Unemployment drops .....

[EagleKeeper]

Due to people dropping out of the market, not due to jobs being generated.

Business still is distrustful of economic direction and the administration policies.
government forecasts we know are rosy and over inflated, but by 40%. That sound like manipulation of numbers.

WASHINGTON (AP) — U.S. employers added 169,000 jobs in August and many fewer in July than previously thought. Hiring has slowed from the start of the year and could complicate the Federal Reserve's decision later this month on whether to reduce its bond purchases.

The Labor Department said Friday that the unemployment rate dropped to 7.3 percent, the lowest in nearly five years. But it fell because more Americans stopped looking for work and were no longer counted as unemployed. The proportion of Americans working or looking for work fell to its lowest level in 35 years.

July's job gains were just 104,000, the fewest in more than a year and down from the previous estimate of 162,000. June's figure was revised to 172,000, from 188,000. The revisions lowered total job gains over those two months by 74,000.

Link

 

[fskimospy]

Due to people dropping out of the market, not due to jobs being generated.

Business still is distrustful of economic direction and the administration policies.
government forecasts we know are rosy and over inflated, but by 40%. That sound like manipulation of numbers.


Link

Oh my god, the crazies are back with their BLS conspiracies again.

1.) You're trying to resurrect the Confidence Fairy. Why? That has been proven false.

2.) Who is manipulating the numbers? Was BLS manipulating the numbers in January of this year when revisions showed that they had underreported job gains by 127,000 jobs in the preceding months? (they over reported by 76,000 this time)

 

[mshan]

The margin of error on the first release of the BLS establishment survey topline number is + / - 100,000, and August is known for upward revision of 50k+ as more data comes in and a more precise estimate (lower margin of error) can be extracted from data (also remember that BLS establishment survey includes goverment, and is more focused on large corporations than ADP Jobs Report* (http://www.adpemploymentreport.com/2013/August/NER/NER-August-2013.aspx focused on small and medium sized private sector businesses, and after the changed their methodology around last September, they are not trying to guess what the first release of BLS will be, they are trying to predict where the BLS will ultimately end up):

http://blogs.wsj.com/marketbeat/201...-report-isnt-as-bad-as-it-looks/?mod=yahoo_hs (article is from August 2012)

** That being said, talking heads on tv are screaming about labor force participation rate (http://news.morningstar.com/articlenet/SubmissionsArticle.aspx?submissionid=169792.xml) but not a peep about U-6 Unemployment Rate going down from 14% to 13.6%. **

Plus average hourly earnings up, average work week up, number of part time for economic reasons down...

Unemployment rate for established college grads dropped from 3.8% to 3.5% (big change seemed to be those without high school degree might be coming back into workforce looking for work: 11% to 11.3%).

Plus blowout ISM Services report yesterday had some even suggesting we could have got +240,000 today.

http://www.bls.gov/web/empsit/cpseea05.htm





There is alot of spin on tv right now, but when the dust settles, 3 month moving average, year over year, after revisions, will probably show continued trend growth, but might also suggest that the expected soft patch that was expected early on this year, is probably going to be just that, a temporary soft patch, not new trend, though reacceleration in growth in second half of year won't be as robust as Fed's original projections (3% real gdp growth).

Rebecca Patterson pointed out yesterday that the Fed Funds futures started pricing a 50 bps increase in Fed short term interest rate at end of next year, instead of August 2015, about 2 weeks ago (http://video.cnbc.com/gallery/?play=1&video=3000197030 start around 3:10 mark) . So if today's jobs report was so bad, presumably some of that should be reversed (?) Greg Ip also points out that another quiver still left in the Fed's arsenal is that if the markets are assuming a taper on auto-pilot, if Bernanke can reiterate that the pace and duration of taper is data dependent, and not on autopilot in terms of rate of removal of stimulus.

edit: Looks like Fed is already jawboning back first Fed Funds rate increase (tapering is not tightening argument, just easing up on accelerator in terms of added stimulus): http://www.marketwatch.com/story/chicago-feds-evans-sees-first-hike-in-late-2015-2013-09-06

Goldman Sachs:

