This morning the Bureau of Labor Statistics [BLS] reported that total payrolls fell by 20,000, the fourth straight monthly decline. Private sector jobs fell by 29,000, the fifth straight monthly decline. However, the numbers were not as bad as expected, since most forecasters were looking for a decline of about 80,000 jobs. However, there is much less to the numbers than it appears at first glance.
Most importantly is the Birth/Death (B/D) adjustment. The BLS adjusts the numbers each month to factor in new jobs created or destroyed by businesses starting up or closing down that donât get captured by their survey. They do this all the time, so there is nothing nefarious about it. However, the method is largely a trend following one, and tends to get it very wrong at turning points in the economy.
The total B/D adjustment in April was a gain of 267,000 jobs. In other words, the actual survey indicated that there was a loss of 287,000 jobs in April. Year to date, the adjustment has added 166,000 new jobs (January tends to be a month of big downward revisions in the B/D model). Over the last 12 months, the B/D adjustment has added 787,000 jobs. Apparently U.S. businesses are having a population boom akin to the actual population booms in many parts of the third world.
Just a gut check on the reality of the numbers -- letâs look at the B/D numbers for construction. The number in the official report was a decline of 61,000 construction jobs in April. That is after a B/D adjustment of plus 45,000 jobs. How reasonable is it to assume in the current environment that people are flocking to start construction companies right now, enough of these brand new firms to be creating 45,000 new jobs?
Even within the official report were some troubling numbers. The number of people working part time for economic reasons rose by 306,000 in April to 5.2 million. That is a 6.25% increase in just one month. Over the last year, the number of involuntary part-timers is up 849,000 -- a 19.5% increase. The average workweek fell by 0.1 hour to 33.7 hours. The average manufacturing workweek fell by 0.3 hours to 40.9 hours.
The average hourly wage rose by just $0.01, hardly enough to keep up with inflation, particularly headline inflation which is what counts for most people who do not sit on the Federal Reserve Open Market Committee. Combined with falling hours, this caused the average weekly wage to fall by $1.45. The index of aggregate hours worked fell by 0.4.
These numbers do not bode well for the ability of the U.S. consumer to go on spending at the usual rate. What money they get is going into necessities like food and gasoline, leaving little left over for discretionary purchases. Avoid the retail sector, particularly mid-range firms like J.C. Penney (JCP), Target (TGT), Kohlâs (KSS), Bed Bath & Beyond (BBBY) and Macyâs (M).
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