Headline numbers from today’s jobs report looked great. Unemployment fell to 7.8 per cent, non-farm payrolls came in line with expectations, and last month’s number was revised up.This prompted some to claim the numbers were made up. President Obama said, “this morning we found out that the unemployment rate has fallen to its lowest rate since I took office.”
But Gluskin Sheff’s David Rosenberg didn’t paint such a rosy picture of the report and had a very specific response to any such claim:
“That the 7.8 per cent jobless rate takes it to the level that prevailed when the President took office in January 2009 has raised many an eyebrow. I don’t believe in conspiracy theories. But I don’t believe in the Household Survey either.
This notoriously volatile indicator has become even more so in recent months. It showed a 195K slide in July and a 119K decline in August, to only then reveal a massive 873K surge in September. So, aced on a household employment, the economy was in a recession in July and August and the miraculously boomed at its strongest rate since January 1983 (is Obama really the new Reagan)? If it’s too good to be true, then it probably is.
But this is why the headline unemployment plunged, and that is what is very likely to make the front pages of the Saturday newspapers. Digging beneath the veneer, the quality of these so-called Household jobs is called into question, seeing as part-time work for ‘economic reasons’ dominated with a 582K run-up in September. And upon closer inspection of the actual amount of slack in the labour market, the more inclusive U6 unemployment rate that does a much better job at capturing underemployment remain stubbornly stuck at 14.7%.”
Here are Rosenberg’s key takeaways:
- The headline 114K non-farm payrolls figure is half of the +200K norm on payrolls. Only half of the over eight million jobs lost in the Great Recession have been regained, three years after the recession ended.
- “The bulls will most assuredly point to the 86K upward revisions to the prior two months, though the counterargument is that a visible slowing is taking hold since that puts the 114K ‘spot’ number at more than just a bit of a discount to the three-month average of 146K.”
- While weekly earnings were up 0.6 per cent in September, inflation has also ticked up with rising grocery and gasoline prices, so in real terms wages are stagnant.
- Most of the new jobs were focused in education/health and leisure/hospitality – which account for 25 per cent of employment.
- 47 per cent of private sector firms cut their staff requirements in September or kept them steady, up from 42 per cent in June. Factory payrolls declined by 16,000 in September, and this followed on a 22,000 decline in the August report. This scale of back-to-back declines hasn’t been seen since early 2010.
- Temporary agency employment considered a leading indicator for future job creation fell by 2,000.
Bottomline – Rosenberg doesn’t see much in today’s job’s report that suggests that economic activity is going to gather steam through the rest of the year.