Sunday, June 03, 2012

Please make it stop

Nothing quite makes my head hurt like the Sunday morning talk show circuit.  Even the good reporters get lost talking about subjects like the economy, budgets and taxes.  The weak jobs report on Friday gave the media plenty to talk about this weekend but frankly most of it was recycled bullet points instead of reasonable analysis.

To review: the jobs number was weak and this is starting to feel like the same old story as 2011.  Strong winter data that fades as we enter the summer.  However, digging a little deeper we find that:

* Labor Force Participation Rate, which has been the focus of many people (including myself) in recent months, actually increased to 63.8% in May. This is encouraging and it is one of the strange issues with the employment data - as more people re-enter the workforce or start looking again it will actually cause the unemployment rate to increase.  Despite this increase the number of still way below the historical average.

* Also, it's worth noting that the employment/pop ratio increased to 58.6% in May.

* Government jobs continue to decline but there appears to be some moderation of the decline among state and local governments.  The one qualifier I'd add is that pension costs could crop up again in 2012-2013.  Governments received a small reprieve from the relentless increase in pension costs in 2011-12 because of the strong performance of the stock market from 6/2010-6/2011.  However, right now we're about a month away from having 1 year with no change in the markets.  If this is the case, governments will be forced to increase contributions to their pensions and this could impact employment in 2012-13. 

* Those looking for a positive spin on the employment data could point to the 420k+ increase in the household survey data.  However, this tends to be a very volatile data set and it is not a terribly great predictor of future job reports.

Other items to keep in mind from last week:

* Initial Jobless Claims jumped to 383k
* Pending Home Sales fell 5.5%
* Refinancings and purchase applications fell even with record low interest rates.
* European unemployment  was unchanged.
* India’s GDP grew at only 5.3% (however, I think in the US we'd be very happy 5.3%) and that was the slowest growth in a decade.
It should be another interesting week with lots of European news, questions as to whether the Fed start to hint at QE3 and potential unrest in the Middle East.


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