Why I don’t buy the 4.5% Unemployment Rate

Where is the wage pressure?

That’s the question on my mind as we await today’s NFP. Yesterday saw a stronger than expected ADP Report, which whacked bonds and sent yields back over the 5% level; The 10 year closed at 5.144%. A prime mover: growth in service industries, which accelerated to the fastest pace in 14 months in June.

The Fed will be closely watching the data for signs that Average Earnings are rising, as a gauge of potential

Which brings us back to our original point: If Unemployment is actually as low as its been reported by BLS, then there is no slack in the labor market. We have a situation where demand is outstripping supply. In the Oil market, that sends prices higher. In Agricultural commodities, the same thing occurs. Indeed, in every market I can think of, when Demand is greater than Supply, prices rise. That’s Econ 101: prices should be rising robustly in that environment

Yet we see little evidence that wages and salaries are moving appreciably higher. Outside of bonuses and stock options, most wages have been pretty stagnant. For most of the past 4 years, they had been falling on a relative basis to inflation. Its only the past few quarters or so that hourly wages have risen at the rate of inflation or better.

A sign of a slack labor market is sluggish wage gains. Which is pretty much what we have been seeing.

The WSJ’s Ahead of the Tape column looks at the same issue, and asks a different question:

The Federal Reserve says measures of inflation have
improved lately. But it’s still worried that there’s little slack in
the economy, which could ultimately push prices and interest rates
higher. A key measure of slack is the unemployment rate. When it gets
very low, it can be a signal of labor shortages that create wage and
price pressures.

The labor market appears to have weakened a bit.
Through May of this year, surveys of U.S. businesses show they added an
average of 133,000 nonfarm jobs per month to their payrolls, according
to the Labor Department, down from last year’s average of 189,000.

Yet even though job growth has been slowing, the
unemployment rate isn’t budging. It is expected to come in at a
relatively low 4.5% for June, around the level it’s been at for nine
months. This is all the more striking because the survey of households
that the Labor Department uses to calculate the unemployment rate shows
especially paltry employment gains through May this year. Those paltry
gains suggest the unemployment rate should be rising.

His take is that since NFP gains have been on the low side, we should see unemployment tick up. My view is that all these Quarters of low unemployment should have sent wages skyrocketing, late 1990s style.

Yet neither has happened.  I cannot help but wonder why . . . 

Where’s the wage pressure?


chart courtesy of economagic


A few other things to watch for:

1) ADP data showed private sector job creation of 150k. That is the
number of total NFP the economy needs to merely keep up with population
growth and immigration each month. Watch for a celebration of mere population growth.

2) The June number enjoys a healthy Birth Death adjustment.  Bill King noted that "Last June the BLS created 166,000 (175k Prelim) Net B/D Model jobs out of thin air."


UPDATE: July 6, 2007 8:39am


"Nonfarm payrolls increased 132,000 in June, after
swelling 190,000 in May and 122,000 in April, the Labor Department said
Friday. Previous reports showed job growth of just 157,000 in May and
80,000 in April. Monthly job growth has averaged a robust 145,000 so
far this year. The unemployment rate was unchanged last month at 4.5%.

Average hourly earnings increased $0.06, or 0.3%, to
$17.38. That was up 3.9% from a year earlier, suggesting tight labor
markets still aren’t putting much pressure on labor costs."

A few notable data points from the release:

• B/D Adjustment was +156k

• Education and health services were strong at +59k, as was Leisure and hospitality +39k and Government +40k

• Construction employment was up by 12,000  (WTF?)

• Professional and business services were down 9k


ADP Employer Services Says U.S. Added 150,000 Jobs
Shobhana Chandra
Bloomberg, July 5 2007

Help Wanted: A Labor Report With Some Slack
Justin Lahart
WSJ, July 6, 2007; Page C1

CES Net Birth/Death Model 

Employment Situation

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What's been said:

Discussions found on the web:
  1. Eclectic commented on Jul 6

    Don’t have any idea of this will show the break or not, but August’s BED will be very interesting either way. 0827 EST

  2. Ted Craig commented on Jul 6

    Just a thought:

    Isn’t wage pressure created by employment mobility rather than mere employment? In other words, its not as important to get a job as it is to get the next job. There’s no real easy way to measure people changing jobs, like there is to measure people getting jobs. Like I said, this is just a theory, but a large static workforce would seem to create as little wage pressure as a smaller workforce.

