Why the employment data is quite desperate

Tsing Tao · Apr 9, 2012

Without getting into the shenanigans of whether or not the BLS is accurate by any definition of the word, lets just assume they are for the scope of this argument (hah) and have a read at Dr. Hussman's latest weekly missive. The link for the whole entry is below, but I'll just include the interesting info on the employment part - which should give us an impression of just how bad the Fed has made things for everyone (except Wall Street).

What about recent employment gains?

But wait. How can we say that quantitative easing has such weak effects on the economy when we've clearly enjoyed a significant amount of job creation since mid-2009? Isn't that clear evidence that Fed policy is working?

Well, that depends on what one means by "working."

Last week, we observed "Real income declined month-over-month in the latest report, which is very much at odds with the job creation figures unless that job creation reflects extraordinarily low-paying jobs. Real disposable income growth has now dropped to just 0.3% year-over-year, which is lower than the rate that is typically observed even in recessions." It wasn't quite clear what was going on until I read a comment by David Rosenberg, who noted that much of the recent growth in payrolls has been in "55 years and over" cohort. Suddenly, 2 and 2 became 4.

If you dig into the payroll data, the picture that emerges is breathtaking. Since the recession "ended" in June 2009, total non-farm payrolls in the U.S. have grown by 1.84 million jobs. However, if we look at workers 55 years of age and over, we find that employment in that group has increased by 2.96 million jobs. In contrast, employment among workers under age 55 has actually contracted by 1.12 million jobs. Even over the past year, the vast majority of job creation has been in the 55-and-over group, while employment has been sluggish for all other workers, and has already turned down.

For most of history prior to the late-1990's, employment growth in the 55-and-over cohort was a fairly small and stable segment of total employment growth. Undoubtedly, part of the recent increase has simply been a change in the classification of existing workers as they've aged (1945 + 55 = 2000, so the we would have expected to see some gradual bulge in this bracket since 2000 due to aging baby boomers). But the shift is too large to be explained simply by reclassification. Something more troubling has been underway.

Beginning first with Alan Greenspan, and then with Ben Bernanke, the Fed has increasingly pursued policies of suppressing interest rates, even driving real interest rates to negative levels after inflation. Combine this with the bursting of two Fed-enabled (if not Fed-induced) bubbles - one in stocks and one in housing, and the over-55 cohort has suffered an assault on its financial security: a difficult trifecta that includes the loss of interest income, the loss of portfolio value, and the loss of home equity. All of these have combined to provoke a delay in retirement plans and a need for these individuals to re-enter the labor force.

In short, what we've observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety. Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers. Meanwhile, overall labor force participation continues to fall as discouraged workers leave the labor force entirely, which is the primary reason the unemployment rate has declined. All of this reflects not health, but despair, and explains why real disposable income has grown by only 0.3% over the past year.
More...

http://www.hussman.net/wmc/wmc120409.htm

budcampbell · Apr 9, 2012

Makes perfect sense. US monetary policy has forced those who planned to exit the workforce, to remain, or get back in, heating up competition for jobs that aren't there anymore.

trefoil · Apr 9, 2012

No dispute from me. The internals of the latest report sucked too. Both Feb and Mar looked worse than Jan. The only ray of hope is that both are still preliminary, so maybe the revisions will make things look substantially better. That's happened before.
Absent that, there's trouble.
In Mar, temporary help services swung to negative from firmly positive, which was a large part of the drop in services employment. Not a good sign at all.
There was one small inconsistency in the Mar report: the manufacturer's diffusion index went back up to levels more consistent with prior months, after dipping in Feb, even though goods-producing jobs created stayed relatively low. Other than that, major suckage.
Globally, the world economy is still stuck in low gear, with Europe continuing its circular firing squad habit. It's going to be hard to work against that resistance.

Chuck E. Cheese · Apr 10, 2012

Trouble is all those job gains are mostly with medium to mediocre pay so that explains the sluggish increase in disposable income. Factor in high food & gas prices than you have a very good recipe for stagflation. The economy have to create some 200k plus jobs per month just to keep pace with new/old workers entering/re-entering the work force so that is why this number is very key. Last week job report of 120k is a first warning of the mid year doldrums that we accustomed to. So here we go again: sell (or sell short) in May and stay tuned.

Manipulation or not, they can't hide the fact that things are slowing down or even decreasing.

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Why the employment data is quite desperate

Tsing Tao

budcampbell

trefoil

Chuck E. Cheese