Friday, July 08, 2011

Ugly (but probably accurate) jobs picture

Well, the ADP number that goosed the stock market for 2 days again proves to be about as accurate as a Dallas sports reporters forecasting how many Superbowls the Cowboys will win in the next decade.

The good:

At least we didn't lose any jobs :)

The bad:

Just about everything in this report.

* Unemployment rate up to 9.2%
* Only 18,000 jobs created vs. official expectations of 105-125k.
* Labor force participation slipped back to 64.1% - the lowest level in 25 years.
* Employment to population ratio fell to 58.2%.
* Average work week fell.
* Average hourly earnings fell.
* Average duration of unemployment is now 39.9 weeks another new high.
* The number of birth/death jobs was 131k (more than half in leisure and hospitality). Who knows how much this added to the final total but it's clear that without this number we probably would have lost jobs in June.
* April and May were revised down.

As a reminder, the US economy needs to add about 150k jobs per month just to keep up with population growth. We need to be adding 250-300k jobs per month to get the unemployment rate to budge.

Typically, I look for holes in the BLS data that show where the headline number might not be as good as promised. This month the entire report is a disaster.

This report will do two things:

1) Increase the chatter about QE3 (the banks are practically picketing in front of the fed begging for it now).

2) Weaken the hand of any Congressman that wanted to force a showdown over the debt ceiling. This report shows how weak our economy is right now and any hint at default could push us over the edge, so I think this will hasten the negotiations to get a deal done.

Cheers!

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