Macro Outlook on US: The Math Does Note Lie

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The following is an exceprt of Greg Weldon's December 10th institutional newsletter, Weldon's Money Monitor.

We note commentary from President Obama's Chief Economic Advisor Alan Krueger, a wildly accomplished academic-economist, following Friday's release of the BLS Employment Situation Report for November ...

"Today's employment report provides further evidence that the US is continuing to heal. It is critical that we continue the policies that are building an economy that works for the middle class. The types of programs that the President has been proposing to support the economy in the short-run, get us on a sustainable fiscal path in the long-run, and protect the middle class. We are going to continue to see progress in this economy."

Indeed, appearing on radio following the report, Krueger specifically singled out one data point, one which could have easily been gleaned from watching television, as a 'major positive'. Mister Krueger focused solely on the sizable single-month increase in hiring by the Retail sector posted in November. Alan even stated how this headline figure defined a resurrection in consumer confidence within the middle-class.

Confidence, linked to this labor report ???

Why, because the Unemployment Rate declined and retailers hired more people during their busiest season ???

Try selling that thought to the MILLIONS of CHRONICALLY UNEMPLOYED.

Try selling that thought, to those who once represented the middle-class.

Indeed, we would quickly point out that the rise in Retail Employees posted for November was NOT as large as the rise posted in November of 2007, during a period immediately preceding the biggest collapse in the US labor market in decades.

In fact, an even larger rise in Retail Employment, posted in November of 2007, marks what is still the all-time peak in Retail employment in the US. The simple fact is, that the total number of people employed in the Retail Industry fell to a new multi-decade low in December of 2009, and has only managed to climb back to the SECULAR LOW set in 2003.

This is a sign of building confidence ???

Moreover, we note that Retail Employment has regained ONLY 44.8% of the jobs lost during 2008-09 ... and ... despite the sizable single-month gain in November, hiring in this macro-sensitive sector continues to LAG the overall, still-feeble and sub-par, 'recovery' in total employment.

The corollary is 'academic' ... MORE than HALF of the people who lost their jobs in the Retail sector, have FAILED to regain them.

Bottom line ... from the top-down, the ultimate reality of the situation is defined, simply, by the MATH, the indisputable, void-of-opinion macro-mathematics revealed DEEP within the report from the BLS. Basis the macro-mathematics, it is clear that the ONLY thing 'building' in the US labor market is the dysfunction, and the secular erosion in job growth that has sparked a CRISIS that few wish to discuss, and one that politicians and their economic-allies refuse to even acknowledge.

It is a crisis defined by intensifying chronic unemployment.

Indeed, the Labor Force posted its own HUGE single-month decline of (-) 350,000. We are MOST certain that the population of the US did NOT contract during November, leaving only thoughts of chronically unemployed who 'dropped out' of the 'equation' during November ...

... providing the REASON the Unemployment Rate declined by two-tenths of one-percent in November, to a new cycle low of 7.7%.

This is a sign of building confidence ???

Next we focus on the chart below which plots the total number of people in the US that are "Not in the Labor Force" ... which rose by an eye-opening 542,000 during the month of November, FAR outpacing the 146,000 increase in 'headline' non-farm payrolls.

Further, November's over-sized single-month increase reverses back-to-back monthly declines, and takes the total back to within 38,000 of the all-time high set in August, at 88.921 million.

Digging deeper, we observe the intensified upside acceleration in the Number Not in the Labor Force ... with an increase of more than SIX MILLION people since April of 2010 alone.

total number not in labor force last thirty years

And, with the acknowledgement that this measure includes people who are not able, or old enough to, be employed ... we also focus on the fact that since January of 2008 the Number of People Not in the Labor Force has risen by a whopping 10.342 million.

And, currently, the Number of Employed in the US ... remains (-) 4.6 million BELOW the level posted in January of 2008.

This is but one 'tangible' piece of evidence that, mathematically, speaks volumes to the 'existence' of a secular change in the US labor market, a change that has left in its wake a 'crisis' of 'long-term', or 'chronic', unemployment. Thus, we embark on a deeper-dive into the history of the data, visually observing the 'fracture' in the US labor market, a fracture that could take many-many years to 'heal'.

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About Gregory T Weldon

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