March Employment Numbers Better Thanks to Government Hiring

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


According to the latest government statistics, U.S. nonfarm payrolls increased by 162,000 in March. The headline unemployment rate was still 9.7% as was the case in January and February. The alternative unemployment rate ticked up to 16.9% however. Most hiring took place thanks to the Census, the health care industry, and the magic of seasonal adjustments - none of which indicate a recovering economy.

The U.S. census has really been the key to the better (or more accurately less awful) employment numbers for the last several months. According to the recent payroll report, the U.S. government hired 48,000 census workers in March. Hiring has been going on for approximately a year now, but has only been substantial since last fall. The Financial Times of London has reported that the government will be hiring 1.2 million workers for the 2010 Census - twice as many as were needed for the 2000 Census (think of this as a form of hidden government economic stimulus). Only a small fraction of this number has shown up in the employment figures so far, unless the hiring is being hidden in the Business and Professional category. There appears to have been about 50,000 extra temporary workers showing up there every month since last fall. A footnote indicates that this number may include workers from 'other' categories - one possibility for 'other' would be government.

The seriousness of the unemployment picture and how bad the economy actually is can be seen in the number of long-term unemployed (those without jobs for more than six months). This number increased by 414,000 in March to 6.5 million. Of the unemployed, 44.1% are now long-term unemployed. This number is much worse than in any other recession in entire post-War period. Another 9.1 million people are working part-time because they can't get full-time employment. Another 2.3 million workers are considered marginally attached to the labor force and not counted as unemployed because they didn't look for work in the last four weeks, but did do so during the last year.

So what made the 162,000 job gains possible in March? In addition to 48,000 jobs officially listed from the census, there were another 40,000 temporary help service jobs. Health care was the next biggest gainer with 37,000 jobs. Health care has been the only industry to consistently add jobs since the recession began in December 2007. It is not an economically sensitive industry. Leisure and hospitality added another 22,000 jobs, manufacturing 17,000 and construction 15,000. Seasonal adjustments, the government statistician's tool for turning a sow's ear into a silk purse, should be considered the source of extra employment in these industries. When I saw the figures, I wondered if the extra construction workers had been hired to build castles in the sky. To be fair, a case could be made that manufacturing and construction are gaining jobs now simply because there couldn't be any more unemployment in the short-term in those industries, both of which have been devastated during the recession.

Despite all the negative aspects to the employment report, including average hourly earnings falling 0.1%, the mainstream media trumpeted it as more evidence that 'happy days are here again' (the title of a song from the Great Depression). Coverage was filled with statements such as, "The increase is the latest sign that the economic recovery is sustainable and healing in the job market is beginning." Government hiring of census workers and more health care jobs (many of which are also government related) does not indicate a sustainable economic recovery. Instead, it indicates sustainable government spending to try to make a recovery look like it is taking place.

Disclosure: Not relevant.

NEXT: Don't Confuse Inflation With Economic Growth

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

U.S. Employment Numbers Indicate More Stimulus Ahead

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


The December 2009 Nonfarm Payroll report (released January 8th) indicated that the U.S. added jobs for the first time since the recession began two years ago. This didn't take place in December however. Payrolls last month fell 85,000 with most of the damage coming from drops in construction and manufacturing. Revisions for past months made by the BLS indicate that the U.S. added 4000 jobs in November, instead of the 11,000 loss initially reported. At the same time that 15,000 extra jobs appeared in the November totals, 16,000 were subtracted from the October totals. Certainly, some would think this was suspicious.

While the BLS (Bureau of Labor Statistics) may be playing tricks with the numbers to make the U.S. employment situation look better, it is still quite obvious that the overall picture is pretty dismal. The best spin they could put on the recent news was that the drop in the numbers in the fourth quarter of 2009 was much less than in the devastating first quarter. This 'we are still falling off a cliff, but at a slower rate' message shouldn't reassure anyone. While it is true that there are less layoffs now than there were a year ago, the numbers literally couldn't have gotten much worse. Looking inside recent U.S. employment reports, it can be seen that large numbers of temporary workers added to payrolls have prevented the job loss numbers from being lower than they would have been otherwise. Another 47,000 temp workers were added in December. People have also been leaving the labor force in large enough numbers to keep the top line unemployment rate at only 10.0%. According to the BLS another 661,000 people supposedly exited the U.S. labor force between November and December 2009. While people who aren't in the labor force obviously don't have jobs, they are not considered unemployed.

There were only three industries that added employees in December. Professional and Business Services added 50,000 employees, but this seems to be mostly temporary workers. Education added 13,000 jobs. Health Care added 22,000 jobs and has been the one perennial bright spot in U.S. employment since the recession began. It has added jobs every month in the last two years. A vibrant health care sector can't be the cornerstone of a healthy economy however. The goods producing sectors are needed for this and they are still hemorrhaging jobs. Another 53,000 jobs were lost in construction and 27,000 in manufacturing in December. The loss of construction jobs is not surprising since other statistical reports indicate that U.S. real estate activity is weak. Reports on Durable Goods and the ISM Manufacturing index though indicate U.S. manufacturing has been doing well for many months. There seems to be a disconnect there.

Unemployment is perhaps the most sticky of political issues and something that politicians watch closely. Their automatic reaction is to spend more money to tackle the problem. First they borrow it, and when the credit lines run out, they print it. The U.S. is already well along in this scenario. Investors can also expect a continuation of the Fed's zero interest rate policy until there are real improvements in the employment numbers. It is estimated that it will take the creation of 200,000 jobs a month to lower the U.S. unemployment rate. December's report indicates that this won't be taking place in the near-term future.

Disclosure: Not applicable.

NEXT: Sun Shines on Solar Stocks in Early 2010 Trading

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.