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Thursday, July 02, 2015

The Jobs Schizophrenia Continues; It Must Be Close to a Breaking Point

Before we even get to jobs, we need to contemplate rail, which gets worse as the year wears on:
Total U.S. carload traffic for the first six months of 2015 was 6,930,568 carloads, down 3.8 percent or 271,831 carloads, while intermodal containers and trailers were 6,605,029 units, up 2.3 percent or 149,442 containers and trailers when compared to the same period in 2014. For the first six months of 2015, total rail traffic volume in the United States was 13,535,597 carloads and intermodal units, down 0.9 percent or 122,389 carloads and intermodal units from the same point last year.
Total June traffic was down more than 2% YoY. In one place they say -2.3%, in another -2.8%. We don't have June trucking figures; they should be better because they are biased toward intermodal. So no disaster, but the divergence from last year's pattern is pretty strong.

Turning now to the unemployment report, Establishment says we added more than 200K jobs; Household responds with jeering and farting noises and says we lost over 50K jobs.We wish these two would just grow up and start working together.

When numbers get this out of joint, I usually turn to Table A-8. Table A-8 says that, since February and on an SA basis, we have gained about 160K government jobs and lost about 210K private sector jobs, but added self-employed. The net non-ag wage-and-salary is virtually unchanged at +10K, with the balance being made up of private household workers. 

Table A-8 agrees well with rail. 

There must be some things off about the Establishment survey, because it's telling us there hasn't been much life in construction, which just can't be true. Construction and housing reports show strong activity, and those agree with fuel supplied figures from EIA.

Table A-8 also agrees that construction is good, because it shows we've added over 250K self-employed since February, which you would see when construction was strong. And gas, self-employed, construction surveys, and auto sales all agree that construction is strong. The net A-8 non-ag gain for all categories of employment since February is about 310K, which does make sense. 

The official unemployment rate this month is 5.3%, which is sourced to the "exodus" - the total labor force fell sharply, because those not in the labor force rose by over 600K. This may be partly due to the end of the school year, although seasonal adjustments are supposed to deal with that. But as we collectively age, retirements are going to pick up, so perhaps that's the reason for this blip. 

But regardless, net unemployment is reaching lower bounds. 

The establishment report is initially poorly able to pick up some types of structural changes in the US economy. It can both lag upturns and lag downturns, although in revisions sometimes occurring years later it becomes much more accurate. CES generally compensates pretty well for the unavoidable flux with the birth-death adjustments.

The Establishment survey is quite reliable for wage and hour trends, and this month it was pretty static. Therefore my conclusion is that the Establishment survey is over-reporting a bit; wage trends are probably accurate but partly due to retirements and replacements with lower-level employees; a year or two from now Establishment will be revised to report lower trends for employment this spring. Also, never discount the importing-cheaper-workers trend.

NACM CMI is showing more trouble in B2B credit. The June numbers were not good month-over-month and YoY. Thus we will see some issues this summer. In particular, the BK numbers are rapidly degenerating. That is quite surprising because 2008 naturally caused a lot of BKs, and structurally they are now disfavored. So if they are happening, they are happening from acute stress, and the unfavorable indicators show very signficant financial stress.

As long as construction and motor vehicle sales hold out, you won't get the correlations needed to form a recession. MV production plans for the summer quarter are still very strong.

When MV production plans slack off, that's the time to worry.

Ok. Great, deep analysis. Reasonable and rational. Tested by history. Great. A usual. :)


I think a more accurate forecast must include what is happening in greece, europe, china and the fact that central banks have played all their trump cards already.

If grexit was baked into the cake already, then markets would not have dipped sharply last week or be so hampered this week.

And china's move to relax lending and margin rules smacka of desperation to me.

I see no positive inouts down the road, either - nkthing likely ti happen that will make consumers in the usa or western Europeans spend more.

in fact, i see people spending less. And a recession.
Not to mention that the President gave another spiking-the-ball speech on how superb the economy is due to his transcendent leadership.

And he actually cited the unemployment rate as proof! I have to hand it to him, he does not lack chutzpah.

Reliapundit - I have been watching the Chinese debacle with foreboding awe. This is their 1929.

The South American economies are not doing well. The Asian economies are having difficulties. It's hard to find a really bright spot.

I looked at the manufacturer's shipments, orders and inventories, and that looks recessionary in May.

I think there are more problems with export orders than just the strong dollar.
Hi maxedout, thanks for the thoughtful reply. After trillions in central bank stimulus the global economy is teetering on the edge of another crash. Imo, only an unpredictable event of a positive nature can turn things around before a crash occurs and i just dont see any possibilities. It is much more likely that an unpredictble negative events triggers the crash. But even without something eventful a crash remains most likely. What cannot go on forever wont. Btw, china announced even more desperate measures today to prop up their economy...,

There is an indicator called the Chemical Activity Barometer put out by the American Chemistry Council, that is fairly new I think but does seem to have a good record tracing economic activity or lack thereof. Couldn't find it, is there anyway you caould ? and see if it can shine some ligh on the economic situation ?

Being that a government job requires about 5 private sector jobs at minimum to pay for it, the fact that private sector jobs are down and government jobs are up is actually a double negative. Add in the fact that government jobs are generally full-time jobs and any private sector job growth is in part time jobs, you're going to need about 10-12 part-time jobs to pay for them.

The only other option to pay for those additional government jobs is new and increased taxes. That essentially points to further private sector job cuts. One only has to look at the financial condition of California, Illinois, Pennsylvania and a couple others and then realize these basket cases are increasing government payroll they cannot afford, acting like the GSE's and banks 7 years ago in assuming the rest of the nation will bail them out.
Konnie - I watch chemicals on rail and on manufacturer's shipments, orders and inventories. They have been rough this year, esp. in the second quarter, but might be stabilizing right now.
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