Suddenly, a Sharp Deterioration in the Job Market
Submitted by testosteronepit on 02/18/2012 23:43 -0500
Wolf Richter www.testosteronepit.com
A hullabaloo broke out on February 3 after the BLS released its jobs
report that indicated that a surprisingly robust 243,000 jobs were
created in January, and that the unemployment rate had dropped to an
even more surprising 8.3%. Cynics, academics, BLS heretics, BLS true
believers, hype mongers, and politicians of all stripes waged a
veritable media battle over these numbers that President Obama serenely
trotted out as validation of his policies. Even Rush Limbaugh jumped
into the fray. Rarely, if ever, had BLS numbers caused so much public
disagreement—and scorn. But that’s history. Now we're in February, and
unemployment, after a year of fairly consistent improvement, is suddenly
showing a sharp deterioration.
On Friday, Gallup’s
mid-month unemployment reading, which covers the preceding 30 days,
jumped from 8.3% in mid-January, the low point since the financial
crisis, to 9.0%. An astounding increase. And its Job Creation Index confirmed that trend, dropping from +16 in January to +13 in February.
Worse, 10% of the employees in mid-February were part timers in
search of full-time jobs, though down a tad from January's of 10.1%, the all-time worst
level in Gallup's history! Underemployment—a combination of the
unemployed and part-timers who are looking for a full-time job—jumped to
19% from the mid-January reading of 18.1%. While Gallup’s unemployment
reading has improved steadily over the course of 2011, the
underemployment reading has simply gotten worse.
Gallup's mid-month reading has been a good predictor of the non-farm
payrolls report that the BLS releases two weeks later on the first
Friday of the following month. For example, Gallup’s mid-January reading
improved to 8.3%, in line with what the BLS would report two weeks
later (causing the above hullabaloo). Unlike the BLS, Gallup, does not
seasonally adjust its unemployment reading, so some uptick during this
time of the year is normal. But that kind of jump is far beyond normal.
Of course, the BLS might tweak its formula to further decrease its
utterly confounding workforce participation rate to the point where the
resulting unemployment rate will actually, and once again, surprise on
the upside, despite the hue and cry that may cause.
And there was another indicator: the Philly Fed
employment index collapsed from 11.6 in January to 1.1 in February—a
warning shot for Jack Ablin of Harris Private Bank whose concerns on
this were published by Politico's Morning Money
on Friday. The index reflects hiring plans by employers, and they have
pulled in their horns. They're now adequately staffed, though they might
add a few people here and there, while they’re waiting for demand to
show signs of life. That wait may tax their patience, however: gasoline
prices are at an all-time high for this time of the year, and other
debacles are tearing into the toughest creature out there that no one
has been able to subdue yet. But even that tough creature may have
reached its limit. Read.... The Inexplicable American Consumer Takes an Unexpected Breath.
Over the years, the Philly Fed employment index has shown a strong
correlation with the BLS jobs report, and Ablin estimated that based on
it, only 50,000 new jobs were created, a far cry from the 243,000 in
January—fictual or not. This and the nasty mid-month unemployment number
from Gallup revive an odd idea: has the ECRI’s much ridiculed recession
call been right all along?
Unless the BLS can figure out how to statistically adjust its next
set of data and estimates to relegate any negative elements to blissful
oblivion, there will be disappointment. And it will slam into lofty
expectations—which may cause the stock market to, well, spike because,
in these crazy times of ours, QE3 with all its wondrous, illusory, and
ineffectual magic will suddenly reappear on the table. Read.... Bernanke’s Rain Dance at the Bottom of the Stairs.
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