Another Phony Payroll Jobs Number

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

The Bureau of Labor Statistics announced today that the US economy created 271,000 jobs in October, a number substantially in excess of the expected 175,000 to 190,000 jobs. The unexpected job gain has dropped the unemployment rate to 5 percent. These two numbers will be the focus of the financial media presstitutes.

What is wrong with these numbers? Just about everything. First of all, 145,000 of the jobs, or 54%, are jobs arbitrarily added to the number by the birth-death model. The birth-death model provides an estimate of the net amount of unreported jobs lost to business closings and the unreported jobs created by new business openings. The model is based on a normally functioning economy unlike the one of the past seven years and thus overestimates the number of jobs from new business and underestimates the losses from closures. If we eliminate the birth-death model’s contribution, new jobs were 126,000.

Next, consider who got the 271,000 reported jobs. According to the Bureau of Labor Statistics, all of the new jobs plus some—378,000—went to those 55 years of age and older. However, males in the prime working age, 25 to 54 years of age, lost 119,000 jobs. What seems to have happened is that full time jobs were replaced with part time jobs for retirees. Multiple job holders increased by 109,000 in October, an indication that people who lost full time jobs had to take two or more part time jobs in order to make ends meet.

Now assume the 271,000 reported jobs in October is the real number, and not 126,000 or less, where are those jobs? According to the BLS not a single one is in manufacturing. The jobs are in personal services, mainly lowly paid jobs such as retail clerks, ambulatory health care service jobs, temporary help, and waitresses and bartenders.

For example, the BLS reports 44,000 new retail trade jobs, a questionable number in light of sluggish real retail sales. Possibly what is happening is that stores are turning a smaller number of full time jobs into a larger number of part time jobs in order to avoid benefit costs associated with full time workers.

The new reported jobs are essentially Third World type of jobs that do not produce sufficient income to form a household and do not produce exportable goods and services to help to bring down the large US trade deficit resulting from jobs offshoring.

The problem with the 5% unemployment rate is that it does not include any discouraged workers. When discouraged workers—those who have ceased looking for a job because there are no jobs to be found—are included the unemployment rate is about 23%. Continue reading

How the EZ Money Boom Ends …

Submitted by William Bonner, Chairman – Bonner & Partners 

Checking the Balance Sheet

“Through the door there came familiar laughter
I saw your face and heard you call my name
Oh, my friend we’re older but no wiser
For in our hearts the dreams are still the same
Those were the days”


– “Those Were the Days” by Gene Raskin

POITOU, France – Yes, they were good years… 1980-2015. We laughed. We cried. We got married. We raised children. We bought houses. We made money. Whose life has not been improved since the end of the 1970s?

Reagan’s “Morning in America.” Then the Clinton Years. Finally, George W. Bush’s “Fin de Bubble” era. Who is not older and better off (or at least older) than he was when the era began? Should we just stop there, happy to have had such a wonderful time together?

ReaganThe great communicator back in the day …

Photo credit: Jeff Taylor / AP

Today, the Dow opens at 17,867 points – not far from its all-time high. And about 1,180% higher than it was 35 years ago. A man would be fool to question his happiness in marriage; would he be so foolish to wonder about the bliss afforded by such a bull run?

Should we merely thank divine providence… or the profane feds… for our granite countertops, our rising stock market portfolios, our families, and our fortunes? Should we look in the closets and under the rug? Or maybe – just maybe – should we check the balance sheet? Continue reading

Irreversibly Broken and Dysfunctional

Submitted by Doug Noland – Credit Bubble Bulletin 

Bloomberg: “The October Jobs Report Gives Fed Officials a Green Light to Raise Rates.”

With global “risk on” back in full swing, the focus of U.S. monetary policy belatedly shifts back to fundamentals. October’s 271,000 was the largest jobs gain since last December. The unemployment rate is down to 5.0%, the low since April 2008. Average hourly earnings were up 2.5% y-o-y in October, the strongest performance since July 2009. The private sector added an eye-opening 268,000 jobs during the month, with Services employment up 241,000. Indicative of an extraordinarily unbalanced economy, no manufacturing jobs were created during October.

Existing home sales are on track for the strongest year since 2007. Automobile sales are booming as well. Monthly auto sales last month posted the strongest October since 2001 (from Dow Jones), with annual sales poised to test the all-time record. Kelley Blue Book is expecting 2015 sales 12% above 2014.

