The thing about population growth.
It would have been nice if we’d been correct to the minute, but we were two months early, and therefore wrong, when we wrote on March 30, If This Plays Out, Friday Will Get Ugly.
But it did play out today.
At the time, we suspected that the March jobs report, released in early April, would be a debacle. We based this on an analysis of the divergence over time between the reports issued by payroll processing company ADP and the jobs reports issued by the Bureau of Labor Statistics. That divergence had been going on for months. Eventually it reverts to the mean. We postulated that March would be that month.
Instead, it happened two months behind schedule, so to speak, as today’s jobs report was precisely that sort of debacle.
This is what was “expected”:
The Labor Department was expected to report, according to Wall Street economists, a “moderate” gain of 158,000 jobs in May, “moderate” given that the Verizon strike kept 35,000 workers off their jobs. The “whisper number” was around 200,000 jobs.
And this is what we got:
The BLS reported that the economy had added 38,000 jobs, the lowest since September 2010. Furthermore, the April job gains of 160,000 were chopped down by 37,000 and the March job gains of 208,000 were chopped down by 22,000. Hence, with 59,000 jobs revised away, and with only 38,000 jobs “created” in May, the net total in today’s report was a net loss of 21,000 jobs. We haven’t seen that since the Financial Crisis.
“Shockingly weak,” and “In one word, ‘Ouch'” is how MarketWatch put it so elegantly.
It was ugly all around. A number of sectors, including manufacturing, shed jobs, and the labor participation rate dropped for the second month in a row, to 62.6%. Just about the only good number was the magic headline unemployment rate, which fell sharply, from 5% in April to 4.7%, the lowest since the Great Recession began, leaving some folks scratching their heads and searching for answers.
But here’s where the report really spread gloom:
The number of temporary jobs plunged by another 21,000. Temporary employment is a harbinger for future employment trends, on the way up and on the way down.
The temporary-help sector was a major – and much lamented – driver of jobs growth after the Financial Crisis. The sector began adding jobs in September 2009. It was an early sign that companies were starting to hire again but didn’t want to commit to more permanent jobs, even as the economy overall continued shedding jobs until February 2010.
From the low point in August 2009 at 1.75 million temporary jobs, the sector added 1.2 million jobs by December 2015, when it peaked at 2.94 million. But then it started shedding jobs. With May’s loss of 21,000 jobs, the sector is down 63,800 from December:
This also happened in 2007, when the temporary help sector started shedding jobs even as the overall economy was still adding jobs until right up to the official beginning of the Great Recession. And it happened in 2000, before the 2001 recession kicked it.
Staffing agencies are cutting back because companies no longer need that many workers. Total business sales in the US have been declining since mid-2014. Productivity has been crummy and getting worse. Earnings are down for the fourth quarter in a row. Companies see that demand for their products is faltering, so the expense-cutting has started. The first to go are the hapless temporary workers.
This is the reality for businesses:
The chart below shows the gaping disconnect between declining total business sales (all businesses, not just the S&P 500 companies) and total nonfarm employment. Something has to give – and it’s starting to:
The decline in temporary workers isn’t just a one-month statistical blip, but a five-month trend: the sector has become a flashing red warning sign that the labor market is skidding even deeper into trouble.
The meme that 14 million jobs have been created since the Great Recession is constantly trotted out as a sign of how the labor market has healed, but these folks forget to add a detail: since the Great Recession, the US population has grown by 16.5 million. Turns out, jobs growth was smaller than population growth! So per capita – for each of the 323.2 million people in the US – there are now fewer jobs than at the bottom of the Great Recession.
And the US population isn’t about to stop growing, just because the growth in jobs has stalled and may soon start reversing. So this is going to make it a heck of a lot tougher for individuals out there in the job market.
There have been other warning signs. But until recently, the official labor market metrics in the US — unemployment rate, number of jobs created, weekly unemployment insurance claims, etc. — have been immune to the worsening malaise visible elsewhere.
For businesses that have to fight it out on a daily basis in the trenches, reality has begun to bite in a very serious way, especially for smaller companies. Read… US Commercial Bankruptcies Soar (despite Rosy Scenario)
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All of us who have been following wolfstreet can say we saw it coming.. I’ve been reposting nearly everyday on my FB for anyone who cared to read these posts and I hope they’ve taken some precautions like paying down credit card debt as fast as they can so as to not get burned like the 2008 debacle when banks raised rates on everyone including the folks who carried no balance.. Thanks for keeping us informed Wolf and giving us the framework so we know where to look and what it means..
