Employment is not "falling off a cliff", it's better described as stagnant. Wages paid to the work force are starting to surge too, up 2.4% annualized in the last three months.
Yes, much of the surging PPI costs can easily be passed on, because more importantly than job growth (see previous Noland essay on credit expansion), people are flush with borrowed easy money derived from inflated assets. In fact credit is outstripping wages and salaries by nearly 8 to 1. That in my mind makes new borrowing eight times more relevant to the inflation story than wages and jobs. You are overly focused on jobs as the key ingredient of this Train Wreck inflation brew. That's the wrong focus, it's new credit expansion (and money printing from the BOJ) that drives the demand. Credit expansion must slow considerably to end this inflation outbreak.
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Sorry, you lose.
Employment has fallen off a cliff 100% guaranteed.
Labor participitaion rate has fallen, and last 2 months employment revised down to boot. It takes 150,000 jobs to break even and we produced 21,000 jobs. We lost 130,000 jobs last month. PERIOD! MINIMUM. Since they revised the last two months down we should check and see how many jobs were lost in the preceeding two months as well.
I strongy suggest you read Mauldin.
Here is a snip:
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The Bureau of Labor Statistical Magic
First, some would argue that we should not be whining about unemployment. It is, after all, only 5.6%, which is historically not all that high. But current headline Bureau of Labor Statistics unemployment rates are not the whole story. The magic of statistics is that if you get to define the terms, you can make the numbers say what you want them to say.
No great conspiracy here, but the unemployment numbers are developed in such a way that unemployment is understated. If there was some conspiracy, we would not be able to look at the detailed way in which the numbers are developed. The fact that most commentators do not look beyond the headline number is not a conspiracy. It is laziness. Big difference.
The unemployment numbers are useful as they give us a direction of employment, which has been improving, and a basis for historical comparison. But there is more when you look at the underlying actual numbers that make up the statistics and how they are counted.
For instance, the BLS does not include people in the category of unemployed who want a job but have not looked for one in the last four weeks. If you add in the people who want a job but are not counted as unemployed, the unemployment rate goes up to 8.8%.
There are also 4.4 million people who are working part-time but would like a full time job. If you add those in also, we have 11.8% of the population who are unemployed or are under-employed.
But the statistics are even more ambiguous than that. If you look at the actual numbers for February 2004 (www.bls.gov) you find that the total number of people classified as unemployed went down by 127,000. Doesn't that mean we created 127,000 jobs?
The answer is no. Let me throw you some odd statistics. First, since November, the actual labor force (according to the BLS) has dropped by over 700,000, even though the population rose. The number of people actually employed dropped by a seasonally adjusted 265,000. The number of people who are now considered not in the workforce rose by over 500,000.
Yes, in the world of government statistics, we can have a rising population, the number of employed go down and still see the unemployment rate drop. We simply use a definition for unemployed which ignores many of those who are in fact unemployed and would like a job.
The number of people not in the work force has risen by almost 1.7 million in the last year. Part of the rise in the number of people not in the labor force is due to retirement, going back to school and other natural forces, but a significant part is simply reclassifying people as not part of the labor force because they have not looked for a job in the last four weeks. The labor participation rate is 62.2%, down by 0.2% from this time one year ago, yet supposedly the unemployment rate has dropped almost 1%.
frontlinethoughts.com
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Mish continues after that snip from Mauldin.....
Furthermore it is far worse that even that. US govt stats show that the average new job pays $34,000 per year and the average job lost paid $45,000. (I forget the link to that and those figures are approximate but very close). So not only have we lost 1 million jobs, the jobs we are gaining are paying way less! If that is not falling off a cliff what is?
Jobs are the RIGHT focus because it is tradeable. People making investement decisions based on what matters TO THE MARKET, not some theory as to what SHOULD matter in someoene's opinion, were extremely well rewarded on Friday. That to me says I was right, and not only that, focus on jobs has been right since last September and I will bet you and continue investing for the rest of this year based on jobs.
If I am overly focused on something, at least I am focused on something that is making money in practice not what should be making money in theory. If and when the PPI starts mattering in practice, hopefully I will be smart enough to shift my focus to it. Right now the market is focused on jobs, and has been focused on jobs for quite some time, as have I. Just what is wrong about that?
Mish |
