The October jobs report looks surprisingly strong – until you dig deeper. Employers increased headcount, yet the labor force hit a 35-year low. The unemployment rate actually went up, as did the number of temporary workers. All those trends are going in the wrong direction.
U.S. jobs report
- October Jobs Report: Labor Force Shrinks to 35-Year Low
- Here's How Many Jobs We Need to Add Every Month for the Next Four Years
- Beware the Strange Data in the September Jobs Report
- What the August Jobs Report Means for "Septaper"
- The "Part Time-ification" of America: How We've Been Conned Again
- U.S. Jobs Report: How Unemployment is Really 14%
- Unemployment Down, But February Jobs Report Not All Rosy
- February Jobs Report: Here's What to Expect
- What the December U.S. Jobs Report Tells Us About 2013
- U.S. Jobs Report: What to Expect from December
- Take a Closer Look Before Cheering the November U.S. Jobs Report
- November U.S. Jobs Report: What to Expect
- October Jobs Report: Reality vs. Politics
- A Positive October Jobs Report Will Seal an Obama Victory
- Conspiracy Theories About the Jobs Report Don't Ring True
- Read This Before You Cheer the September U.S. Jobs Report
Money Morning Capital Wave Strategist Shah Gilani joined Stuart Varney of FOX Business' "Varney & Co." today (Wednesday) to go over the bungled and belated September jobs report.
This month's Bureau of Labor Statistics' report, initially scheduled for release Oct. 4, was delayed until Oct. 22 on account of the government shutdown. But it looks like the extra days didn't help sort out jobs data - the BLS is now under fire for releasing numbers that simply don't add up.
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The September jobs report, delayed for weeks because of the government shutdown, is not at all what anyone expected. Not only did the headline number of 148,000 jobs fall far short of expectations but a lot of the underlying numbers just don't quite add up.
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Investors generally took the lackluster August jobs report as a sign the U.S. Federal Reserve will hold off announcing a tapering of its $85 billion a month bond program at the Sept. 17-18 Federal Open Market Committee (FOMC) meeting.
The Labor Department reported today (Friday) that U.S. job growth last month increased by a less-than-expected 169,000 jobs, adding to signs that economic growth likely slowed in the third quarter. The unemployment rate dipped in August to 7.3% from 7.4%. Economists were looking for employers to have increased headcount in August some 180,000.
By now, you've had a few days to digest the "wonderful" jobs numbers reported from Washington last Friday.
Well, don't get too excited about the economy. We've been conned again.
First off, 59% of all jobs created this year are in 3 sectors: Leisure/Hospitality, Retail Trade and Administrative/Waste Services. Wages in those sectors have fallen by 0.7%. These jobs pay an average of $15.80 per hour versus the $23.98 average hourly wage. Which means "jobs creation" just equals cheaper labor.
The American jobs participation rate is at 34-year lows and falling, as people give up and leave the workforce.
Underemployment is between 14% and 15% and rising.
Employers added just 88,000 jobs in March, according to the U.S. jobs report released Friday, hiring at the slowest pace since June 2012.
The number was a huge miss. Analysts expected a gain of 200,000.
"We all over shot it," Austan Goolsbee, former chairman of the Council of Economic Advisors in U.S. President Barack Obama's first administration, said on CNBC. "This is a punch to the gut. I mean, this is not a good number."
Since the government's way of calculating unemployment is frighteningly inaccurate, even with such a small amount of jobs added the unemployment rate fell from 7.7% to 7.6%.
That's because the labor force participation rate slipped from 63.5% to 63.3% -- the lowest level since 1979.
Friday's jobs report from the U.S. Bureau of Labor Statistics is a mixed bag.
The report had some positive news, as the unemployment rate fell to 7.7%, the lowest rate since December 2008.
While the preliminary numbers for February show that 236,000 new jobs were created, exceeding analyst estimates by a wide margin, the figure for January was revised down from 157,000 to 119,000. However, the December number was revised up from 196,000 to 219,000. So for the three months of December 2012-February 2013, the economy has added a total of 574,000 jobs, well above expectations.
But despite the increase in the number of jobs, the main reason for the decline in the unemployment rate is that fewer people are participating in the labor market.