    Also, some would say you’re looking at the wrong measure. Rather than wages, you should be looking at total compensation.

  3. Peter commented on Jul 6

    June Payrolls are expected to rise by 125k vs a 157k gain in May. The average ytd gain in payrolls is 133k vs 189k in ’06. Even though the monthly #’s haven’t shown much correlation to the ADP data on any given month, yesterday’s better ADP # has led to whispers of a higher # today. The unemployment rate is expected to remain unch at 4.5% and avg hourly earnings are expected to rise .3%. Due to general expectations in corporate America of a 2nd half economic recovery, companies have been very reluctant to trim staff in light of the moderating economy at the 2%ish level over the past year but it’s also the reason why job growth is running below last year’s level. Bonds are little changed ahead of the data as is the $. Refinery concerns and Nigerian supply disruptions sending crude higher again.

  4. Neil Harris commented on Jul 6

    I’ve been reading your blog for a while. I have to say that I think the Fed and the government understand exactly what is really going on with inflation — but they have a vested interest in publishing a much lower number. Since social security payments are linked to the cost of living, admitting what is really going on would be hugely expensive for the government, and at least this administration does not appear inclined to give away the treasury this way — they prefer to reallocate funds to the upper incomes and let some of it reinvest in the economy instead of on saving and consumer spending. For better or for worse.

  5. Quints commented on Jul 6

    Like other commodities, substitution can help keep prices down. It may be that as wage pressure increases, so does outsourcing activity, thus reducing wage pressure… Also, I don’t believe people are over the otsourcing shock, and the psychological blows of constantly reading about large layoffs somewhere in America may be keeping folks a bit less demanding of higher wages….Both points pure speculation…

  6. Tom B commented on Jul 6

    In my field, pharmaceuticals, hiring hasn’t been strong in years. Big downsizings at Bayer, Pfizer, Biogen, etc. I think many people have taken early retirement or are working low level jobs to get by.

  7. John commented on Jul 6

    According to the report, wages are up 3.9% from this time last year… Thats certainly above inflation(roughly 2.6~2.7%) and shows modest wage growth.

    What numbers are you looking at that show real wages going down? All the numbers I see indicate modest wage growth after inflation(year over year that is).


    BR: If you think inflation is running at 2.6%, there’s little I can inform you about wages, income, unemployment or other govt data . . .

  8. Fred commented on Jul 6


    I believe a partial explanation lies in 2 things — productivity and the self employed entrepreneur. Productivity has made fewer workers necessary, and workers that leave jobs many times start their own businesses.

    Food for thought.

  9. Woodshedder commented on Jul 6

    Barry, are you saying that if food and fuel were added into the inflation reading that it would be much higher than 2.6%?

  10. Winston Munn commented on Jul 6

    I don’t find wage stagnation a great mystery when you read…

    “New hiring in the areas of education, health services, leisure and hospitality and government drove overall job growth last month. Construction companies also expanded employment — even as they coped with fallout from the housing slump. Those employment gains swamped job cuts at factories, retailers and certain professional and business services.”

    It’s not numbers of jobs but quality of jobs that matters. Teachers, health care workers, and government employess have no great sway in forcing higher wages – they added jobs.

    Unions, such as in manufacturing, have power to increase wages – they lost jobs.

    I think we took the wrong exit when we hit the Phillips curve.

