Blue World Employment Situation Report Analysis
Release Date: Usually the first Friday of each month
Release Site: www.bls.gov
Market Sensitivity: VERY HIGH
Management Value: VERY HIGH
Friday, April 06, 2012
Brain surgery is not rocket science to a brain surgeon©
Sometimes it’s no fun to be right. This is the report we have been dreading…and predicting. Headlines are headlines and spin is spin, but the details will tell the story more often than not so let’s dig into ’em.
The rate fell again but even the mainstream analysis we’ve skimmed seems to be acknowledging that it’s not “good” news by virtue of the recent phenomenon of a shrinking labor force in the face of an increased number of employed people. In case you missed it there is a broader explanation of this in our post at http://owl.li/8kHlp. This month, however, the news is a little worse. Not only did the number of jobs created not outpace the reduction in the civilian labor force giving us the lower percentage, but the total number of unemployed people actually rose too. This illustrates the deficiency in the number of jobs being added not keeping pace even as the labor force shrinks! Moreover, it is historically unusual to see a drop in the labor force in the spring and summer months. A more typical pattern is to see the force rise into summer before dropping off as fall approaches. March 2012 demonstrates a significant deviation from that pattern.
There has been no change in the 25+ with a Bachelor’s degree and higher group. That continues to be the most ominous sign for us. Wages grew again, but at a miserably sluggish pace that continues to be materially slower than inflation. That does not bode well for continued strength in consumer spending. We fear the recent optimism generated by durable goods and auto sales represents more of a deferred spending blip than a sustainable trend. The work week actually declined in total hours (-.1) for the first time in a while. That is an off-the-radar ill-omened sign. Worse is that while manufacturing added a few jobs, their work week declined by a more alarming .6 hours and overtime remained absolutely flat. This is more evidence of the difficulty regarding lower productivity and higher unit labor costs. You can hear a broader explanation of that dynamic at http://owl.li/9zUkI. It is the audio of Matt’s appearance last month on The Noon Business Hour on CBS radio WBBM AM 780 in Chicago to discuss the jobs report within the context of the economy at large. Construction continued to shed workers and their weekly compensation actually fell. This does not corroborate some recent optimism in housing related headlines. Those unemployed for 27 weeks or more was essentially flat but down a bit, none the less. The more concerning number is the increase in the number unemployed for less than 5 weeks. Those are new job losses and another example of why the wild market reactions to the weekly new unemployment benefits applications is unjustified. That stat is an unreliable predictor of the monthly jobs report. You can learn more about that in our post “The Confusion Suffered by ‘Experts'” in the blog archives at www.blueworldam.com.
Is the data “good” or “bad?” We don’t see it as either. The data is the data. The impact on the economy is certainly either positive or negative. In our view “good” and “bad” refer to the quality of the decisions business owners, managers, and investors make based on the data. Limiting your analysis to reading the headlines will often lead to “bad” decisions. Following trends within the detail compared with the detail from other reports held up against what we see in real life every day is what constitutes actionable intelligence and enhances the opportunity to make “good” decisions. This is the area where we hope we help.
Thanks for reading and, please, stay tuned…