My point is not that the U.S. economy is robust – or even sound. From my perspective, booming home and auto sales reflect the upshot from years of ultra-loose financial conditions and a resulting “Bubble Economy”. Importantly, the Federal Reserve’s extreme monetary accommodation is grossly inappropriate considering U.S. financial and economic backdrops. Keep rates at zero, print a few Trillion, backstop booming financial markets long enough and spur unprecedented inflation in (perceived) Household Net Worth – and Bubble Economy Dynamics will eventually prevail. They have.

The Yellen Fed is now expected to raise rates next month. And, suddenly, there’s some trepidation that “one and done” might not suffice. From a traditional analytical perspective, the Fed has fallen behind the curve in historic fashion. In the past, it would require a series of hikes and a period of time to temper the intense impulses to borrow, lend, spend, invest and speculate. Especially if monetary conditions were held loose for too long, real pain was required to impose some restraint. Continue reading

Payroll Consistency

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

There is no accounting for revisions because by the time anyone remembers it was too late. The same is true for monthly variations that can easily become swallowed by overarching trends unconcerned with such small time periods. All of that means we shall repeat, over and over, the same incessant dichotomy whereby everything looks bad andeven recessionary but the payroll report erases it all.

I’m not actually speaking just of October’s headline, as this month has already been repeated in kind twice before just this year. Here is what I wrote about the May jobs report released on June 5:

It makes a very interesting contrast, to start the week under cloud of suspicion only to end it with its reverse. Economic data was routinely awful earlier, though for the most part financial markets are moved more by how that might make Janet Yellen feel than anything of a fundamental basis for all those prices…
None of that matters anymore, apparently, because the headline jobs figures wash away all economic sins. Like January this year, this payroll report was just about perfect: high headline, jump in full-time and labor force, and at least a close read on the Household. All of that adds up to very little outside of what seems to pass for conventional “wisdom” about the economy. I’m not sure when it happened, but the payroll figures seem to have surpassed everything else in terms of the economy’s weight in at least setting mainstream media perceptions, likely because bubble rationalizations do not like to be disturbed – and the payroll report is about the only account that obliges.

I could honestly just reprint those passages and call it a day on the payroll mismatch. And that highlights the rather unusual uselessness of the one economic account that most people associate with broad economic function. From that point forward, the US and global economy fell much further, with much violence financially, rather than what was suggested by the “perfection” of May’s first look at it. Of course, those months around then were eventually revised significantly lower, not that many have noticed, such that the clear slowing inflection even in the Establishment Survey rated sometime instead around January; which was, not coincidentally, that first “perfect” payroll report of the year. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

US Looks Set For December Interest Rate Rise After Jobs Boost (Guardian)
US Jobs Report: Workers Aged 25-54 Lose 35K Jobs, 55+ Gain 378K (Zero Hedge)
Peter Schiff: It’s Going To Be A ‘Horrible Christmas’ (CNBC)
US Consumer Credit Has Biggest Jump In History, Government-Funded (Bloomberg)
Primary Dealers Are Liquidating Corporate Bonds At An Unprecedented Pace (ZH)
Will China’s Consumers Step Up In 2016? (Bloomberg)
China’s Demand For Cars Has Slowed. Overcapacity Is The New Normal. (Bloomberg)
World’s Largest Steel Maker ArcelorMittal Loses $700 Million in Q3 (NY Times)
Berlin Accomplices: The German Government’s Role in the VW Scandal (Spiegel)
EU Asks Members To Investigate After VW Admits New Irregularities (Reuters)
VW Says Will Cover Extra CO2 And Fuel Usage Taxes Paid By EU Drivers (Guardian)
Goldman Sachs Dumps Stock Pledged By Valeant Chief (FT)
New Countdown For Greece: A Bank Bail-In Is Looming (Minenna)
UK Care Home Sector In ‘Meltdown’, Threatened By US Vulture Fund (Ind.)
US Congress Proposes A Chilling Resolution On Social Security (Simon Black)
Germany Imposes Surprise Curbs On Syrian Refugees (Guardian)
Germany Receives Nearly Half Of All Syrian Asylum Applicants (Guardian)
Sweden Feels The Refugee Strain (Bloomberg)
Sweden Tells Refugees ‘Stay in Germany’ as Ikea Runs Out of Beds (Bloomberg)
Greek Coast Guard: Five More Migrants Found Dead (Kath.)