The employment picture is a huge economic headwind. That is why each report gets so much
attention. Lack of employment =
continued weak demand. If the employment
situation improves, consumption should pick, balance sheets will heal faster,
the economy will improve, and then you get a positive feedback loop. With that in mind, let’s take a look at the most
recent report…
The Good:
- We added 163k jobs
- Better than consensus (100k forecast)
- The stock market appeared to like the number
- Indicates we aren't in a recession
- Other aspects of the report were more negative
- Unemployment actually rose to 8.30%
- U6, a broader range of unemployment rose to 15%
- Revisions in prior months and seasonality
Nothing. While I just
said the report gets attention, it’s one report. The trends remain not good and the employment
picture is still poor. Calculated Risk has some
fantastic graphs that illustrate this:
- Deepest job loss and slowest job recovery in Post WWII recessions (here)
- Long-term unemployment, while decreasing, is still elevated (here)
- Note, if this doesn’t decrease it could indicate a more secular employment problem
- People ages 25 to 54 are underemployed relative to prior levels (here)
- People still aren’t participating in the labor force as they have in the past (here)
So to conclude, it’s good we are moving in a positive
direction, continuing to heal, and seemingly not in a recession as of now. Still, the report is not a game changer and
does not augment the underlying key theme – the employment situation as a whole
is weak.
Focus on the trends, not one reading.