  11. stuart commented on Jul 6

    “With housing starts off over 30%, it’s a puzzle why residential construction employment is only off about 4%.” It’s been solidly demonstrated that the birth/death model is vastly overstating jobs. When the BED is updated to this quarter-currently completed for Q3 ’06, we’ll find that 95% of the jobs gained from that model were ghosts….just like Q3 ’06. The unemployment rate of 4.5%…give us a royal break. It’s designed not to count you as unemployed. Leaves out discouraged workers who gave up looking, we’ll just leave them out…don’t want to make the statistics look too bad. Working 15 hour weeks with NO pay…hey no problem, we’ll count you too as employed-we know you want to be. Get arrested while having a job, no problem, still counts those jobs. Your unemployment benefits ran out last week after 20 weeks, ok, now we assume you must be employed…. anyone would have to be a fool to believe those figures. Economic figures are as much political figures.

  12. some guy commented on Jul 6

    You can’t compare the headline number to that of the birth/death model as the headline number is seasonally adjusted and the birth/death model is not. the correct comparison is the non-seasonally adjusted employment numbers to the birth/death model which for the months of April, May, and June were:

    Employment: 856k, 941k, 504k
    Birth/Death: 317k, 203k, 156k

    It doesn’t look quite as bad when you look at it on an apples to apples basis.

  13. John commented on Jul 6


    According to your June 15 post…

    “There can be little doubt that consumer inflation — up 2.7% year-over-year — is slowing with the economy. The core CPI remains elevated at 2.2% year-over-year — slightly above the Fed’s comfort zone of 2.0%.”

    Even when food and energy prices are included inflation is 2.7%. Over the last four years CPI is up an annual rate of 3.15%. Food is up 3.1%, energy is up 12.9%.

    I can understand not believing the core 2.2%, but how does inflation get at or above 3.9%?

  14. Karl Smith commented on Jul 6

    There are a couple of things going on which could cause the discrepancy you are seeing:

    1) Composition adjustment. The mix of workers as well as the relative demand and supply of workers determines average earnings.

    For example, even a slack market in I-bankers is going to have higher wages than a tight market for cashiers.

    This is actually a big deal. Not to go to nerdy on you but economy wide productivity gains fall significantly below industry by industry gains because high productivity industries tend to shed workers. Not always of course, but that is the general tendency.

    So, as we shed production jobs and pick up low skill service jobs we could actually see wages fall.

    2) Size of the labor force. The labor force is growing at a much slower rate than it did in the mid-90s meaning that an inequivalent unemployment rate implies slower job growth.

    There is no reason to expect that the boost in the labor force we had in the 90s will ever return. It was probably a one time phenomenon that had to do with the confluence of a lot of social and technological factors.

    It could happen again but even the best monetary policy can’t be expected to reproduce that experience.

    3) The natural rate could be falling. Depending on your theory of the natural rate there is reason to believe that it is falling. If you believe that the service-sector-natural-rate is lower than the production-sector-natural-rate then you might expect the natural rate to continue to fall as US manufacturing declines in employment.

    Also, there is a nerdier argument that before the 1990s the US was too large to be effectively supported by a single currency. Increasing in digital technology and decreases in transportation cost have knit the US economy together more firmly and led to a decrease in the natural rate.

  15. jmf commented on Jul 6


    interesting to see that the greenback is selling off despite the “strong” job number…..

  16. bam commented on Jul 6

    Can I just remind everyone that the Secretary of Labor is married to the Senate (Republican) Minority Leader.

  17. Fred commented on Jul 6

    I’d like to point out a possible broadening out of job gains — quoting Tony Crescenzi:

    “An interesting aspect of today’s payroll report is a gauge that tells us the percentage of industries that added workers during the month: the diffusion index. In June, it was very high at 62.9% among the 278 industries surveyed.”

    As he says, it’s only one month’s number, but if it’s a trend, could be good

  18. sam commented on Jul 6

    Zandy from economy.com has opined that CPI measures are meant for rich folks lifestyle (net worth 5mil+). For them, inflation is low.
    in capitalism, after all, policies have to made that best suit the capitalists.

