Free Markets, Free People
A quickie as I have a busy morning that doesn’t include much blogging:
The April jobs report is a miss!
There were just 115K new jobs created in April. That’s well below the 160K that was expected.
But unemployment rate fell from 8.2% to 8.1% and last month was revised from a gain of 121K to 166K.
So it was a disappointment, but not a catastrophe due to the revisions.
Other key numbers:
- The underemployment rate has stayed flat at 14.5%
- No improvement in weekly hours.
- Average hourly earnings grew 0.2% month over month.
- The labor force participation rate has fallen to 63.6%, the lowest level since 1981.
I’m sure Dale will have more with his daily econ stats. Note how bad the underlying numbers are in the 4 bullet points. The weakness continues and continues to build.
UPDATE (Dale): I just need to offer a little correction to the quoted data above. Hourly earnings did not increase by 0.2%. Hourly earnings increased from $23.37 to $23.38. the 0.2% increase was the over-the-month percent change to the index of aggregate weekly payrolls, which is not the same thing as hourly earnings.
I’m sure they’re “unexpected”:
Private-sector employment growth decelerated sharply in May, according to Automatic Data Processing Inc.’s employment report released Wednesday, in another possible sign of a sputtering U.S. recovery.
Employment in the nonfarm private business sector rose a seasonally adjusted 38,000 in May, well below the 175,000 increase expected by economists. In April, private payrolls showed an increase of 177,000, ADP said.
“This is exceptionally weak,” said Eric Green, chief market economist at TD Securities Inc. in New York.
“This was a dismal report, indicating a significant slowdown in job creation after six months of solid gains,” said Nicholas Tenev, economist at Barclays Capital Research.
“Sold gains?” Yeah, not so much. We’ve yet to hit the threshold of job creation – about 300,000 or so – necessary to tread water, much less be adding jobs. The gains we’ve seen in the past six months have been “positive” in that there were net jobs created, but 38,000 is about 10% of what we need per month to begin to chip away at unemployment.
The government will report its version of the numbers on Friday (the above is the ADP report):
On Friday, the government will report on U.S. nonfarm payrolls for May, data that also include government workers.
Economists polled by MarketWatch are looking for a gain of 175,000 in payrolls and for the nation’s unemployment rate to tick lower to 8.9% from 9.0% in April.
That would mark a slowdown from the healthy 244,000 jobs added in April.
It would also tell us that there is no real slowdown in hiring government workers, wouldn’t it – you know, despite “budget woes”, etc. And note too that we again, despite “a dismal report”, see economists saying the unemployment rate will “tick lower” to 8.9%? Yup, the Ministry of Truth is available to feed you whatever data you want to believe (which may explain why “improvements” in the unemployment rate don’t seem to boost consumer confidence at all). Again, not being at the “tread water” level with job creation, you have to wonder how the calculations are figured and what is being considered and not considered to anticipate the unemployment rate coming down in the face of “a dismal report”.
Dale has covered the real numbers for quite some time – well into double digits. But there is indeed a larger question out there – is the workforce actually shrinking and the old norms no longer the standard by which we should measure unemployment. I.e. are older workers looking at the job market and saying, “to heck with it, I can retire and I’m going too”?
Don’t know for sure, but regardless, the numbers from ADP remain “dismal” for May.
Yup, as Tim Geithner would say – “welcome to the recovery”. And, given the trends, I would guess this isn’t the last of the “unexpectedly” high unemployment report we’ll see. Again, ad nauseam, there’s been no incentive provided by government, but plenty of disincentives that are keeping businesses on the sidelines and consumers from spending:
Initial jobless claims climbed by 19,000 to 479,000 in the week ended July 31, the most since April and exceeding the highest estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment benefits dropped, while those getting extended payments rose.
A cooling economy means employers will resist taking on more staff in coming months, raising the risk consumer spending will weaken further. The jobless rate rose last month as payroll increases weren’t large enough to keep up with gains in the labor force, economists forecast a government report tomorrow will show.
As if anyone has to be told, this is not good. And it wouldn’t surprise me to see the U6 unemployment rate tick up over 10% again in the next few months:
“There really is no upside momentum in the labor market, and that’s a critical long-term determinant of where the economy is going,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. “People just aren’t getting jobs.”
That’s because jobs aren’t being created and offered. Name the incentive, at this point, to do so? Tax increases are in the offing, health care laws, 1099 requirements, Democrats still pushing for cap-and-trade, new financial regulations that impact the market and economic policies which give the impression the administration is at war with business.
Why would any sane business owner invest in his business in times as unsettled as these?
Answer: he or she wouldn’t. And that’s the biggest reason unemployment continues to “unexpectedly” rise. Headcount is the easiest thing to add when times are good. It’s also the easiest thing to reduce when times are bad. And if they stay bad – as we’re seeing now – few if any are going to be adding jobs.
Economics 101 – provide incentives to get the behavior you want. Provide disincentives to discourage the behavior you don’t want. The administration’s economic policies have, to this point, provided business with all manner of disincentives to hiring. And then the “experts” are surprised when jobless rates are “unexpectedly” higher than estimated.