Just like 2007-08 so many experts never saw it coming and few understand this one either..
İ bought substantial bullion around a month ago at 1295 and was waiting for this after losing some money on paper anyway İ expect to have many more good days going forward silver and gold in your posession while its still “on sale”
You are incorrect on this one. We never have 100 percent employment. Children and elderly do not work. Therefore if population grows 16.5mm and jobs grow 14mm that is a net percentage gain. 85 percent employed in an economy that has 60 something percent employed is averaging upward.
he meme that 14 million jobs have been created since the Great Recession is constantly trotted out as a sign of how the labor market has healed, but these folks forget to add a detail: since the Great Recession, the US population has grown by 16.5 million. Turns out, jobs growth was smaller than population growth! So per capita – for each of the 323.2 million people in the US – there are now fewer jobs than at the bottom of the Great Recession.
David, it’s not that simple, for these reasons:
– Population growth in the US is a mix of births and immigration.
– Immigration consists largely of working-age people that enter the work force directly.
– Birth rates are down and play a smaller role than they use to.
– Boomers are not leaving the workforce to the extent that prior generations did.
– And Millennials have moved into the workforce.
All these groups are jostling for jobs. Job growth has to accommodate them, or else their individual situations get worse, even while the overall numbers might look better on paper.
Still, there was a gain in the labour market, albeit a very weak one. But the bad news is that this was the period of recovery and expansion, the bad news is that a new panic will strike the advanced economies (usually starts from the US) within the next two years at the max. Probably sooner.
That “gain” was achieved by adding 224,000 jobs through the birth-death adjustment, which assumes small businesses are creating jobs. But since more small businesses are closing than opening, they should be subtracting jobs in this adjustment. Plus they mess around with seasonal adjustments, constantly lower numbers from previous months, ignore the tens of millions who’ve stopped looking for work, and God knows what else. The US has been losing millions of jobs for years. The government is simply lying.
And in Japan there are more jobs now for people as the population is deceasing………………
You underestimate the problem because you seem to reside in a crystal palace somewhere within the city limits of golden San Francisco.
Come visit the humid hell hole called the tri-state area on the east coast and you’ll find countless apartment complexes owned byt US and foreign companies filled to the brim with illegal foreign professional workers.
It is impossible to get an apartment in many areas because of the deluge of temp visa and straight out illegals filling techical positions.
So I would add many millions more workers into your assessment of ‘population growth’. Possibly ten million.
You seem too timid to even consider illegal immigration into your calculations.
They keep say there are 11M illegals in the US but I think there are that many just in Florida. I base it on my observations of population size, knowledge I acquired being a New Yorker.
The tech invasion by foreigners has been going on a long time in NY. It was rampant in the consulting firms there twenty years ago. Mostly Indians, Russians, Chinese, and Eastern Europeans.
elderly do not work.
I am 72. I bang out 6 figures in my business and pay employment and income taxes. I also cut some of my lawns. Stack my own firewood. Weed some of my flower beds. Drive 3 cars that have an average age of 8 years. Could hire help. Could buy new. Cash money at the ready and no debt.
When I stop working, someone will comment – he is a no-show – reason – he died.
YES, YES, YES!!!!
That’s the Boomer I aspire to be (I’m a Boomer but much lower on the age scale).
I am a late boomer, probably like you, but 11 years ago I saw the writing on the wall then.
There has been no growth for most of this century, and this is why.
Income has simply been distributed over a greater number with minuscule increase in GDP with a collapse in real incomes.
There is a limit, and we have reached it, in how far redistribution by way of shelf stackers over breadwinner jobs can be made.
Save yourself, I moved my business offshore and run it from my phone. No office no taxes, no overheads, damn, I haven’t even filed a tax return now in over a decade.
But I make treble and more now than I did pre 2005, and that tax free and bureaucracy evasion.
That sounds like one of the benefits (i.e., unintended consequences) of globalization, but any concerns about FATCA? (https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca)
Same here (69) and I love my work! No end in sight….
62, work 55-60 hours/week.