  19. Matt commented on Jul 6

    This is a question for Barry or the sharp commenters, if we agree that the inflation ex-inflation numbers are a joke because they exclude gas, housing, etc., when will we see true inflation drop due to reducing home prices? I know that the real estate bubble has been worse on the Coasts, around Vegas & in Florida, but will not the reductions in home prices help cool the jets on true inflation nationwide?

  20. SPECTRE of Deflation commented on Jul 6

    Construction employment was up by 12,000 (WTF?)

    LOL! We ain’t building the Space Shuttle folks. ILLEGAL ALIENS! Don’t expect we will hear this mentioned by anyone but Lou Dobbs and Bloggers like Barry.

    All I can say is that the elites take us for fools, and based on this mornings action in the market and bonds, I guess they are as right as rain.

    Let me get this straight. Bonds are up [yield] because the market believes the numbers were hot? ROFLMAO! How about the fact that we compete for money on a global field, and everyone else is raising rates?

    This isn’t so much about an overheating economy, but rather, a recogniition that we must take the Treasury Bonds to auction where the powers that be [China, Japan] decide how much we will pay in interest.

  21. XON commented on Jul 6

    Ted Craig said: “Isn’t wage pressure created by employment mobility rather than mere employment? In other words, its not as important to get a job as it is to get the next job. There’s no real easy way to measure people changing jobs, like there is to measure people getting jobs. Like I said, this is just a theory, but a large static workforce would seem to create as little wage pressure as a smaller workforce.”

    This is something I’m waiting to see shake out politically. When all of these homeowners who bought in the last 3 years realize that they are not going to be able to move any time in the next 15 years, what are they going to start saying to their state and federal congrescritters and the courts? (If freedom of movement is a Constitutional right, and the government has been consciously providing false data that induced their accepting the over-inflated prices/abusive mortgages, I can see a new legal industry taking a shot at this.)

  22. michael schumacher commented on Jul 6


    Yes most are unaware of that fact.

    recall when Ms. Chao was a frequent guest on B’Berg and Suzy Assad just ripped her to shreds on the BLS numbers each month. The last appearance I saw was the customary bulldog Suzy attack (coupled with the correct amount of rhetoric that blasted the labor department’s continued use of moving averages (explains why they think construction has added jobs) and she just sat there and said “well those are right because they are issued by the labor department”…..before the mic was turned off “Ms. Chao” commented that her and her husband would never frequent this show again. “I’m taking my sandbox away and none of you can play in it until you kiss my ass”

    I also have not seen Suzy for a while too-LOL


  23. David commented on Jul 6

    I am entertained by the number of benign explanations offered …

  24. SPECTRE of Deflation commented on Jul 6

    Concerning inflation, wouldn’t a truer picture emerge by looking at a simple nickel. It costs the Mint 9.3 cents to make a damn nickel. There is your inflation folks, and the government numbers be damned because they have done so many contortions to come up with their FAKE numbers that it is now laughable. Core inflation? Excluding fuel and food? How about Healthcare and Education?

    Concerning the employment numbers, but for the B/D adjustment, we would have had a negative number. Case closed already!

  25. SPECTRE of Deflation commented on Jul 6

    I am entertained by the number of benign explanations offered …

    I have spilled the coffee 3 times this morning laughing at this Alice In Wonderland extravaganza we call the markets.
    We have definitely gone down the rabbit hole.

  26. Marc commented on Jul 6

    I’ve heard a lot of theories and the one that makes some sense is that the job type isn’t specified in the published number. So if we’re getting a lot of low-level service jobs created and there’s little wage pressure there, then I can see why we’re getting full employment without wage inflation.

    Here’s the kicker; Where’s the cash coming from that’s purportedly fueling the economy? I see a couple of things here. One, the savings rate is at it’s lowest in a long time and debt is through the roof. Two, service related industries are seeing good numbers but the durable goods numbers have been horrible. Three, outsourcing to other countries (manufacturing and customer service) keeps a lid on worker wage inflation in the US.

    This begs the question. At some point will the cash flow (from the US consumer) slow and earnings start to drop? When?