The participation rate fell by 0.1 percentage points to 63.5% in February as 130,000 people dropped out of the labor force. The employment-population ratio remained flat at 58.6%.
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Economists expect nonfarm payrolls to show a gain of 160,000 jobs in February, with the unemployment rate holding steady at 7.9%, when the Labor Department releases the February jobs report tomorrow (Friday) at 8:30 a.m.
Employment growth has averaged 177,000 per month over the last six months, and February is expected to fall short.
One reason is the 2% payroll tax cut that ended with 2012, leaving workers with less disposable income. Also, top income earners were slapped with a higher tax rate.
The full tax impact wasn't felt in January, but retailers and restaurants are beginning to feel the pain.
The unemployment rate, originally reported as 7.7% for November, was revised upward for that month to 7.8%, and stayed the same for December.
The figure was roughly in line with expectations. Estimates for the number of jobs created in December ranged between 140,000 and 160,000.
Non-farm payroll hiring in December was most robust in health care, which created 45,000 jobs. Manufacturing, construction and hospitality also logged strong gains.
Oddly, employment dipped in retail during the holiday-sales month, which is usually the most active time for the sector.
The government also shed jobs, dropping 13,000.
After eliminating some 653,000 jobs from 2008 to 2011, state and local governments kept headcount mostly even in 2012. The decline in December could be attributed to the economic uncertainty hanging over Capitol Hill.
The Pentagon has warned that workers may have to be furloughed if the debate over raising the U.S. debt ceiling, set to be taken up in a few weeks, is dragged out past next month.
Also weighing on government hiring is the pack of problems that will challenge growth, like rising worker pension costs, steep spending cuts and reduced federal funding that will likely kick in during 2013.
As Moody's chief economists told USA Today, "The fiscal headwinds will be blowing hard in 2013."
The private sector created 215,000 new jobs in December, much more than the 133,000 jobs economists had expected, and a sharp increase from the previous month, according to the report.
The biggest gains were in the category of trade/transportation/utilities, which grew by 53,000.
Gains in construction hiring were also robust, with 39,000 positions added in December, the U.S. jobs report said.
The healthy showing in this struggling sector was attributed mostly to relief work after Hurricane Sandy. But the slow, yet steady recovery in the housing market also deserves some of the credit.
Medium-sized businesses led job creation, adding 102,000 new jobs. Large businesses followed with 87,000 new jobs.
Bucking the trend was manufacturing; the sector shed 11,000 positions while service providers increased headcount by 187,000, according to data from Moody's Analytics.
The strong showing was a surprise, given months of cautionary words from a bevy of analysts and the Congressional Budget Office.
The analysts and the CBO had warned the fiscal cliff saga would lead to massive job losses and cutbacks in business expansion, hiring and investment.
"The most surprising thing is that despite all the brinkmanship over the fiscal cliff drama and the debate about that, businesses didn't change their hiring plans. They seemed to slow up their investment spending but not on their hiring, so that's very, very encouraging," Mark Zandi, Moody's Analytics chief economist, told CNBC.
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The addition pushed the unemployment rate down from an unhealthy 7.9% to a still elevated 7.7%. That is the lowest level in four years, since December 2008.
Projections for the unemployment level ranged for it hold steady at 7.9% or rise to up to 8.1%.
But the reasons for the drop aren't as encouraging as the lowered rate itself.
The Real Story of the November U.S. Jobs ReportThe reason behind the surprising drop was because more dejected workers simply left the labor force. Some 350,000 people, unable to find work and no longer looking for a job, have dropped off the radar and were not counted among the slew of individuals still out of work.
The labor participation rate fell 20 basis points to 63.6%. Without this drop in the labor force, the unemployment rate would have remained at 7.9%.
Three years after the end of the 2007-2009 recession, the labor force participation rate remains extremely weak. If the rate reflected normal levels, the unemployment rate would be considerably higher.
Also contributing to the unexpected uptick was early seasonal retail hiring, instead of long-term sustainable positions. Retail was a key jobs producer in November, adding 53,000 to payrolls.
That's partly due to Thanksgiving being earlier this year than usual. Plus, more stores kicked-off the holiday shopping spree much before the usual Black Friday start.
These factors "suggest an asterisk will have to be put alongside the monthly non-farm report," Bloomberg senior economist Joseph Brusuelas wrote in today's Bloomberg Economics Brief.
