), because QE3 is going to dump a bunch of companies into bankruptcy.
There is maybe a 10% chance that the Fed will develop some guts and not do it, but 10% isn't very encouraging.
Therefore, my base forecast probably now shifts to the strongly negative for a much more consistent and more widely disseminated downturn. I will only know for sure after I see the August Monthly Treasury Statement. All companies, faced with declining profit margins, become more conservative with spending and hiring, and it certainly looks as if any impetus in smaller companies will not be sufficient to overcome the roadblock.
You knew it was coming. Here it is.
My guess is that government tax polices relating to equipment depreciation and tax credits for employment hiring were significant factors in this process. The problem is that manufacturing has become very efficient and as market segments modern up there equipment
based on government tax policies rather then organic demand the results trend towards manufacturing consolidations, BK, along with the entire supply chain that existed prior to the manufacturing segment gearing up shrinking.
My business lease expires at the end of next year. I am one of those people who is locked up because of Obamacare. I can renew my lease on a year to year to bide my time as I think commercial property rates are going to decline. But this would stop me from adding on to my service area as I really need another two service bays.
Or I could find something else on the market but they all want at least a 5 year term. This is what I would like minimally but I fear it would lock me into a high rent rate (assuming commercial rates fall) and WHAT IS OBAMACARE GOING TO COST? I could live with the business risk but to add Obamacare risk to it and I am leaning to just renewing for a year until something is settled. If I just plug the fine of $2000 per person in, it really hurts the economics of the business. If my gears are locked up on this issue, imagine a company that has a lot of employees is thinking. Heck, we will be lucky if the Supreme Court even hears the case in 2012. Obama and Pelosi never met a payroll and it shows.
CHRIS DANIEL: Mr. Juszkiewicz, did an agent of the US government suggest to you that your problems would go away if you used Madagascar labor instead of American labor?
HENRY JUSZKIEWICZ: They actually wrote that in a pleading.
CHRIS DANIEL: Excuse me?
HENRY JUSKIEWICZ: They actually wrote that it in a pleading.
CHRIS DANIEL: That your problems would go away if you used Madagascar labor instead of our labor?
HENRY JUSKIEWICZ: Yes.
above piece of interview
full interview (audio)
Links to this post: