Stocks have staged surprise rebounds after seemingly poor payroll reports half a dozen times in the past year. But the one time that there was better-than-expected job news, on Dec. 5, the market tanked. Go figure – it's a great example of how upside down the logic is on Wall Street.
To help us interpret the jobs report of last week, I turned to my favorite independent labor analysts, Philippa Dunne and Doug Henwood. Here's their view of the latest numbers, which they considered the most positive in months – despite the many problems highlighted by the latest jobs report.
Let's analyze some of the highlights – and lowlights – of the most recent report:
- The headline job loss of 20,000 jobs was driven by losses of 75,000 in construction, mostly in non-residential, with large losses in specialty trades (those who finish buildings). Heavy and civil construction both were flat, which makes you wonder where the StimPak [stimulus package] is going. Manufacturing added 11,000, its first positive month in three years, led by motor vehicles. Retail added 42,000, with no single sector hogging the gains. Transportation and finance had modest losses. Healthcare added just 15,000 jobs, slightly below the sector's average over the last year, and private education lost jobs.
- Temp firms were real standouts, adding 52,000 workers, continuing their strength. Temp agency Kelly Services Inc. (Nasdaq: KELYA) hit a new 52-week high last week, reflecting the strength of temp employment in the jobless recovery. In fact, temp employment is on the verge of going positive year-over-year, which would be the first time that's happened since early 2007. Let's hope this is a harbinger of broader payroll gains, and not just a new regime of throwaway jobs.
- The federal government added 33,000 workers – 9,000 of them for the U.S. Census – with the total partly offsetting losses of 41,000 at the state and local level. Given the fiscal situation at the sub-federal level, we can probably expect more of the same.
- Diffusion indexes (positives less negatives) posted nice across-the-board gains, with the one-month measure at its highest level since March 2008. The 12-month index is still a laggard, but it's at its highest level in eight months. These suggest some firming in the labor market's internals.
- Average hourly earnings for production workers rose 0.3%, while the measure rose and 0.2% for all workers. The yearly changes are 2.5% and 2.0%, respectively. Wage pressures are nonexistent, which is great to hear if you're worried about inflation, but isn't so great if you're a worker hoping for a nice raise.
- The average workweek rose 0.1 hours for both production workers and for all workers. This is the longest workweek in the production-worker series in a year. Aggregate hours rose nicely for both sets of workers in the major sectors, and the yearly decline in aggregate hours for production workers is its smallest since October 2008. The rise in the workweek, which is starting to look like a trend, portends well for future hiring.
- Employment losses since December 2007, when the recession began, are now pegged at 8.4 million, or 6.1% of total employment. That's the worst since the post-war demobilization recession of 1945, and nearly three times the average job loss in post-1950 recessions.
- The labor participation rate was up 0.1 point and the employment/population ratio rose a nice 0.2 percentage points, its first increase since last April. While it's too early to say whether this strength in the household survey is a harbinger of an upturn that will soon show up in payrolls, it's something to be filed under "tentatively encouraging."
- The unemployment rate declined a sharp 0.3 percentage points to 9.7% — all of it clean, meaning there wasn't any rounding funniness, or pop-control distortions. "Hidden" unemployment declined even more markedly, with the broad U-6 rate falling a sharp 0.8 points to 16.5%.
- The job-finding rate (the probability of a person unemployed in December finding a job in January) rose by three points to 24.5%, its highest level in six months. It looks like we're seeing more concentration in the very-long-term unemployed, defined as those who were jobless for 27 weeks or more.
All in all, Dunne and Henwood conclude, this was a pretty good report by the standards of the last couple of years. In more normal times, this report wouldn't be any cause for cheer, they observe. But it does support hopes that the labor market is turning.
The problem, however, is this: During a normal expansion of a healthy economy, monthly payrolls typically rise as much as 150,000 a month. But during the early stages of a recovery, gains are expected to exceed 250,000 per month.
In contrast, at best the economy shed 25,000 last month in what is supposed to be a recovery. And it might be worse. TrimTabs Investment Research, an economic-research firm based in the San Francisco Bay Area, reports that its data, based on records of real-time tax receipts, shows that job losses last month actually totaled 104,000. TrimTabs Chief Executive Charles Biederman says he believes the public is being lulled into a false sense of improvement by incorrect federal jobs reporting.
"By the time everyone wakes up to the fact that the economy is not recovering, the damage will already have been done," he says.
Since payrolls are still shrinking – even though the economy is supposedly improving – something is really wrong. At minimum, the recovery in employment is going to take a lot longer than the recovery in the economy, and every month that goes by there's even more ground to make up.
Editor's Note: As the story above demonstrates, Money Morning Contributing Writer Jon Markman has a unique view on the markets. With uncertainty the watchword and volatility the norm in today's markets, profitable investments are harder than ever to find. It takes a seasoned guide to find those opportunities.
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News & Related Story Links:
- Money Morning:
Jobless Recovery Category
- Money Morning:
Unemployment Report Set to Reflect the Bitter Face of a Jobless Recovery.
- TrimTabs Investment Research:
Official Web Site.
- Money Morning News Analysis:
The Five Factors That Could Rescue U.S. Stocks.