The Real February Employment Report - In Pictures
There has been much debate over the latest employment report released by the Bureau of Labor Statistics for February which showed headline employment gains of a whopping 236,000, of course, less discussed was the downward revision to January from 157,000 to just 119,000. The unemployment rate fell to 7.7%, on expectations of a 7.9%, as the labor force participation rate fell from 63.6% to 63.5%.
As we have stated, so very many times previously, the problem with long at individual data points is that you effectively miss the "forest for the trees." For example, while the majority of mainstream analyst ballyhooed over the 236,000 job increase in February was missed was that this was a rather sharp decline from the 271,000 jobs one year ago. In reality, the first two months of 2012 produced a total 582,000 jobs versus just 355,000 in 2013.
Instead of me detailing the "forest" for you - sometimes the best thing to do is to "show you the forest" and let you decide for yourself.
The first chart shows the annual net change in the "official" seasonally adjusted employment data, which is always highly contested because of those seasonal adjustments, versus a 12-month average of the monthly non-seasonally adjusted data.
What the chart above shows is, that by either measure, employment appears to have peaked for the current economic cycle. This contradicts claims that the economy, and thereby employment, are set for expansion in the coming year. The chart below shows the same data on a shorter time frame to more clearly show the slow, but steady, decline in employment since the beginning of 2012.
In the latest employment report we saw full-time employment actually fell as part-time jobs continue to fill in the gaps. The next chart shows that while unemployment claims have fallen in recent months - full time employment as a percentage of the working age population continues to remain mired at the post-recessionary lows.
This tells us a couple of things. First, after four years of reducing costs by reducing employment - businesses are likely at levels of minimum employment needed to maintain current demand levels. Any additional increases in employment are being filled primarily with lower cost part-time employment. Therefore, unemployment claims are falling simply as a function of there being fewer terminations. Secondly, what employment is occurring is simply a function of population growth and not representative of stronger economic underpinnings. In other words, full-time employment is barely keeping up with population growth. This is not "green shoot" of a potential economic rebound.
One thing that is most interesting is that while individuals are able to collect 99-weeks of unemployment benefits - the BLS does not count those that have been unemployed for longer than 52-weeks. There seems to be a disconnect here. As we discussed previously - during the Clinton Administration there was an official U-7 unemployment rate which was comprised of those officially unemployed, those working part-time for economic reasons and those unemployed for longer than 52-weeks. The next chart shows all three measures.
While the real unemployment rate (U-7) has declined it is still at very high levels which goes a long way to explain the disconnect between Wall Street and Main Street.
The last chart shows the number of individuals that are simply excluded from the labor force for a variety of reasons.
Those excluded from force remains at historically high levels which why the labor force participation rate remains at the lowest levels since the early 80's.
While the mainstream media focuses on one "tree" to the next, and tries to extrapolate minor improvements indefinitely into the future, for investors it is more important to remain focused on the "forest." The overall trends of the data currently paint a very different picture than what we read in the headlines. However, it really is up to you to decide.
Source: Street Talk Live?
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