I have to disagree with the assessment of job growth as "steady." Its not — its been erratic, weak and disappointing. NFP rose by a mere 78,000 in May (April’s outlier 274k was unrevised ). March was revised down by 44,000 to 122K. Weakness in May was across the board, but notable was the poor service sector growth (+64K versus an imaginary +232K in April).
How bad was this report? April’s +274k outlier included (w/o seasonal adjustments) a birth/death improvement of 257k. May’s birth/death adjustment contributed +207k; the bottomline was, even with this fat b/d number, we only got +78k new jobs. Despite the spinning you heard on TV, there’s no way to avoid reality: This Nonfarm payrolls report stunk the joint up.
Look: The consumer has held up their part — they’ve spent steadily, despite weak personal income improvement, and even weaker real income after inflation. But they are not the problem — Corporate Business hiring and spending is. This recovery has been unable to generate anything other than stimulus based momentum. There’s been little in the way of organic (read non-stimulus based) growth.
Unless and until business starts hiring and spending aggressively, the best we can hope for is an anemic, real estate fueled economy.
But the real estate fueled economy is driven by consumer debt, now about $11 trillion. Consumer debt is growing at 10-11% per year, far outpacing GDP. On top of this, they owe future taxes to pay off $8 trillion in national debt. Their future has been mortgaged away. In the near future, foreigners will finally realize that US consumers are destitute and terminate their line of credit with higher interest rates. These higher rates will cause the debt burden to mushroom. For anyone who hasn’t figured this out yet, sorry about the bad news.
The people that drive me nuts are the ones that say how Bush’s tax cuts are making everything so wonderful. In addition to the stimulus of consumer spending and the real estate market, we also had over $600 billion in deficit spending (reported deficit plus trust fund surplus that was consumed) stimulating the economy. That means we’ve got deficit driven stimulus of over 5% GDP, yet the GDP grows at 3.5%.
But the economy is booming. Just ask anybody in the Bush administration.
Friday Gatling Blog: I’m Just Raw Edition
Whoa, Nelly! No, seriously. I mean it.
Barry,
I don’t think we should get hung up on one month’s report. The monthly average for the last year is +171k new jobs, ahead of the 5year monthly average of +27k, and the 10 year monthly average of +135k. We are even running ahead of the 5/03- 5/04 period (+116k/ monthly average).
I also don’t buy the seasonal adjustment or the birth/death argument because there have ALWAYS been seasonal and birth/death adjustments, but they were revised annually. The BLS didn’t want 750k in revisions at the end of the year, so they smoothed out the data. Consequently, revisions have gone down significantly (I believe they are running about 200k a year now).
Have you looked at the jobs data or do you assume that any jobs must come from the red-hot housing sector? Of the 898k new jobs created so far this year, only 127k were “construction”, which amounts to 15% of new jobs created, and inline with 2004. Service Producing jobs have created 771k new jobs (about 85% of new jobs), with the bulk of the new jobs in “transport”, “business services”, and “education & health services”. We continue to lose jobs in “manufacturing”, as our retailers continue to source to China and beyond.
IMHO, the report was weak enough to keep Unit Labor Costs in check, but not weak enough to ignite fears of a weakening economy, especially with rates below 4.0%.
Corporate America is too busy paying itself handsomely for non-performance to spend any of that cash hiring people who might actually perform; after all, what reason do they have to do so?
/not entirely kidding
(I mean really, can you believe Kennedy at JDSU, granting himself zero-basis options and talking up a reverse split at the same time?! Good Lord, am I glad I’m not long that impending disaster!)
RUDDERLESS
The WSJ is sending me links to selected articles that do not require subscription, so here’s one on G-span’s never-ending struggle to drive up the unemployment rate. The purpose of increasing short-term interest rates is to put upward pressure on…