Tour De Farce of The Real Employment Charts

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This post is a copy of the updated permanent page of employment charts.

Total and Full Time Employment

Updated June 3, 2012

The number of persons employed full time in May rose by 635,000, not seasonally manipulated (from the household survey). That compares with a gain of 774,000 in April 2011.  The average gain in May for the previous 10 years was 797,000. This May’s increase came on the heels of a very poor April which appeared to be a giveback of some of the record gains in March. The March gain of 1.33 million was a record since 2002, and it was multiples of the typical March gain of 289,000. Taking the 3 months from March through May to filter out the weather related gyrations, this year’s gain of 2.05 million was significantly stronger than 2011′s gain of 1.9 million and was well above the prior 10 year average of 1.76 million.

In other words, these numbers were much better than the “sky is falling” headline seasonally adjusted numbers that everyone was moaning and groaning about on Friday. Any time you see that much hysteria over a single data point, it’s usually a good idea to be highly skeptical. Not that any of this has anything to do with stock prices. They may continue lower, but the employment data is not the reason. Fear of the unknown is.

My focus is on full time rather than total employment. Part time jobs are nice, and for many that hold them, they are a lifeline, but the important metric here is full time jobs. Without those, we’re dead. Total employment grew far more than full time jobs, as has been the case throughout this “recovery.”

Full Time and Total Employed Long Term View - Click to enlarge

Full Time and Total Employed Long Term View - Click to enlarge

The chart above  gives some perspective on how far total employment and full time employment fell in the first stage of this depression, and how much they have yet to recover. It’s clear that full time employment is lagging badly.

The seasonally adjusted (SA) fiction is really screwing the pooch this month. Seasonally adjusted numbers frequently veer away from reality by the very nature of the arbitrary seasonal adjustment process. Conomists and the media focus almost entirely on this nonsense, which attempts to compare one fictitious number with another fictitious number to derive a fictitious month to month change. Meanwhile they ignore the actual data. I mean, if you’re going to emphasize the seasonally adjusted crap, you could at least check it against the trend of the real data.

The not seasonally adjusted (NSA) data is the actual data. The seasonally adjusted data is absolute fiction, and it frequently over or understates the real rate of change of the trend, and sometimes even goes in the opposite direction of the actual momentum of the trend. The conomic establishment tries to downplay the actual data by calling it “not” data as in “not seasonally adjusted,”  which carries the connotation that somehow “seasonally adjusted” (SA) without the “not” in front of it is the real thing, when the opposite is true.

Mainstream Wall Street and academic  shill conomists cloud and obfuscate the facts by sticking them into a numbers grinder hoping the product will come out as a nice tasting numbers sausage that everyone can eat. Unfortunately, sausage, while tasty, isn’t good for you when it’s your entire diet. And if you actually knew what you were eating, you wouldn’t eat it.

Wall Street and the shillcademic conomists are too lazy or too crooked to do the simple analysis of comparing year to year changes and the monthly rate of change in the real data to past years to get a clear picture of where the trend is headed. It’s so easy to do when the data is placed on a chart. But unlike technical analysts who actually know how to read patterns and trends in noisy data, the vast majority of shillcademic and Wall Street conomists who sell their souls just to get on TV, have no clue how to to do that. The process is so simple. Maybe that’s the problem. They like complication because they think it puts the truth out of reach of the general public. In reality, the public gets it. It’s the conomists that don’t.

Full Time Employment Short Term View - Click to enlarge

Full Time Employment Short Term View - Click to enlarge

This charts shows the year to year trend line connecting the April data in both series along with the raw actual NSA data, and the SA fiction. Contrary to all the hand wringing Friday over the May jobs data, there’s no evidence of material slowing in either series.

