Comments on Friday's May Jobs Report
Last October, we growled on October 8 about the monthly jobs reports published by the U.S. Department of Labor’s Bureau of Labor Statistics. A bit of context that we included in that Growls:
“In the second edition of his book, “The Secrets of Economic Indicators,” Bernard Baumohl says the monthly jobs report, published the first Friday of each month, is “(t)he most eagerly awaited news on the economy.” According to Baumohl, “No single economic indicator can jolt the stock and bond markets as much as the jobs report,” and the unemployment rate is the centerpiece of the jobs report.”
The two major data points from the May jobs report, released at 8:30 A.M. on Friday, June 1, 2012, was the unemployment rate increased from 8.1% to 8.2% and that “job growth fell sharply to 69,000 during the month, the weakest growth in a year,” according to today’s Washington Times. In addition, “revisions showed that only 77,000 jobs were created in April, far below the 115,000 previously reported.” The paper also reported:
“This is a major disappointment. There was major weakness in construction,” an industry that had seen unusual job gains in the winter because of mild weather, said John Silvia, chief economist at Wachovia Securities. The Dow Jones Industrial Average immediately dropped more than 150 points at the start of trading Friday morning, as Wall Street economists had predicted the job gains would be twice as large.”"The slowdown was seen in many other industries besides construction, which has been whipsawed by unusual weather patterns this year. The vital business services sector, which is the heart of the U.S. economy and has created 1.4 million jobs since the end of the recession, lost 1,000 jobs in May. About the only businesses to see healthy job gains were health care, transportation and wholesaling.”
In a report on Friday titled, "Rotten May jobs report underscores weak recovery," CBS News also reported:
" . . . Given that this month represents the three-year anniversary of the end of the Great Recession (according to the National Bureau of Economic Research, the 18-month recession ended in June 2009), now is a good time to discuss how things are going in the recovery.
"Reports released over the past two days confirm what many have been feeling: Corporate America has participated in the recovery, while many workers have not. The all-important monthly employment report and its less important cousins - weekly jobless claims, Challenger, Gray & Christmas job cut report and the ADP private sector employment report - all paint a picture of an uneven jobs recovery."
Peter Coy, writing for Bloomberg Business Weekend, wondered if the economy had slipped below the 'Mendoza Line," baseball lingo about a shortshop who batted less than .200 in five of his nine seasons, implying a "dividing line between mediocrity and badness."
For a comprehensive look at the May jobs report, James Sherk and Rea Hederman prepared an Issues Brief (No. 3619) that includes the following chart:
Josh Mitchell also provides a comprehensive look of the May jobs report for the Wall Street Journal. This Journal story is rich with useful charts, too. As was James Pethokoukis at EnterpriseBlog for the American Enterprise Institute (here, here, and here). and includes several good charts. And in his column for Investor's Business Daily, Larry Kudlow went "inside the number," saying:
" . . . the data are just as bad. The unemployment rate rose slightly from 8.1% to 8.2%. The so-called U6 unemployment rate, tracking the marginally employed or completely discouraged, increased to 14.8% from 14.5%. And labor earnings are barely rising at 1.7% over the past year, almost in line with the inflation rate. In fact, through April, after-tax, after-inflation income is scarcely rising at 0.6% for the past year.
"The private workweek also fell in May. So did the manufacturing workweek and aggregate hours worked for all employees. The small-business household survey did rise, but that follows declines in the prior two months."
Virtually unnoticed in the reporting of the monthly jobs report is the 'margin of error.' I first picked this up in a post by Keith Edwards at the American Thinker's blog. He points out "the BLS margin of error for month job numbers is +/- 100,000," meaning the actual number could range from -31,000 to 169,000. A New Yorker story picks-up on this little-known statistical fact.
Another interesting comment about the monthly jobs reports was made by the Calafia Beach Pundit, Scott Grannis, former chief economist of a large fixed-income portfolio, who opined:
"It's been more than 30 years that I've been following the monthly employment report, and I've never understood why it is that the market places so much importance on a single number. Especially since that number can and most likely will be revised significantly in the future, it is subject to seasonal adjustment factors that are never completely accurate, and it is volatile from month to month. I've also never understood why the market focuses on just the establishment survey of jobs and almost completely neglects the household survey. Both have their problems, and sometimes they can diverge a lot, but over time they tell the same story, only from different perspectives. I've found that looking at both surveys can be very useful, and I make a point of doing that on this blog. The household survey is especially important to follow in the early years of a business cycle expansion, because it can pick up the growth of small start-up companies which aren't covered at all by the establishment survey until future revisions which match the survey data to tax records."
On Friday, at the Cato Institute blog, Cato@Liberty, Dan Mitchell says the numbers in the May jobs report are "(a)t best, the results are mediocre," adding the numbers are "particularly painful" because of the passage of the $800+ billion stimulus bill. He includes the following chart, and also a link to the highly informative, interactive website of the Minneapolis Federal Reserve Bank.
Additional resources can be found at the following:
- James Taranto, Wall Street Journal’s Best of the Web, June 1, 2012 reminds us the unemployment rate was supposed to be 5.7% by now.
- At CNBC, Diane Olick, June 1, thinks the jobs report triggers trouble for housing.
- Allahpundit opines at Hot Air says the White House response to the jobs report is that the problems in the labor market won’t be solved ‘overnight.’
- Mike Brownfield provides additional context, including the global and political, for the jobs report at Heritage Foundation’s blog, the Foundry.
- At Via Media, Walter Russell Mead notes the possible effect of the jobs report on the presidential race.
- At National Review Online, Kevin Hennesy says the “jobs numbers are so weak that financial-market participants are beginning to see another abyss in our future.
- Roger Simon writes that “America gets a wake-up call” at Pajamas Media.
- In a Power Line post, John Hinderaker notes the unemployment rate in January 2009 when President Obama took office was 7.6%.