Faster horses, older whiskey, younger women, more money
Actually the first time jobless claims haven’t been quite immune. If you look at the long term chart, they look relatively low, and you might get the impression that things are chugging along. But when you look at the first derivative, you will notice that just recently the year over year change went from something like -15% to about zero. So in other words, we really havent made much progress on this in over a year. Which makes sense, since the energy sector restructuring is shedding quite a few jobs in a handful of states, and that, plus the huge investment cuts, are spilling over into second round layoffs, when the demand drop induces rethinking of the mentality of hyper growth. (See ND, OK, LA, parts of TX, WY, NM, etc)
If you track the employment numbers by industry and state, you can see it pretty clearly. While these regional problems were expected to make the net job gain numbers weaker, I hadnt expected to see the rollover across so many industries (save for finance and professional services, which havent woken up to it yet.) Also didnt expect the temp jobs to turn so late, but they have definitely latched on to something happening since late last year, and I suspect it has something to do with the demand dropoff from rich folks (look at Audi R8 sales since mid 2015) which coincided with the double correction in stock prices. Id say another downturn for equities now, and we’ve got big problems. (not to mention little china.)
Surely June ( Holy sh8T- it is June) ok July is off the table. Now that the US is bagged just like the rest of the world.
With the dollar on a tear already- and everyone else embracing, or flirting with negative rates- can the US afford a hike?
It would seem a little odd to put China and Japan on notice not to devalue and then do it for them- it actually saves them having to do it, (I know the US also warned Germany but that is too absurd to criticize)
And it gives them a good come-back to US criticism: ‘hey, we didn’t devalue down- you revalued up.’
Agree with you on the Fed not raising rates in the very short term. This should stabilize the dollar and Treasury bonds may increase. I have a bit a long term Treasury ETF (TLO) which pays a 2.41% yield and should be a safe place to park some cash if the Fed sits tight.
Trump says the unemployment rate is probably 25%. I always thought it was at least that high. I think Trump will win it in a landslide. I wonder what giveaway Hillary will come up with to counter the bad news.
Yes, 25 percent is about right.
Enjoy some of yr stuff but have to disagree on this prediction. And I’m going to make a prediction: from now until November at least this so called University of his will be under investigation. Especially why two state AG’s suddenly dropped the civil fraud case against him, shocking their task forces, and then the AG’s received campaign contributions.
What’s the difference between using personal emails for government business and an (if proven) offering an AG a contribution for dropping a case of civil fraud- only one is a ‘high crime or misdemeanor’.
I’m going to coin a word to describe the next four months, and maybe beyond: Unigate
Considering Bill Clinton has a fraudulent university problem himself I think the whole thing will go away. This is probably why the AGs backed off, they don’t want to talk about Bill. And then there’s the Palm Beach story, one Trump may know a lot about.
The cases were ready to go to court, it wasn’t just a ‘problem’ it was a case prepared by staff to get back small folks money. Why would the AG’s go to the expense of preparing a case over a period of months if they are going to drop it. This including under cover students who were encouraged to max out their credit cards for the 35,000 Gold version.
Ironically by so doing these mom and pops destroyed their actual chance of maybe picking up a reno. There are courses with some value aimed at this sector. (But they aren’t 35K)
The idea that a New Yolk big time guy who spends (actually used to spend) hundreds of thousands on designs, rezoning etc. can have tips for these folks is ridiculous.
Second: Bill isn’t running for president. This couple has had literally millions spent investigating them-going back to their two -bit one time real estate venture White Water ( they built one house)
Get the particulars of Trump U’s program (ever been to a time share presentation) and find a Clinton equal. Did I mention it wasn’t a university- it broke the law by calling itself one.
Funny thing is I am a right winger- but how the GOP ended up with this guy is at least to a Canadian, a mystery.
Trump doesn’t need me to defend him. As for the Clinton’s, why would anybody want that sleaze back in the WH?
Fair enough Petunia- we exchanged views without name calling ( you know how these forums can get)
But can I ask you a question that is not meant without any sarcasm or anything- I’m just curious.
What do you make or think of Sanders?
One of the reasons I ask is that you’ve been pretty open about going through some tough times and I wonder if you are open to a system that enforces more equality.
Moving to a joke from a British group comparing the US and UK
“Well at least the Americans have inherited our two party system- they have the Republicans which is the equivalent of our Conservative Party, and they have the Democrats, which is the equivalent of our Conservative Party.
I have supported universal health care since I was very young. I think everybody should be covered and everybody should pay. I also think that people are “entitled” to the benefits they are forced to contribute to.
As for Bernie, anyone that can help the keep the Clintons out of office is a god send for this country. If Bernie won I wouldn’t have a problem with it even though I support Trump.
Trump has encouraged violence at his rallies, demonized religious minorities, openly attempted to intimidate members of the media and now a federal judge and at a rally in San Jose threatened to jail Hillary Clinton. The man’s not joking; he’s a bona fide fascist.