"Our most important finding is that the impact of both nonfarm payrolls and advance GDP is small and statistically insignificant," says Hatzius. " In contrast, the Philly Fed index, the Chicago PMI, and initial jobless claims contain a statistically significant and economically meaningful amount of information for growth. For example, an increase in the first-release Philly Fed index equivalent to a [one standard deviation] surprise (about 8 points) is associated with an average growth pace of our CAI over a 6-month period that is almost 0.3 [percentage points] higher."

http://finance.yahoo.com/news/goldman-payrolls-shmayrolls-investors-being-174317919.html

(initial jobless claims have been running at pre-recession levels, and IIRC based upon what someone said on tv, when adjusted for sluggish population growth now (decreased birth rates and tight immigration post 9/11), they may actually be lowest on record)

GDP (margin of error + / - 1.2%: http://video.cnbc.com/gallery/?play=1&video=3000187949) (private sector spending so far this year is averaging 3%; overall number is just getting dragged down by fiscal drag of sequester, expiration of temporary payroll tax holiday, etc.)


Gross Domestic Income as better indicator of growth: http://video.cnbc.com/gallery/?play=1&video=3000196302




*

As more data come in, the law's impact can't be seen in hiring statistics, says Mark Zandi, chief economist of Moody's Analytics.

"That mandate, originally slated for 2014, has not deterred hiring as feared, some economists now say.

I was expecting to see it. I was looking for it, and it's not there,'' says Zandi, whose firm manages ADP's surveys of overall private-sector job creation. If the Affordable Care Act "were causing a drop, you would see meaningful slowing.''


...


"New research from Moody's and other economists also challenges the idea that small employers are hiring only part-time workers to avoid falling under the health care law's mandate to insure full-time workers.

It's true that about 77% of jobs added nationwide in 2013 are part time. But this year's new jobs are concentrated in industries such as restaurants and hospitality that use as much as twice as many part-timers as other companies, Moody's economist Marisa DiNatale found in a July paper. Most industries are actually using fewer part-timers than last year, DiNatale said.

Likewise, FT Advisors chief economist Brian Wesbury says this year's gains in part-time hiring offset a late-2012 drop in part-time jobs when full-time employment was surging. For the last 12 months, 75% of new jobs are full time, according to the Labor Department."


http://www.usatoday.com/story/money/business/2013/08/20/small-business-hiring/2662407/

 

[Doppel]

This is a good number though. We may be into the 6's fairly soon. I refuse to let myself get sad over such a steep drop in the total number regardless of underlying factors

 

[Double Trouble]

Smoke and mirrors only goes so far I guess. The new jobs being created are often lower quality jobs, and the unemployment rate dropping because people no longer looking for work is not a good thing. Overall, I'd say the numbers are pretty bleak today, and the market seems to be reacting accordingly.

 

[Double Trouble]

This is a good number though. We may be into the 6's fairly soon. I refuse to let myself get sad over such a steep drop in the total number regardless of underlying factors

The total number is actually much less meaningful than most think. It's the underlying factors that are meaningful. If I lose 10,000 middle class jobs and create 15,000 mcjobs, that wil make the overall unemployment number drop, but it's still a terrible thing for the country.

 

[nehalem256]

So when is the sequester going to tank the economy again?

 

[fskimospy]

Smoke and mirrors only goes so far I guess. The new jobs being created are often lower quality jobs, and the unemployment rate dropping because people no longer looking for work is not a good thing. Overall, I'd say the numbers are pretty bleak today, and the market seems to be reacting accordingly.

What smoke and mirrors? Can you be specific?

 

[Double Trouble]

What smoke and mirrors? Can you be specific?

Don't get your panties in a bunch, I'm not talking about some secret cabal manipulating the numbers to make them something they are not.

I'm talking about the trillions being pumped into the economy to prop things up, and the creation of lots of jobs that are of lower quality masking the structural problems of the job market and the economy as a whole. A lower unemployment figure sounds good, but it doesn't mean anything without analysis of the underlying factors.

 

[fskimospy]

Don't get your panties in a bunch, I'm not talking about some secret cabal manipulating the numbers to make them something they are not.