  27. Eddie commented on Jul 6


    That domestic slowdown in earnings will be more than made up for by increases in foreign earnings. What do they say now? Almost 50% of the SP500 earnings are foreign now? I am sure it wasn’t that high just 10 years ago.

    It’s a new world order, and the US consumer is not as important as it used to be. People shorting the market because of a slowdown in ths US are missing the boat as the multi-nationals continue to gain based on foreign earnings (helped by the weak dollar).

  28. SPECTRE of Deflation commented on Jul 6


    That domestic slowdown in earnings will be more than made up for by increases in foreign earnings. What do they say now? Almost 50% of the SP500 earnings are foreign now? I am sure it wasn’t that high just 10 years ago.

    It’s a new world order, and the US consumer is not as important as it used to be. People shorting the market because of a slowdown in ths US are missing the boat as the multi-nationals continue to gain based on foreign earnings (helped by the weak dollar).

    Posted by: Eddie | Jul 6, 2007 11:58:13 AM

    What good does it do when the dollar has lost a third of it’s value in the last two years? Why not invest in EU large cap stocks? This way you play global growth while not getting your head handed to you by the exchange rate?

  29. johntron commented on Jul 6

    I think that the internet has made it easier for people to “live off the grid” as freelancers, semi-retirees and cash-only laborers as obviously it’s easier to use the internet to find clients/customers/etc.

    Unfortunately, it’s pretty tough to test this hypothesis, but with so many people permanently out of the labor market, there is probably a large hidden reserve of “underground labor” that keeps wages down (along with outsourcing and migration).

  30. michael schumacher commented on Jul 6

    it’s fairly hard to use any of the BLS statistics for much of anything since after a time period of 6 months you just simply do not exist….according to them.

    Pretty easy to have “growth” when the entire picture is ignored.

    Job Growth is jobs created ex unemployment= “handy gov’t statistic that always keeps the unemployment rate below 5% (or whatever target they see fit) and wage growth as stagnant…because we would’nt want to show a hint of inflation would we”- otherwise known as NFP.



  31. fat mary commented on Jul 6


    is that really a true story?

  32. michael schumacher commented on Jul 6

    all of it except for the last quote as that was my addition…..should have mentioned that part of it.

    I’m taking a guess as to when it was since I’ve not watched that “show” for over 6 months now. Had to have been in November or December…
    And If I had not owned a Tivo I would’nt have caught it….my wife heard it and I replayed it.


  33. Bond investor commented on Jul 6

    Michael, I missed the Suzy Assad-Elaine Chao dustup you mentioned. I was curious enough on a Friday to look for the video on Bloomberg. Interestingly, the name “Suzy/Suzie/Suze Assad” doesn’t come up with any kind of hits when I do a search. She is no longer listed as a host of Open Exchange. The video from Jan 5 2007 has a break in it. Bloomberg had “technical difficulties” with Ms. Chao. Michael McKee says, “I’m sorry we lost you there… at least you didn’t lose your job.” Both make a grimacing smile.

    If Suzy Assad has left Bloomberg, it’s a shame. Maybe she can sign up on Fox Business Channel (or CNBC, if the Murdoch deal goes through).

  34. Michael Donnelly commented on Jul 6

    John, the CPI has all kinds of issues but you are correct the official number is 2.7%, keep in mind the past few months it’s been running higher (annualized).

    The 3.9% number from today’s report is equally flawed. For starters it only covers about 60% of the workforce (Production hourly wages – when’s the last time you used an hourly punch card?). And I’m not even counting all the folks that get paid in dividends (hedge fund 15% margin folks)

    So yes general wages have outpaced inflation (but not in the last 5 months) just remember you are comparing a best guess at wages and a somewhat biased best guess at inflation.

    Ted Craig, check the BLS’s JOLTS data for how many are moving from job to job. They’ve got good churn type numbers.

  35. MarkTX commented on Jul 6

    • B/D Adjustment was +156k
    • Construction employment was up by 12,000 (WTF?)

    I NOW DECLARE “shenanigans”

    If someone would please find officer Barbrady

    I will go get my broom.

