Some are hailing the Bureau of Labor Statistics’s latest labor situation report of 244,000 jobs added during the month with unemployment rising to 9.0% as a sign that the economy has improved, the recovery “has legs”, etc. Frankly, I don’t see it. When you subtract the number of jobs added by McDonalds alone (62,000) and take into consideration the sheer size of the birth-death adjustment (some 175,000 jobs), I find that report pretty phlegmatic. It’s especially so what you take into account that a) we’re nearly two years into a recovery; b) according to the NBER the mean trough-to-peak period is 59 months in the post-war period; and c) the median is no more than 58 months. That means that we’re probably at least half-way into the recovery.
It’s all downhill from here, baby.
I prefer Gallup’s simpler survey-based measure of unemployment. Like the BLS report, it has shown a mild improvement over the last period. Unlike the BLS, though, it also tracks underemployment – which has NOT improved recently. Which suggests that a lot of people are getting, well, McDonald’s-quality jobs.
Also, the long term trends are, as you put it, phlegmatic:
http://www.gallup.com/poll/125639/Gallup-Daily-Workforce.aspx
Yes, a very disappointing and unfortunate report. And there’s that pesky birth/death statistical monstrosity again.
I suppose the only two noteworthy points to be made are that a) its clear we are going to continue to see choppy numbers; that’s always an indication of drifting vs clear momentum and 2) as a former lender and now business owner I’m very used to viewing monthly or quarterly financial reporting. For 20 years now I’ve been listening to cock and bull stories like “we had bad weather” as if weather wasn’t historically variable. Funny thing, I’ve never heard “we had good results because of GOOD weather.” Anyway, I think these people have missed the boat and need to get with the program and adopt the greatest, most universal theory of all time: global warming. “Well, earnings were down because of global warming; its predicted by the theory, you know.” (Heh. Couldn’t resist.)
I suppose I could point out once again that the business community as a general proposition is not in an investing and hiring mood in the current political environment………..but I know what that will get me. So on we go professing “surprise.” I’ll try not to drool when making that surprise argument……
At the same time, Ezra Klein is right:
The recovery has been much swifter, and much more sustained, on the corporate side. They’re not just nearing normal. They’ve left normal in the dust. Yesterday, Fortune magazine released its annual Fortune 500 list. Their press release came armed with a remarkable statistic: “The combined profits of the Fortune 500 increased by 81% — $318 billion — this year, the third largest percentage gain in the list’s history.†Compare that to the unemployment rate, which fell by just 8 percent over the past 12 months.
These are very good times to be a shareholder in a politically-protected company. Too bad that wealth creation doesn’t actually trickle down to the rest of us.
I wonder if you just run the math on net savings to corporations for reduced financing costs (free money in short term markets), how many billion does that add up to?
This one is for you Dave.
http://www.calculatedriskblog.com/2011/05/employment-dirty-little-secret-and-more.html
Steve
“I suppose I could point out once again that the business community as a general proposition is not in an investing and hiring mood in the current political environment”
In that environment, they are racking up near record profits.
Steve
“I wonder if you just run the math on net savings to corporations for reduced financing costs (free money in short term markets), how many billion does that add up to?”
And I also wonder what the increase in commodity raw material inputs is. How many billions does that add up to?
Steve –
“In that environment, they are racking up near record profits.”
Its called unsustainable margin expansion, and cash cowing. Business 101. They aren’t stupid; they are not making the investments in physical or human required for future growth. Cash cowing is an end stage posture, not a growth posture.
Get back to me when you understand rudimentary business concepts.
I am aware that it’s a misuse of statistics to subtract the birth-death adjustment from headline employment. Notice that I didn’t do it.
However, it’s not wrong to note how high the adjustment factor is relative to jobs and I see nothing in CR’s post that would suggest otherwise.
Bottom line: unemployment is too high, job creation isn’t great enough, and I sincerely doubt it’s going to grow significantly more robustly over the next 20 months.