I'm talking about the trillions being pumped into the economy to prop things up, and the creation of lots of jobs that are of lower quality masking the structural problems of the job market and the economy as a whole. A lower unemployment figure sounds good, but it doesn't mean anything without analysis of the underlying factors.

I don't view pumping extra dollars into the economy to be smoke and mirrors either, it's just the best monetary policy the fed can manage given the irresponsible spending cuts by fiscal policy managers.

 

[mshan]

My impression of QE3 / open ended QE / QE Infinity, initiated last September ostensably under the guise of bringing down unemployment at a faster rate than it would otherwise naturally occur, is that real reason was as a safety net for financial markets last fall, given contentious presidential election, debt ceiling debate, upcoming year end fiscal cliff, and lingering issues with Euro / Eurozone.

Just a month ago or so, I believe Fed released study which said that QE3 had not been very effective as economic stimulus, and that it might just be propping up asset bubbles in credit markets globally, and Fed is focused on financial stability and gently attempting to prick bubble before it pops violently again:

"Imagine that you are a bank. The Fed tells you that it is lowering short rates and holding them low for a long time. That is, in essence, a signal to borrow short and lend long. In the summer of 2009, T-Bills were yielding roughly 0.5% and 10-year Treasuries were roughly 3.5%. If the bank were to borrow short and lend long with Treasury securities (no credit risk), it could get a spread of roughly 3%. Lever that trade up a "conservative" 10 times and you get a 30% return. 20 times leverages gets you 60% return. Pretty soon, you've made a ton of money to repair your balance sheet.

The banks weren't the only ones playing this game. The hedge funds piled into this trade. Pretty soon, you saw the whole world reaching for yield. The game was to borrow short and lend either long or to lower credits. Carry trades of various flavors exploded. There were currency carry trades, some went into junk bonds, others started buying emerging market paper. You get the idea.

The net effect was that not only interest rates fell, Risk premiums fell across the board. The equity risk premium compressed and the stock market soared. Credit risk premiums narrowed and the price of lower credit bonds boomed."


http://humblestudentofthemarkets.blogspot.com/2013/07/its-risk-premium-stupid.html

http://video.cnbc.com/gallery/?video=3000176107 ("What's Ben Bernanke Really Afraid Of?"]

 

[PokerGuy]

I don't view pumping extra dollars into the economy to be smoke and mirrors either, it's just the best monetary policy the fed can manage given the irresponsible spending cuts by fiscal policy managers.

Pumping trillions of additional borrowed dollars into the economy will make the economy appear to be more solid than it really is. Those trillions have to be repaid, which does not show up in regular economic indicators (with the exception of the very low interest payments). That's smoke and mirrors. In the end it might be the right thing to do or it might not, but it's still smoke and mirrors either way. DT is right, all smoke and mirrors.

Spending cuts? Since when? All we've seen is reduction in spending increases, no cuts.

 

[fskimospy]

Pumping trillions of additional borrowed dollars into the economy will make the economy appear to be more solid than it really is. Those trillions have to be repaid, which does not show up in regular economic indicators (with the exception of the very low interest payments). That's smoke and mirrors. In the end it might be the right thing to do or it might not, but it's still smoke and mirrors either way. DT is right, all smoke and mirrors.

Spending cuts? Since when? All we've seen is reduction in spending increases, no cuts.

Of course they show up in regular economic indicators and what they are doing is totally transparent. They come out and publicly state exactly what they are going to do. (in fact having the public know what you are doing is a vital part of the plan) That is the opposite of smoke and mirrors.

The US budget deficit has declined at a record pace over the last few years. Some of that has come from tax increases, but a lot from spending cuts. This was bad macroeconomics as most people realize by now, but we are stuck with it because conservatives refuse to re-examine their economic philosophy even in the face of so much evidence for how it was catastrophically wrong.

I have no interest in the same old 'what constitutes spending cuts' argument.

 

[rudder]

The unemployment rate makes everyone giddy... but we should really be looking at the employment rate.

http://www.bls.gov/news.release/empsit.t01.htm

 

[fskimospy]

The unemployment rate makes everyone giddy... but we should really be looking at the employment rate.

http://www.bls.gov/news.release/empsit.t01.htm

We should look at both.

