More on NFP

"It looks like the U.S. economy is now dominated by housing, shopping,
eating and drinking (with some help from very expensive health care).
These don’t look like core productive sectors," our dynamic duo
comments. But they add, "We’ll take it for now." Which in some ways
demonstrates just how low expectations for employment have sunk, thanks
to long years of straggly recovery.


Above is the money quote from Barron’s Alan Abelson, citing the Liscio Report. It turns out that I am not the only curmudgeon looking askance at the NFP report.  

Abelson notes that NFP "was good, [b]ut, alas, it was still a sizable piece from great." Further, he takes up another subject readers of this blog should be all too familiar with: the misleadlingly low unemployment rate and the declining labor participation rate

"A more comprehensive — and we feel more accurate — reading suggests the real jobless rate is 6%, not 5%. And if you include everyone who should be working full time but isn’t, the rate approaches 9%."

I do not recall ever seeing this seriously discussed in any mainstream media prior. (Please disavuseme of this notion if you have links proving otherwise).

Abelson continues:

"Our friends at the Liscio Report, Philippa Dunne and Doug Henwood, concur that while solidly positive, July’s showing didn’t smack of "boomtime." They note the largest contributor by sector was retailing, up 50,000 jobs, paced by car dealerships (nothing like giving away cars to attract a crowd), clothing and department stores. Health care again came through with 29,00 new jobs, and bars and restaurants, which have been responsible for one of every eight slots added this year (we’ll drink to that), swelled last month’s payrolls by 30,000. Housing, directly or indirectly, chipped in another slug.

To Philippa and Doug, the job data, while a pleasant surprise, failed to erase their long-term concerns. For one thing, the gain was still below the 50-year average. They also found somewhat worrying that over the last year "construction, health care, retail trade and eating and drinking establishments" have contributed nearly half the jobs added, even though these sectors account for just a third of total employment."

This is a perfect example of data that is not fabricated, but merely misleading.

Ours is an anemic post-bubble recovery, not organic but rather artificially stimulated by every possible mechanism at the government’s disposal. It is not healthy. It is not natural. And its "coming around the clubhouse turn" . . .


Extreme Rhetoric

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  1. Dave Altig commented on Aug 6

    Barry – I think the Abelson remark is off-base. If you are waiting for job growth in manufacturing, you will be waiting a very long time. In the now-iconic heyday of labor market performance of the latter-1990s, average labor growth in the manufacturing sector was zero — which, on reflection, we all know. What Abelson has identified is the major sectors in the non-manufacturing side of the economy. That is where the job growth has been since at least the mid-60s, and where it will be in the U.S. economy evermore. My reading of the employment report is that the employment growth in that part of the economy was fairly broad. There may be reasons to remain cautious, but I don’t think Abelson has identified one of them.

  2. Norman commented on Aug 6

    Seems to me that economic growth and employment from housing should be at the top of the quality list and not be disparaged. After all, we need food, shelter and clothing to subsist and in the case of housing, work done on that provides value for 50-100 years. I remember people foaming at the mouth over fiber optic lines being laid and now only 10% of them are being used. Give me housing construction anytime.

  3. touche commented on Aug 6

    No one expects manufacturing to rebound in the US. However, the growth in services has been concentrated in areas that are likely to sputter (home construction, real estate sales, car sales) or that are low on the pay scales (janitors, school bus drivers, retail, food services). This sure doesn’t justify the debt binge that is financing all this!

    Net job gains last month:

    Construction of Residential buildings 5,900
    Building material and garden supply stores 7,000
    Real estate 9,600
    Architectural and engineering services 5,200

    Automobile dealers 5,500
    Clothing and clothing accessories stores 12,500
    Department stores 10,300
    Food services and drinking places 29,500

    Transit and ground passenger transportation 8,500
    Credit intermediation and related activities 5,800
    Management and technical consulting services 6,200
    Services to buildings and dwellings 9,200
    Offices of physicians 5,800
    Nursing and residential care facilities 6,600
    Local government education 18,300

    The biggest loser was Motor vehicles and parts -10,700

  4. Lord commented on Aug 6

    If employment growth is in lower paying jobs but wages are up, then are existing higher paid jobs increasing wages or are all jobs edging up slightly?

  5. Barry Ritholtz commented on Aug 6

    I suspect Abelson’s point is that these are all lower paying sectors — food/drink/retail isn’t design/engineering/coding.

    Construction jobs are strong — but recognize that they are the result of an aberrational government handout: Ultra low interest rates. The structural imbalances they are causing is why Greenspan is on a rate tightening course.

    What happens if we continue to lose higher income high benefits positions — software, industrial, manufacturing — and replace them with lower wage, lower benefit roles?

    WalMart greeter, McD fry cook, Bartender — these are all credible jobs, but not exactly the foundatiopn of a robust economy.

  6. Tim commented on Aug 6

    I’m glad to see that Barry is sensitive to the plight of software engineers – I can tell you from first hand experience, outsourcing of good software jobs to India is very real.

    It seems to me that everyone is too giddy about their home equity to look beyond the headline jobs number – wouldn’t want to find out the disturbing truth about the quality of job creation by the world’s economic superpower.

  7. Eric commented on Aug 7

    The low expectations point should not be missed. In no prior post-recession period would this pace of employment or compensation growth be deemed acceptable, let alone “inflationary”; each of the 6 scattered “good months” over the last 2-3 years have been far below the sustained employment growth rates in post-recessions past. The economy has been so far unable to sustain employment growth above the post-1973 median. The real drama consists of the fact that unit labor costs have risen 1.4% or less from 2001-present. Despite rising productivity, workers appear to have little influence to raise their collective share of the output. Perhaps we have learned, just like many economists seem to have learned vis a vis the data, to expect a lot less.

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