July is usually the peak month for both total and full time employment. Over the previous 10 years, the level of full time employment in May has been, on average, 2.1 million below the previous year’s July level. If the trend is up, this July will be higher than last July. Last year the May number was 1.4 million less than July 2010. This year the May level is already ahead of the level of last July by 875,000. In fact, it broke last July’s level in April. The economy is a couple months ahead of schedule in affirming the uptrend in jobs. Friday’s jobs report was not the disaster that the pundits, the media, and the trading bot Al Gore rhythms seem to believe. Furthermore, the withholding tax data shown below suggests that there’s been a rebound since the April 12 date of the jobs survey data.

Full Time Employment, Stocks, and The Fed - Click to enlarge

Full Time Employment, Stocks, and The Fed - Click to enlarge

Stock market performance is at the mercy of the Fed (0r over the past 12 months the ECB, not shown), and employment follows them both. While at times there’s a lag, the linkage is undeniable.  However, over the past year, the SOMA has not reflected the impact of the Fed’s MBS purchases from the Primary Dealers, a subject which I cover in depth weekly in the Fed Reports. That graph of Fed purchases from the Primary Dealers has been rising steadily since last September.

By cashing out the dealers via these MBS buys, the Fed enables the dealers to buy more Treasuries. The next week, the Treasury spends that cash. That’s how Treasury debt is immediately transformed into economic activity. We all know that it’s fake activity and can only be sustained as long as the Treasury Ponzi remains intact, but the fact is that it does remain intact, and it’s resulting in slow but steady gains in employment, including full time employment over the past year. The game should continue until the Fed picks up the marbles, or until the other players run out of chips, which probably won’t happen as long as everyone is running away from the European gaming tables to play at the US casino.

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Average Weekly Earnings

Updated June 3, 2012

Average Weekly Earnings - Click to enlarge

Average Weekly Earnings - Click to enlarge

This data is shocking for May. After a strong gain in April, average weekly earnings collapsed in May. They had risen in April by 3.6% over the past 12 months. In May the annual change dropped to zero. Hourly wages actually rose 1% year over year, so the hourly worker seems to have done better than fee, commission, and management earnings. That’s probably an anomaly.

A 1% gain in hourly wages is still bad. While hourly wages were previously stagnating, they had been rising lately, with the average hourly wage up 2.7% in the 12 months through April. Hours worked were also running positive until May, when they dropped from 34.6 in May 2011 to 34.2 last month. So more people were working in May, but they worked fewer hours and earned less. Excess labor supply is slowly being absorbed, but suppressing earnings in the process. Labor supply absorption too slow to result in any overall improvement in the real unemployment rate.

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Job Openings and Labor Turnover Survey (JOLTS)

Updated May 8, 2012

This one’s a bit of a lagger. Current data is for March. Some mainstream journopundits were touting the “good news.” Of course we already knew March was strong from the payrolls data. This is like cheering a ballgame played in March, and your team just lost a big one in April, ok Dan Gross?  Cheerleader…

Job Openings and Labor Turnover (JOLTS) - Click to enlarge

Job Openings and Labor Turnover (JOLTS) - Click to enlarge

Like so many other data series in this class, this “recovery” is still just a cyclical bounce in a secular downtrend until proven otherwise.  Here’s the full Gummit report.

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Initial Claims Charts

Updated June 3, 2012

In the week ended May 26, actual claims increased by 14,700 including  the usual upward adjustment of 4,000 due to incomplete state counts at the time of  the advance release (current week). The week was weaker than the week ended May 28, 2011, when claims rose by 5,200 and it was also weaker than the 10 year average of an increase  of 6,900.

There’s a lot of week to week volatility in the data. Looking at a two week span, claims increased by 20,100 versus an increase of 19,900  in the same 2 weeks in 2011. Thus, this year first time claims were virtually the same as last year at this time. On the chart, the slope of the year to year line for this week has been remarkably stable since 2010. The annual rate of decrease in new claims continues to oscillate around the -10% axis. The latest data was down by 9.5%.