 

[Double Trouble]

I don't view pumping extra dollars into the economy to be smoke and mirrors either, it's just the best monetary policy the fed can manage given the irresponsible spending cuts by fiscal policy managers.

I wasn't making a judgement call on whether the policy is sound or not, just saying there is a lot of smoke and mirrors aspect to the economic numbers right now. The economic indicators (including the unemployment numbers) are distorted.

Personally I think the underlying structural realities of the economy are much worse than what the indicators show, but I hope I'm completely wrong.

 

[fskimospy]

I wasn't making a judgement call on whether the policy is sound or not, just saying there is a lot of smoke and mirrors aspect to the economic numbers right now. The economic indicators (including the unemployment numbers) are distorted.

Personally I think the underlying structural realities of the economy are much worse than what the indicators show, but I hope I'm completely wrong.

I guess I just take exception to the 'smoke and mirrors' statement because it implies that there is some trickery afoot. The fed has been completely upfront as to what they are doing and why.

 

[Texashiker]

With an estimated 10,000 baby boomers retiring every day, plus people on welfare, plus disability, plus unemployment benefits running out,,,, I am surprised people are not yelling the recession is over.

From the link in the opening post,

The proportion of Americans working or looking for work fell to its lowest level in 35 years.

 

[fskimospy]

With an estimated 10,000 baby boomers retiring every day, plus people on welfare, plus disability, plus unemployment benefits running out,,,, I am surprised people are not yelling the recession is over.

From the link in the opening post,

The issue with the declining employment rate is not that it's declining. We fully expect the employment rate to continue to get lower as more baby boomers retire. The issue is that it is declining more quickly than the retirement of boomers can account for.

 

[nehalem256]

The unemployment rate makes everyone giddy... but we should really be looking at the employment rate.

http://www.bls.gov/news.release/empsit.t01.htm

Looks like a bubble to me.

 

[Texashiker]

The issue is that it is declining more quickly than the retirement of boomers can account for.

A lot of people are also choosing not to have children.

If we look at the chart in post #20, we see the workforce exploding when the baby boomers started working in the mid-60s. Generation X continued the trend in the early 80s.

By the time we get to the mid-90s things have leveled out.

Starting in the 2000s employment takes a nose dive.

I am starting to understand why the government wants to legalize millions of illegal immigrants.

One of the big questions I have, how much money is the government going to have to print to cover social security and medicare over the next 20 years? We are going to have a massive debt bubble in 20 years when generation X retires.

 

[chucky2]

Don't worry, we've been letting in millions of illegals who like to have lots of kids, the Politicians are taking care of that by hook or by crook...

 

[mshan]

(some seniors, whose nest eggs were devasted by the Bush Near Depression, might be back to pre-recession net worth, their home is increasing in value, and perhaps then are now starting to retire)

** Workforce is only increasing at 0.5% (IIRC, it's been as high as 3% - 4% in 1960s), so break even point (to keep up with population growth) might only be something like 100,000 (BLS establishment topline number) or less right now: http://video.cnbc.com/gallery/?play=1&video=3000195142 (1:50 mark) **

 

[Double Trouble]

I guess I just take exception to the 'smoke and mirrors' statement because it implies that there is some trickery afoot. The fed has been completely upfront as to what they are doing and why.

Yeah, I don't think it's trickery in the sense that someone is doing things specifically to obfuscate the "truth", I think it's smoke and mirrors in the sense that a lot of indicators are distorted, for a variety of reasons.

The fed isn't secretly pumping trillions into the economy, they are very much open about it, but that doesn't negate the reality of the impact the trillions have on the economic indicators, making them seem a lot better than they would otherwise.

The unemployment number (in the OP) is a good example. The number is distorted because it doesn't measure the quality of the jobs created, and it doesn't reflect the number of people dropping out of the pool etc. There are plenty of other measures of course, and one can do a lot of analysis to get a better picture of what's going on, but for the most part the general public looks at the big headline grabbing indicators -- most of which are heavily distorted.

 

[Double Trouble]

Some of the information mshan and nehalem have presented paint an even bleaker picture. Not pretty.