BTW, Dave Altig (Atlanta Fed) had a good post yesterday on outsourcing and domestic unemployment. Basically, it ain’t outsourcing. To tell the truth I don’t think that Dr. Altig understands the secondary effects of outsourcing very well, e.g. outsourcing manufacturing reduces the number of domestic engineering jobs as well as the number of domestic manufacturing jobs.
“Its called unsustainable margin expansion, and cash cowing. Business 101. They aren’t stupid; they are not making the investments in physical or human required for future growth.”
I thought we were waiting for the confidence fairies to arrive? I think that you ignore a lot of data in order to make this all about the political climate. I think it just as likely that we are seeing the continuation of long term problems and changes in our economy. We are also seeing data showing that companies are investing again, but not in real estate.
Dave-Saw that. Hope you saw Dow’s piece. I am not a great currency guy, but I think these kinds of basic changes, coupled with the recent shock to our economy, are more important than worries about whether D or R runs the white house.
Steve
http://blogs.reuters.com/great-debate/2011/05/03/dollar-debasing-and-other-short-stories/
steve,
Not all businesses are making record profits. Many are still struggling. If anyone has any data to show which business are making good profits and which ones aren’t, then I’d like to see it.
There are engineering jobs, of a sort: half the country is chasing after too few iOS app developers. I’m looking for competent iOS coders and game designers myself and it’s not easy. I imagine the same problem exists for Android people.
Virtually none of the training could have taken place in the conventional educational system — it moves too quickly for institutions to keep up.
I don’t have any sort of number on this but certainly given the app frenzy there must be thousands of potential jobs.
Dave –
I’m not sure if your post on birth/death was directed at me. If so, I actually was simply noting that this highly suspect and material adjustment again raises its head. I quite frankly don’t know what to make of it, except it is so material as to make analysis problematic.
steve –
First, that comment of mine came out too caustic. Not what I intended. Just that corporate profitability and investment decisions are different animals. Sorry.
Second, I don’t believe in any way I ignore data for political purposes. Its just that I live in this business world day to day. I read all the same generally published data and commentary you do, or Dave does etc. But I simply do not think there is any substitute for speaking with real live businessmen and how they think, and – most importantly – how they behave. eg Paul Krugman is a very intelligent guy. Yet, when I bother to read him, its clear he is also a very intellectually dishonest and ideologically driven commentator. Hence, he writes crap. He knows nothing about how businessmen ar thinking right now.
Its a free country, you can believe what you want. But the notion that the business community – in particular the small business community – isn’t scared shirtless about Obama and the “kill the rich” environment right now is simply head in the sand stuff. And the economic consequences are real. At the risk of unsolicited advice, you might want to look in the mirror and ask yourself if your own political views aren’t at odds with policies that might actually help those in trouble right now.
No, it was directed at steve. CR had made some blistering statements about people who subtract the B/D adjustment from headline numbers, steve had pointed it out to me, and I wanted to respond.
Since the B/D adjustment isn’t seasonally adjusted and the headline unemployment numbers are you can’t just subtract the B/D adjustment from headline unemployment to arrive at an unadjusted figure. However, you can (as I have frequently done) point out that when the fudge factor is as large or larger than the number you’re adjusting it doesn’t make much difference whether it’s seasonally adjusted or not. The result is suspect. I’m pretty sure we’re in agreement on that.
I might add that I think that Bill (CR) is sensitive about his stalwart defense of the unemployment figures and rightfully so. They’re lousy. Attempting to make a silk purse out of that sow’s ear is an unenviable chore.
As I see it he’s desperate to pitch this as a U-shaped recovery and the evidence is becoming overwhelming that it’s a Japanese-style L. When you do everything that the Japanese did you shouldn’t be surprised if everything turns out for you the way it did for the Japanese.
“I’m pretty sure we’re in agreement on that.”
I’m perty sure as well……
“As I see it he’s desperate to pitch this as a U-shaped recovery and the evidence is becoming overwhelming that it’s a Japanese-style L.”
As I noted re: the JPMorgan stuff. With all my heart I hope I (and you) am wrong. But I don’t think so. And I think it is a tragically self inflicted wound.