    (South Park 2×13 reference)


  36. Jim commented on Jul 6

    Just a few thoughts and observations:

    1) There are 12 million illegals and I’m sure many do construction. I doubt their lay-offs hit the UE numbers.

    2) I’m sure many auto workers are now asking if you want fries with that. They ARE employed though.

    3) Off-shoring still generates negative salary pressure. It’s a global market now.

    4) I don’t think the Fed wants to admit there is high inflation, because if they raise the rate above 5.25% it will take the housing market over the cliff (though I agree with the SS comment also).

    Bottom line … compared to the past I think the stats are alot fuzzier and the Fed has less power (due to global influences)!

  37. Cherry commented on Jul 6

    Barry, your falling into my corner each and every day on this issue.

    Time for the BLS come clean and admit their error. Not only have we not had much unemployment below 5%, we have had just as many quarters around 5.5%.

    Raid the BLS and reexamine the numbers? They have never been the same since the 2001 statistic overhau(Clinton influenced) and the 2003 funding cut(which then was “mysteriously” refunded.

    I am not sure it really matters. I talk to people and they don’t believe its numbers anyway lol.

  38. Quints commented on Jul 6

    Not satisfied with my previous response, I dug deeper and have come upon the definitive answer. Participation Rate.

    The 4% unemployment rate is rendered meaningless because the Labor Force Participation rate fluctuates. Since 2000, the participation rate has dropped significantly. I would argue that everyone of working age, whether seeking employment or not should be included as a participant. (If conditions seem hopeless and I stop looking for a job, I am still unemployed. If I decide to work as a full time stay at home parent because job prospects suck, again, that should not help the employment number.)

  39. Clevelander commented on Jul 6

    Construction employment was up by 12,000 (WTF?)

    Don’t forget that commercial real estate is still booming.

  40. Iasius commented on Jul 6

    “Refinery concerns and Nigerian supply disruptions sending crude higher again.”

    I’ve wondered about this for a while, I hope someone can explain this to me. Refineries are turning crude oil into other products, as such they are crude oil buyers. If there are refinery capacity problems, then why is crude oil increasing in price?

    Imagine that headline: “Half the world’s cars break down, gas prices skyrocket.”

    Doesn’t make much sense, does it?

    So why is it different wrt to refineries?

    I know of only one reason, but I’m it’s enough to explain this: Light sweet crude oil is easier to refine so if refineries are having problems then output can be increased by using the more expensive light sweet crude. But in that case I’d expect higher prices for Brent and WTI, but lower for Venezuelan oil for example. Is this a headline effect? Ie the often quoted price rises, but the average price of crude oil does not?

  41. GREG IP commented on Jul 6

    Fed May Be Questioning Labor-Market Tightness

    The Federal Reserve still sees the labor market as tight, but may be less sure of that than it was six months ago.

    The continued low level of the unemployment rate is one of the reasons the Fed has continued to say in its policy statements that the “high level of resource utilization” could add pressure to inflation. For some time Fed officials have thought slower economic growth would push up the unemployment rate, creating slack in the economy that would help keep wage and price gains from accelerating.

    But there are signs the labor market isn’t as tight as the low unemployment rate suggests. One reason is the absence of a notable acceleration in wage growth. Average hourly earnings rose 0.3% in June from May and were up 3.9% from a year earlier, in line with the rate of growth for the past year. The more comprehensive employment cost index grew 3.5% from the previous year in the first quarter, in the range of the past several years. Broader measures of compensation accelerated in the first quarter, but that may reflect the vagaries of employee stock options and one-time bonuses.

    Federal Reserve Bank of San Francisco President Janet Yellen, in a speech delivered via video conference to the Risk Management Institute of Singapore early Friday local time, said, it’s possible “labor markets may not actually be particularly tight,” citing the restrained growth in employment costs. The Conference Board’s index of job market perceptions, she said, suggests that labor markets are “only very slightly on the tight side.” Ms. Yellen said while it’s possible unemployment has stayed low amid slowing growth because productivity expansion is slower — which would raise inflation risks — she suggested she was sympathetic to “benign explanations” for the disconnect.