So when has a fascist government solved unemployment problems by any means other than going to war?
When you frame the choice between a bona fide fascist and Mrs. NAFTA there doesn’t seem to be much of a difference.
Well Mary many people firmly believe that Hillary should be indicted and found guilty of numerous felonies and treason but perhaps George Carlin was correct about that “club” that we aint in Nothing fascist about speaking the truth is there?
What makes matters worse is the great many of those 14m jobs were in the low paying service sector.
Every one of those lost jobs equals pain for the people losing them. These temp jobs are the lower paying jobs they found after losing their full time jobs. The downward spiral translates into homelessness and hunger in what used to be the richest country in the world. I can’t see this continuing for much longer.
People are going the way of horses….the means of production is making many jobs obsolete for people. Yet people need food and shelter every day regardless of their productivity.
Horses get sent to the knackers, and as people have become less valued for their humanity and more for their supply side incremental value, then they will get sent figuratively, at least for the time being, to the knackers as well.
Do not go gentle into that good night. – Dylan Thomas
Yes the numbers are people. I do not like to see anyone lose their job. However the powers in charge will do everything possible to delay and defer.
Its time for the thin fake veneer to break off this false construct so everyone will see the truth. Their have been a few beacons of truth during these years, Mr Richter being one.
While I wish this journey to be short for the sake of our other fellow Americans, I doubt that will be the case.
Massive deflationary pressures are being reduced by signficant covert federal government spending sanctioned by Obama. Remember the how the federal debt limit was placed in limbo until after the next election (2017)?
Recently in Charlotte, a 100M new control tower started construction. Also, federal courthouse getting major expansion/remodel courtesy of the Feds. Transporation projects here announced monthly particualry since Anthony Foxx was past Mayor of Charlotte. Bottom line, money is flowing out of Washington as we speak to help prop things ups; presumably for Hillary, but also to make Obama look better in his last year.
I don’t know what they will do once the new President takes office. I predict the official debt will show an increase of 1 Trillion plus for 2016, maybe more.
Unfortunately, all of this money is again going to the top dogs. Sure, lots of construction jobs, some mid-level folks and the owners of these companies make the most.
Most people are just trying to keep their heads above water. Most people don’t want to take any more pain so they will be quiet when the government does stuff short term that they know deep in their hearts will hurt worse down the road. That is the nature of life.
I take a look at the Daily Treasury Statement on an irregular basis to see how much the government is actually spending compared to what they say they are spending. There have been a few instances where the figure for the deficit that the political spokesperson gives out to the public and the number the on the Daily Treasury Statement differ by more than 9 figures. These happen at the end of the physical year when the government touts the low deficit for the year and the Treasury statement deals with reality. Here is a link:
I’ve known people who work for the feds over the years. The fiscal year ends in Oct and they stop paying the bills before Sept 1st. The excess cash in the budget is then considered the savings and or bonus pool. The contractors who don’t get their bills paid before Sept 1st know they will have to wait.
An employment and growth problem? Cmon! I have a BS degree in construction management and an MBA plus 30 years industry experience. Now I work 2 part time jobs as a Funeral Attendant making $12/hr and as a chauffeur making $17/hr. But hey I’m not complaining the tips are good. This is what it’s come to for me. Thank God my wife has a steady good paying job as an RN so we can pay the bills and survive.
I would advise any young person who will need employment to go into a service industry like nursing or funerals where there will all ways be demand. Being born and death are still certainties in all economies – Recession or Depression.
Frankly I find it a bit odd that such a degree exists (Bachelor of S in Construction management) but there are so many new species these days.
When I advise young guys these days I often mention plumbing. Like two fields you mention- it never ends. And when you call a service plumber- not new installation, the guy often won’t be ticketed.
I became a not bad plumber just doing my own renos.
It’s not rocket science- but good luck hiring one for the rates you mention.
Hot on the left, cold on the right,
Water flows downhill.
So this report is basically a measure of the numbers of positions given to employees of a small number of large temp firms by “large companies”? And more generally reflects the few actual (“large”, again) companies surveyed…?
MOST PEOPLE DO NOT WORK FOR “LARGE COMPANIES”!!!
They work in small business, sell online, work for government, collect checks, hide in school, do yard work and tree trimming, run one- or two-person drywall businesses, clip poodles or work in auto repair, pump gas, sell lottery tickets, charter out their boat to wealthy tourists, run B&Bs or wait tables…
This report seems to me a measurement of a very, very small selection of large firms, unrepresentative of the real, Main Street economy.