U.S. jobs growth most likely experienced a sharp slowdown last month as the late-October Superstorm Sandy interrupted economic activity.
According to a Reuters survey of economists, nonfarm payrolls are forecast to show a gain of just 93,000 in November, down considerably from 171,000 in October.
Economists surveyed by CNNMoney are more pessimistic, calling for nonfarm payroll gains of 77,000 in November.
Barclays' outlook is even bleaker. The bank sees a gain of 50,000, which would push the jobless rate to 8.0% from 7.9%.
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The BLS report showed a net increase of 171,000 jobs, beating the average analyst estimate of 125,000 and exceeding the net increase of 148,000 jobs seen in September.
The unemployment rate increased to 7.9% from 7.8% in September as more people returned to the labor market.
Given the tight race for the presidency, there is likely to be a lot of partisan chatter on the results of the October jobs report. The data may even sway some undecided voters to lean one way or the other.
The unexpectedly large number of net new jobs created will certainly be cited by U.S. President Barack Obama as proof that his policies are working and that he should be re-elected.
The uptick in the unemployment rate to 7.9%, just above the 7.8% level where it was when President Obama took office in January 2009, will surely be cited by Republican candidate Mitt Romney as evidence of President Obama's failure to revive the economy.
But before you let these numbers influence your political decisions, here are some often overlooked truths behind the jobs report.
After last month's highly-questioned jobs report, where only 114,000 jobs were added but the unemployment rate ticked down 3 percentage points to 7.8%, many have cried foul.
From Donald Trump to Jack Welch the shouts of conspiracy and manipulation were voiced. To many the only explanation was that the report was indeed "cooked."
"I agree with former GE CEO Jack Welch, Chicago style politics is at work here," Rep. Allen West, R-FL, posted on his Facebook (Nasdaq: FB) page after last month's strong report. "Somehow by manipulation of data we are all of a sudden below 8% unemployment, a month from the Presidential election."
Whether or not those numbers were manipulated, the fact remains that unemployment dropped below 8% for the first time in over three years.
That was a significant milestone for President Obama and revived his campaign following Mitt Romney's surge in polls since the first debate.
Another move downward in the unemployment rate, or simply staying below 8%, could be enough to clinch an election that has become almost a dead heat.
Can we talk about unemployment in the U.S.? And can we talk about conspiracy theories?
I thought you'd say "yes." I can almost hear you saying, "Hell yeah, bring it on!"
So, let's have at it.
Let me say my piece, and then you can chime in.
I'll start by saying I don't think there's any conspiracy to manipulate the unemployment numbers.
You know, the numbers that came out on Friday and freaked everybody out.
Somehow, right before the election and right after President Obama fell flat on his face, after Mitt Romney knocked the champ (don't get mad, he's not my champ, he's the champ because he's the incumbent) down almost for a ten-count, the bloodied champ bounds off the canvas and stands on the ropes proclaiming victory over economic malaise because the unemployment rate fell below 8%.
Well, what's freaky about the unemployment number, the U3 number, the most widely watched and reported measure of unemployment in the country, maybe even the world, is that it fell from 8.1% in August to 7.8% the September.
What's got folks in an uproar (folks that aren't so folksy when it comes to the champ) is that it looks pretty conspiratorial that unemployment hasn't been below 8% in 43 months, not since Obama got into office. And all of a sudden it drops in August to 8.1% from July's 8.3%, and far more freakily, drops to 7.8% (that's below 8% for you non-math types) in September from 8.1% in August.
But before I give you my thoughts on why I don't think there's a conspiracy...
Okay, let's stop right there. The truth is I DO believe in conspiracies.
I believe that John Kennedy was assassinated in a coup'd'état in Dallas. Who did it and why? Figure it out, the facts are all there.
I believe that the Federal Reserve System is a front for the power, and of course, moneyed elites who run America for the benefit of its Club Fed members. The facts are all there.
Do I believe in other conspiracy theories? You bet I do. I just don't believe in all of them, especially the ones that can't be proved. Theories are fine, but give me some facts.
But I digress.
Does it smell like a conspiracy, some manipulation of the unemployment numbers that look so much better and may now aide Obama's reelection campaign?
You bet it does.