    The low unemployment rate reflects in part a recent drop in the “participation rate” — the share of working-age people either on the job or looking for work — from 66.4% in December to 66% in May. It edged back to 66.1% in June. Much of the drop in the participation rate has been among teenagers; contrary to the Fed’s expectation, the participation rate of older workers has actually risen. Jared Bernstein, senior economist at the Economic Policy Institute, a Washington think tank, noted the participation rate has fallen especially sharply for young people, blacks and Hispanics, groups who are “especially sensitive to the economy’s ups and downs.” If those missing workers were reported as unemployed, the jobless rate would be 5% instead of 4.5%, he said in a report.

    Peter Hooper, chief economist at Deutsche Bank Securities, said, “The prevailing view at the Fed seems to be that the labor market is tight, but with some uncertainty because the tightness has not yet shown up in a clear upward trend in labor cost inflation and because labor force participation has jumped around a good deal.”

    This suggests that while the Fed still expects a rise in unemployment, such an increase may not be essential to its expectation of moderating inflation, as long as the labor cost picture remains tame, Mr. Hooper said. Nonetheless, even if the unemployment rate isn’t below its long-term “natural” rate, it’s almost certainly in the vicinity — and that will keep the Fed on alert for signs of an overheating economy. Moreover, healthy payroll growth suggests the job market is pretty strong. And the Fed has other reasons to remain on inflation alert , such as the possibility that its recent decline has been led by temporary factors that could fade in coming months, and the possibility that higher import and commodity prices could feed through to other goods and services.

  42. me commented on Jul 6

    “self employed entrepreneur”

    Cant for get those Dick Chaney entrepreneurs.

    I still don’t understand the fuss about the great economy when job creation is constantly under 150,000, and those totals are bogus B/D voodoo. Under Clinton, for 8 years job creation averaged over 225,000 every month, up to 400,000.

    Anybody that believes that Iraq is the whole problem and not the economy is dreaming. There is no draft, and who do YOU know in the war? When people have to sacrifice like in Viet Nam, then you will see Kent State redux. But volunteers? The only reason a lot of them volunteer is the lousy economy.

  43. bam commented on Jul 6

    MS, I think you and are are on the same page. I think the BLS numbers are being manipulated by the same administration that brought us WMD in Iraq. These numbers seem untouchable. Maybe we’ll have a commission in a few years to investigate their accuracy once it becomes obvious that things don’t add up at all. We can all gather around the soup kitchen and talk about how we were screwed by these guys AGAIN. It’s the old “too little too late” strategy.

  44. Econocator commented on Jul 6

    The fishy payrolls report

    Non-farm payrolls increased by 132k in June, slightly above consensus expectations of +125k. Payrolls for the previous two months were revised higher by 75k and the unemployment rate held steady at 4.5%. Markets had been expecting the unemployment rate…

  45. A Dash of Insight commented on Jul 6

    Interpreting the Employment Data

    Today’s payroll employment report showed solid job gains as well as upward revisions to prior months. Econocator has a very nice summary of viewpoints, well worth the look. It does not include the (predictable) Doug Kass viewpoint, described on CNBC

  46. gw commented on Jul 7

    “What’s throwing investors off this time, he says, is the Bureau of Labor Statistics payroll survey. The latest report said 157,000 jobs were created in May, double the level a month earlier. But the BLS itself admits a key component of this statistic–estimates of jobs added at small businesses just opened minus jobs lost at small ones just closed–tends to exaggerate employment in a slowdown. Hoisington notes the estimate accounted for 58% of purported job growth in the past year.

    He says jobs creation today may be closer to the figures from another monthly bls report, the so-called household survey based on phone calls to homes rather than businesses. This says companies added only 15,000 jobs in the year through May, versus the payroll’s 665,000.”

  47. Mike a.k.a/Sage commented on Jul 7

    20% of the work force takes home 60% of all the wages. How does this fact skew the amount per hour that the majority of people earn?

