Friday, May 08, 2009

Jobs report

As expected the jobs report was bad but "less bad" in the headline number so people might be initially upbeat, but the details of this report are actually quite scary.

1) Revisions subtracted 66k jobs from last months jobs report, meaning that last months data was actually 10% worse than reported. Expect this trend to continue.

2) The greatest area of hiring? The public sector as the Census bureau began hiring 140,000 temporary workers to work on the census. One of the problems with the jobs report is that it doesn't weight the jobs by economic contribution. One lawyer laid off from a Wall Street firm might have a salary of $400k while 10 part-time census workers might make half of that amount. The Labor department however views 10 low paying jobs as 10 times as good a 1 high paying job. This has been a problem for many years as high-tech and skilled manufacturing jobs shifted overseas and they have been replaced by Temporary help and Services (Restaurant, Retail) jobs in the jobs report. To the Bureau of labor statistics a job is a job, but to the unemployed GM worker busing tables at Friday's I think they may feel differently.

3) Our favorite the Birth/Death model is Laugh Out Loud bad this month. For many years, the Birth/Death model (which "guesstimates" the number of jobs created at new companies that the government thinks are out there, they just can't find them yet) has been the plug to fill gaps in the economy. I was hopeful that this process would end with a new administration, but I was wrong.

The Bureau of Labor statistics wants you to believe that in the midst of the worst economic downturn in many of our lives:

* 76,000 new jobs were created in Leisure & Hospitality (despite hotel revenue/available room at historic lows)

* 65,000 new jobs were created in Business and Professional Services and

* 38,000 new jobs were created in Construction.

A total of 225,000 phantom jobs were added to this report (up from 114k jobs last month) because some statistician decided that would be the number that would make the headline "less bad". I'd argue that in fact, very few new businesses are opening and we should be showing a negative number in this category as the number of small businesses going out of business exceeds the number of new businesses starting. Just for arguments sake subtract the 225k Birth/Death jobs from this report and you have a startlingly bad 750k jobs lost this month.

I think that smart people can see through this smoke screen and lots of big money players are starting to shift to the short side. The futures are up sharply we'll see if it lasts.


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