Initial Unemployment Claims - Click to enlarge

Initial Unemployment Claims - Click to enlarge

 

Plotted on an inverse scale, the correlation of the trend of claims with stock prices is strong. Both are driven by the Fed’s operations with Primary Dealers as covered weekly in the Professional Edition Fed Report. See also The Conomy Game, a free report. The fact that the claims trend is intact suggests that the current intermediate downtrend in stock prices should end somewhere between 1160 and 1200 unless there’s a significant change in the claims trend over the next 4-8 weeks.

Initial Unemployment Claims and Stock Prices - Click to enlarge

Initial Unemployment Claims and Stock Prices- Click to enlarge

 

As the number of workers eligible for unemployment compensation has trended upward slightly since 2009, the percentage of workers filing first time claims has continued to decline. Comparing the current week yearly line to the 52 week moving average, the trend appears remarkably stable.

Initial Unemployment Claims Percentage of Total Employed - Click to enlarge

Initial Unemployment Claims Percentage of Total Employed - Click to enlarge

 

The chart below gives a longer term perspective. We can see the trend improving but still above the bubble years with their 10 million fake jobs taking orders for new and unneeded condos and houses, building them, and taking and processing mortgage applications. This however does not account for the thousands of mortgage industry executives and Wall Street bankers  who should be in jail but who still have jobs, and still bribe politicians.

Initial Unemployment Claims Long View - Click to enlarge

Initial Unemployment Claims Long View - Click to enlarge

 

The following chart is a picture of reality versus the the Impressionist art of seasonal adjustments. Sometimes it represents reality to some degree, and sometimes it doesn’t. If you are following that data, at any given time you have no way of knowing which it is. One thing is certain–photo-realism it ain’t. There are ways to measure trends using actual data. One way is shown on this chart, which is to show the year to year line as of the current and corresponding date. Another is to view the annual rate of change as shown in the first chart above.

In the most recent weekly data, the SA data suggests that the data is weakening, with the SA claims trend rising since February. The arbitrary seasonal adjustment process has raised a couple of false alarms over the past 2 years with big counter trend pops early in the second half of 2010 and in the second quarter last year. This looks like another one.

Initial Claims, Seasonally Manipulated vs. Actual - Click to enlarge

Initial Claims, Seasonally Manipulated vs. Actual - Click to enlarge

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Federal Withholding Taxes

Updated June 3, 2012

This chart compares current withholding tax collections with last year on the same date. This year has been running ahead of last year in nominal terms. As of May 31, collections for the prior 10 business days were 7.5% greater than last year. A month ago, the edge was 6.8%.

Amazingly, in the week that included the week to which the BLS jobs data applies, which is the week including the 12th of the month, the year to year difference in the 10 day collections was -12%. For whatever reason, there was a drop in employment in that small window. Knowing that, we expected that the jobs data would be bad and said so on this page.

Federal Withholding Taxes Daily

Federal Withholding Taxes Daily - Click to enlarge

 

From May 18:

This chart looks at the year to year change in withholding in real terms, adjusted by the average weekly wage data from the BLS.  On this score, following a bulge in March that was probably due to mutual fund withholding for capital gains distributions, the comparison is now slightly negative in real terms which does not bode well for employment in May. The employment surveys are taken for the week which includes the 12th day of the month.  In real terms, adjusted for the increase in average weekly earnings, the current week was down 1.4% versus the same week last year. That does not bode well for the coming jobs reports for May.

 

Real Federal Withholding Taxes - Click to enlarge

Real Federal Withholding Taxes - Click to enlarge

With the big drop in average weekly earnings for May, I adjusted the data for the real % change in withholding accordingly. It makes the chart look much better than our last look, with a very strong gain since that spike down around the jobs data collection week. So I would have to say that unless things change radically over the next two weeks, the June data will come in as a massive upside surprise. This data through the next week and a half will be hugely important. It could signal a market turning point in early July when the June jobs data is released. Be aware, and beware.

These 2 charts are updated and analyzed weekly in the Professional Edition Treasury update  in conjunction with their implications for employment, and in particular  the Federal deficit and Treasury supply.

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