  48. Winston Munn commented on Jul 7

    Are we overlooking true inflation?

    Milton Friedman claimed that inflation was a monetary event – and to a point I concur. But it is more than simply monetary creation as in addition to the creation there must then be a target of spending for that new money that causes the artificial demand/supply imbalance that is true inflation. In fiat financial systems, new money is provided by debt creation. The U.S. and Great Brittain have witnessed first hand this type of real inflation with the skyrocketing prices of homes brought about by cheap debt availability.

    We have also seen a continuing disparity between rich and poor, while at the same time worldwide monetary creation has exploded. What has this money targeted? Where is the inflation that should be rampant if this monetary event had been spread throughout society instead of concentrated into the hands of a few?

    Bill Bonner of the Daily Reckonng wrote of a recent art auction where pieces were drawing millions above the anticipated price – and for Andy Warhol works, which ownership of to the wealthy is the equivalent of an Elvis on velvet print.

    So it seems that the inflationary pressures are showing up in the toys of the rich. Could there be more?

    What about risk premiums? Could it be that the lowering of risk premium is the increased price on buying risk brought about by real inflation, i.e., monetary expansion that is not going into infrastructure or production but instead is being used to target takeovers and high-yield bonds?

    Could it be that the narrow spread is because inflation (monetary expansion) has been held by relatively few hands and not society in general, and that money expansion has turned junk bonds into Warhol paintings, and to get in on the action you have to bid em up?

    Then, it follows, that if inflationary pressures are not societal wide, the Phillips curve enigma can be resolved with lower unemployment and relatively contained inflation while having stagnant wage growth. This is even more true if the employed are being turned over from highly skilled to less skilled, reducing pressure on retaining the skilled laborer.

    Just an idea in its infancy, but it does explain a lot of seeming paradoxes.

  49. Winston Munn commented on Jul 7

    Another thought just occured to me that seems to validate this concept that lowered risk premium is actually “rich-guy” inflation: covenants.

    Lowered covenant requirements and convenant lite agreements have been the rage for the past year or so; however, with the blow ups of Bear Stearns’s two hedge funds along with the tightening credit in subprime, the access to money has at least temporarily been slowed.

    Coincidentally, with this slowing comes reports over the past couple of weeks of investors balking at covenant lite agreements, PIKs, and other esoteric financial transactions.

    This would seem to confirm the forumla that easy debt=expanded money for the rich=inflation represented by higher risk requirements/lower risk premium, while tightened debt=reduced money for the rich=lowered risk requirements/higher risk premiums.

    I would now suggest that any time risk premium radically drops it should be termed “Elvis on velvet risk premiums”.

  50. VennData commented on Jul 8

    The BLS cuts started with Reagan, and continued with the Boskin Commission and were only implemented during the Clinton era. To say they were Clinton influenced is a mis-characterization.

    They should just publish the raw data they collect and let everyone at it, to spin, spew and regress to their hearts content.

  51. Jim Penson commented on Oct 5

    A comment from one of the mysterious group of people who have stopped looking for work. As a former IT worker, having suffered longer and longer bouts of unemployment, I think it is important to note that merely looking at the number of jobs grown or added does not take into account what TYPE of jobs these are, and what pay rate they come in at. If one were to build a model in which jobs were viewed in a pay rate/net wage/year factor, with the overwhelming trend in IT to change jobs from permanent with benefits to temporary non-benefits, I am sure the trend line would start dropping about 2001 after the tech bubble burst, and continue downward, despite job head counts. Add to this the extremely volatile, transient nature of the baseline technologies used, and one can become a “dinosaur” competing for work with hordes of freshly trained college graduates in short order. I no longer have the skill-set to even qualify for the new jobs, and even if I did, I would be looking for work again in 3 months, 6 months, or however long the contract lasted, building no pension, and paying for my own healthcare. Nothing is more discouraging than having failed to find work for 3 years while reading rosy reports of job growth. It is no wonder people give up.

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