You Can Take Your Jobs Optimism and Shove It
Despite the cheering headlines you might see elsewhere, these numbers, upon close inspection, are pretty awful.
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The Bureau of Labor Statistics released the results of its twin labor market surveys for November. From the establishment survey, non-farm payroll job creation printed at (salted, peppered, and heavily seasoned) growth of 227,000, while revising the months of September and October up a combined 56,000. That's a net creation of 283,000 jobs, if one can trust the numbers, which is asking a lot.
Why the skepticism? Aside from the poor past performance of this series, one only has to go as far as the BLS household survey to find stark contrast in just how many jobs were created in November. This is astonishing. For November, the household survey shows a decrease of 355,000 employed people on top of an October decrease of 368,000. In other words, over the past two months, according to the BLS survey that the financial media loves to ignore, job creation stands at negative 723,000. Things that make you go hmmm? One more thing on this topic. It looks like there were job losses across both full and part time labor forces, so a mass reduction of hours does not seem to be part of this story.
Digging into that household survey, we see a decrease in the civilian labor force of 193,000 individuals and an increase of 161,000 officially unemployed persons. This takes the participation rate down to 62.5% from 62.6% and the employment to population ratio to 59.8% from 60%. Two months ago, this metric stood at 60.2%. Finally, the official unemployment rate that does not count those folks who simply dropped out of the labor force, increased to 4.2% from 4.1%, while the underemployment rate increased to 7.8% from 7.7%.
Additionally, according to the establishment survey, the average full-time workweek improved to a historically low 34.3 hours from a ghastly 34.2 hours in October. Average Hourly Earnings remained precisely on pace with October at year over year growth of 4%.
Unemployment Rate by Gender / Age
Adult men: stable at 3.9%.
Adult women: increased from 3.6% to 3.9%.
Teenagers: improved from 13.8% to 13.2%.
Unemployment Rate by Race
White: stable at 3.8%.
Black or African American: soared from 5.7% to 6.4%.
Asian: decreased from 3.9% to 3.8%.
Hispanic or Latino: increased from 5.1% to 5.3%.
Unemployment by Education
High school dropouts: decreased sharply from 6.6% to 6%.
High school grads: soared from 4% to 4.6%.
Some college or associate degree: increased from 3.4% to 3.6%.
Bachelor's degree & beyond: decreased from 2.5% to 2.4%.
My Thoughts
It's a matter of what one believes. The media always clings to the most optimistic looking numbers when there is dispute. That appears to never change. These are starkly different results though, and we have seen just too much of those over recent years. Treasury yields have dropped sharply in response to the data, suggesting that bond traders see the negativity in this report that I see. The U.S. Dollar Index plummeted immediately, which implied that currency traders also saw sizable job losses in the household survey, but the "dixie" has already recovered those losses, so I am not sure what they see now.
This is a pretty sobering jobs report and stands in opposition to those who go on about the strength of both the economy and labor markets.
The fact is that overall, this is a pretty sobering jobs report and stands in opposition to those who go on about the strength of both the economy and labor markets. I think it must be seen as extremely cautionary that most significant gains in this report were made by teenagers and high school dropouts. What does that tell us about the quality of any jobs that are being created? If the unemployment rate is rising for high school grads, those with some college and those with associate degrees, that also tells us something about middle class jobs that are likely being lost en masse. One other troubling item is the sharp increase in unemployment among those of Black or African American ethnicity. There is a lot not to like in this report. Far more negativity than positively, despite what the clown show on CNBC is telling you.
On the Fed
There is absolutely nothing in this report that would stop a Federal Open Market Committee that was already leaning toward a quarter-percentage point reduction to the target range for the Fed Funds Rate on Thursday, Dec. 18. As a matter of fact, Fed Funds Futures trading in Chicago are now pricing in an 87% probability for such a cut on that day, up from a 68% probability ahead of the release of this report. A next cut of a quarter point after this one is still priced in for March 19, but that likelihood has increased from 53% to 70% this morning. Clearly, futures traders in that market see what we see.
At the time of publication, Guilfoyle had no position in any security mentioned.