The only entities who take this stuff seriously are the stock-holding funds, insurers and banks plus the algos controlling the stock markets…and they’re not concerned about anything other than anticipating other market participants’ actions…
The job numbers provided by the BLS are based on two sets of surveys – of households and of businesses (from tiny to large). So the jobs numbers, as faulty as they may be, are not limited to employees at large companies. They cover all “nonfarm” workers and include the self-employed, contract workers, Uber drivers, employees of mom-and-pop operations, employees of mid-size companies, government employees, teachers, etc. They attempt to be very broad-based.
DEMS keep the WH, take back congress, institute an expansionary budgetary policy (ie. Infrastructure), similar to what the liberals are doing in Canada, that will kickstart the growth engine once again. Ofcourse, healthy immigration is crucial to any sustained expansion, which is the current political football in the US, in the post global era we are now in, open societies are the most successful ones. Another reason why the BREXIT vote in a few weeks is so crucial, western societies must not make the mistake of turning inward on themselves.
In your dreams, Nicko.
In the delusional world of the liberal mind the solution is always more government. The consequences worldwide of what decades of more government has wrought can be most acutely observed in Venezuela. While you may call this phenomena a ‘growth engine’ and welcome more of it what the rest of us get is economic depression and oppression.
repairing roads and bridges won’t do squat for the country when you have massive new regulations and raised taxes choking businesses. that is a big reason more businesses going down than opening. That has never happened before in this country.
Nicko, you are being facetious, right?
No matter what we do – growth is never going to return.
The end of growth hit just over a decade ago as oil prices took off… and the central banks have been scrambling to do ‘whatever it takes’ to keep the hamster running.
They of course are about to fail. We NEED cheaply produced energy to run an economy.
The low hanging fruit is mostly gone
The first cause of low growth is an escalating uptrend in the cost of energy. The key parameter here is the “energy cost of energy” (ECoE). As readers will know, energy is never “free”, but has a cost in terms of the amount of energy that is consumed for each unit of energy accessed.
Though market prices oscillate widely – largely in response to cyclical patterns – underlying trend ECoEs have been rising relentlessly for several decades, and have been acting as an increasingly heavy drag on growth since about 2000.
In that year, according to SEEDS (the Surplus Energy Economics Data System), trend ECoE reduced GDP by about 4.2%, up from 2.8% a decade earlier but still small enough not to be noticed within normal margins of error when calculating economic output.
Today, however, SEEDS puts trend ECoE at over 8% of GDP, which is more than enough to explain the virtual disappearance of growth.
Working out great for Germany
Plenty of crummy jobs available in the burbs where the credit party is undimmed. Friday nights the chain restaurants are packed to the rafters. Lots of nice cars and new pickup trucks, too. In the neighborhoods the streets are very crowded due to 3 and 4 car households and/or garages stuffed with prospective millennial apartment furniture.
Of course we’ll find out the government statistics were bogus all along. I think Chairman Janet already knows. One would expect employment to correspond with business sales. Au contraire! Somebody knows better in the government or on Wall Street. After all the lying leading up to the Big Panic small wonder many of us expect a much nastier scenario to unfold.
bead you are dreaming Those people are living in an unsustainable credit infused bubble and when the music stops you wont be seeing those new cars and trucks anywhere but on the back of the repo mans tow truck Count on it after the dollar implodes
Unless I’m confused (it happens) I think you guys agree. I think Bead also thinks this phony binge ends in a crash.
right on, Bead!
i hope you are a “remote viewer” of it.
Another great article
The end game is very near — I smell the monster now
The GreatER Depression – since 2007/08.
The same as just about everything else, it’s a PROCESS – to a point.
What will your “circumstance” be at the “point” when “critical mass” can no longer be prevented and the “can” gets kicked in to the ditch?
Global geo-physical catastrophe(s), EMP precipitated systemic power grid failure, thermonuclear war, financial “reset”/final wealth “redistribution” to the 0.001%?
Do ya really want to be an “urb”/”citYzen in such a circumstance?
Dimon and others are calling for Gov Fiscal Stimulus to include infrastructure improvements. Trickle down has not worked it is an utter failure. The Gov is obsessed with what……politics and certainly not growth or good management. Its quite entertaining to read here about how little the Dems are doing when in fact its a Repub world. Pot and kettle meet hypocrasy LOL