As expected the employment report for November was bad having shed 533,000 jobs with unemployment advancing to 6.7%.
WASHINGTON (MarketWatch) – U.S. nonfarm payrolls plunged by an astonishing 533,000 in November, the worst job loss in 34 years, the Labor Department reported Friday.
It’s only the fourth time in the past 58 years that payrolls have fallen by more than 500,000 in a month. Since the recession began 11 months ago, a total of 1.9 million jobs have been lost.
But it would have been worse had it not been for the mysterious positive addition of 30,000 jobs by the so-called birth-death model. From here on out we’ll just refer to it as the birth-birth model because no matter how bad the underlying economic data this model somehow always adds jobs in every month except typically January and July when the model backs out a few of its more irrationally exuberant additions.
However, keeping regular track of the amount of fudging in the Birth-Death model
is one of my favorite activities because I think it provides insight
into just how unreliable government statistical models really are. For
a nation that drives economic policy "by the numbers" it’s important
that the numbers are good. The Birth-Death model provides a valuable
caution flag for anyone with a tendency to "believe the numbers" that
are being offered up for consumption.
I found it odd that the birth-death model determined that construction jobs were neither gained nor lost across the Oct-Nov time frame as we saw record-breaking slowdowns in both construction spending and project starts during those months. One wonders what sorts of model inputs they are using at the BLS?
Even odder would be the 5,000 jobs added to the financial activities sector. Based on this alone, we can be sure that this model does not use any sort of inputs from the real world.
And if we look a bit deeper into the jobs report we find more troubling trends with 1 in 8 people either out of work or forced to work part-time:
An alternative gauge of unemployment – which includes discouraged workers and those whose hours have been cut back to part-time – rose to 12.5% from 11.8%.
The ‘alternative measure’ mentioned above is much closer to how Europe reports unemployment, as it includes the so-called "discouraged workers," who would work but can’t find anything worth doing and have given up looking.
Definition:
Marginally attached workers are persons who are currently neither working nor looking for work, but who indicate that they want and
are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached,
have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those
who want and are available for full-time work but have had to settle for a part-time schedule.
Lastly, there is employment, but there is also under-employment. One measure of that is the number of people who are counting as "working," but who have part-time jobs when they would have preferred a full-time job. That measure has been trending upwards for quite a while and now totals more than 7.3 million people.
The number of workers forced to work part-time rose by 621,000 to 7.3 million.
The job losses are just beginning and will not peak for some time. The hope is that this cycle of losses will be over by early spring.
"It is blindingly obvious that the U.S. labor market is in a terrible state and is deteriorating rapidly," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. He expects the job losses "to accelerate over the next few months, peaking – hopefully – in the early spring."
The rate of decline may taper off in the spring, but the losses will probably continue throughout the year. "The eventual peak [in unemployment] will be close to 9%," Shepherdson said.
My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months. My reasoning? The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.
Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.
by zekharyah1