A day late and a dollar short for Democrats now vacating their DC offices to make room for Tea Party and other Republican opportunists, the Labor Department reported jolly good news today… or so the popular press will have you believe.
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Increased Unemployment Lost in Employment Report Translation
Nonfarm Payrolls climbed by 151,000, exceeding both the economists' consensus forecast for 60K and the top end of the forecast range at 97K (based on Bloomberg's survey). Still, unemployment stuck at 9.6%, souring the soup a bit. Furthermore, a closer look at the data shows underemployment still at 17%. Meanwhile, the unemployed count actually increased in October, while the size of the labor force conspicuously declined. If this is good news, I have to reevaluate where I fit in this weird world. The report is definitely not overwhelmingly positive.
The Employment Report for October 2010 blew economists out of the water Friday with a blowout jobs creation figure. The nation's economists expected a positive result, given census workers are now long gone and cannot skew the headline figure any longer (they cost 5K jobs this month). Nonetheless, as the President restated, private nonfarm payrolls (thus excluding government jobs) jumped by 159K, and are up 1.1 million since December. In fact, October marked the 10th straight month of private sector job growth, and four months above the 100K level - the first time for this in four years. But keep reading…
Job additions were mainly driven by the service sector, which we remind you makes up 90% of American GDP these days. Private services industries added 154K jobs on net in October, with Retail Trade adding 27,900 ahead of the start of the holiday shopping season. Wholesale Trade contributed another 7,300. Professional and Business Services contributed 46,000, reinforcing data offered by the Monster Employment Index earlier this week. If the service sector is ready to grow now, then we would have something to be thankful for later this month besides a tasty turkey. The feeling has been that employment would have to improve some first, but it seems possible that the hangover from the real estate & related exotic investment instruments bubble contributed some to consumer malaise. Perhaps Americans are finally starting to feel normal again.
There was some sour news within the services sector though. Financial Activities for one, shed another 1,000 jobs; sorry friends, Wall Street is not inviting you back to the party just yet. Transportation and Warehousing data from the Establishment Survey disagreed with news we received from Monster Worldwide (NYSE: MWW); those jobs were not found in this data. Neither did Information (IT) contribute to the spike this month. And within Professional and Business Services, which we celebrated above, most of those jobs were found in the Temporary Help category. That is a good thing, since this is where the baby is born, but it's also troublesome that companies are not ready to make long-term commitments yet.
There was a weird twist to the news out of the goods producing group. Construction actually added 5,000 jobs in October, while Manufacturing, which was an early driver of economic recovery, followed our old forecast for softness and shed 7,000 jobs last month. Note that this news conflicted with data released earlier in the week from ISM. But manufacturing looks to be getting enough lift from export demand to keep it revving. Motor Vehicle & Parts makers added 3.3 million jobs, but Durable Goods makers shed 3K jobs in aggregate. Nondurables Makers cut 4K jobs in October.
Education and Health Services added 53,000 jobs, with 34K of those coming from the Healthcare and Social Assistance sectors. In other less followed groups, Mining & Logging added 7K jobs, while Leisure & Hospitality shed 5K.
Another positive that might be overlooked today was the tenth of an hour increase in private nonfarm payroll hours worked, taking the eater of capacity to 34.3 hours per week. As this figure increases, pressure rises on companies to add workforce. Industrial Capacity Utilization has been recovering of late, but still has plenty of leeway. That said, today's news is still enthusing. Over the past 12 months, this important barometer has increased by 1.7%.
Despite the improvement in the rate of job creation, the unemployment rate stuck stubbornly at 9.6%. All signs point to a slow grind toward mid-single digit unemployment, which is unfathomable at this point. It could take years before we see anything near the sub-5% rate of unemployment enjoyed for most of the last decade, if we ever see it again.
Part-timers who would rather be working full-time hours fell by 318K in October, to sit now at a still too high 9.154 million. That figure is not that far off from the prior year count, which measured a horrible atmosphere. Another 2.602 million people (up from 2.548 million in September) are counted in a category labeled "marginally attached" to the labor force, and are excluded from the unemployment rate. Within this group, there were some 1.219 million Americans (up from 1.209 Mln.) labeled "discouraged workers," because they believe there are currently no jobs available for them.
We have been a pioneer in the reporting of the "Underemployment Rate," which perhaps we coined. There was another metric that made less sense to us, which preceded this metric; we tweaked the number to develop the Underemployment measure you find here monthly (and everywhere else now too). The math follows:
Our underemployment figure includes part-timers who would rather be working full-time. This adjustment also adds back "discouraged" and marginally attached workers, who are not counted as part of the workforce or unemployed. If we add back the 2.602 million displaced workers to the labor market, and include the 9.154 million underemployed part-timers in the unemployed count, adjusted unemployment reaches ((14.843M + 2.602M + 9.154M) / (153.904M + 2.602M)) * 100 = 17.0 %. That's down slightly from September's 17.1% rate, but compares poorly to the 16.7% measured in August; 16.5% in July and June; 16.6% in May; 17.1% in April; 16.9% in March; 16.8% in February; and 16.4% in January.
Adding insult to injury, the count is favorably impacted by a decrease in the labor workforce to 153,904,000 from 154,158,000 in September. Meanwhile, the total number of unemployed Americans increased in October to 14,843,000, from 14,767,000. This while some 9 million plus Americans are barely making enough to pay their bills working part-time, and another 2.6 million have given up altogether. Even without the contradiction shown here and the conspicuous change to the labor force, the situation remains intolerable. This report might have helped some Democrats keep their jobs, but let's be clear: it does not depict good news.
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