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Here’s How Blowout Jobs Numbers Are Like Termites

Low Wage Jobs Surge- Click to enlarge

Look at those wonderful jobs numbers. It’s like a beautiful house where, hidden from view, termites are quietly and insidiously, slowly but surely, eating away at its structural elements. Eventually the building just starts falling apart and must be condemned.

The seasonally adjusted headline number for nonfarm payroll jobs added in February was 295,000. The consensus estimate of Wall Street conomists had been for a gain of 240,000. That beat of 55,000 was enough to surprise the hell out of the market and not in a good way, as I had warned based on the weekly jobless claims and real time withholding tax data.

The actual month to month change in total payrolls in February was an increase of 900,000 (rounded). The 10 year average change for February is +670,000. The monthly change was better than the average and also slightly better than the gain of 740,000 in February 2014.

The actual, not seasonally adjusted data shows that the growth rate has been accelerating  since May 2014, rising from annual growth of 1.8% to a growth rate of 2.4% in February. I focus on the actual data because there’s no chance of being misled by the abstract impressionism of silly seasonal adjustments.

Nonfarm Payrolls- Actual- Click to enlarge
Nonfarm Payrolls- Actual- Click to enlarge

Actual real time withholding tax collections, which I track in the weekly Treasury update, were at a 12 year record growth rate in February. The blowout jobs number is no surprise to those watching the tax collections.

This last time the annual growth rate was above 2% was at the top of the housing bubble in 2006. Like the first time claims data this suggests that the US economy, distorted by years of ZIRP and QE, may again be at bubble max, and even may have begun to go over the hill.

That tech/internet jobs boom was driven by a technological revolution in computing and information that led to a bubble. The current jobs growth trend has seen disproportionate jobs growth in low wage service sectors. This “boom” was also helped along by a technological revolution in the extraction of oil and gas, as a price bubble that further stimulated the production boom. This boom created fewer direct jobs than the tech/internet bubble but, along with the financial engineering/asset bubble, it did help to create millions of ripple effect jobs, particularly in low wage services.

Low paying service sector jobs have consistently outpaced total job growth and taken an increasing share of new jobs as the US increasingly becomes a society of a few haves and more and more have nots. Since there’s no reason to assume that it will be reversed or even mitigated, this is a trend that can’t end well for the US. Like those subterranean termites, it will constantly eat away at real structural economic growth. Like termite damage it’s not apparent in the topline numbers, but eventually the structure becomes so unsound it just falls apart. We just don’t know when that will happen. It could take a few years or it could take generations.

Low Wage Jobs Surge- Click to enlarge
Low Wage Jobs Surge- Click to enlarge

The lowest wage service jobs grew by 1.34 million in the past 12 months, accounting for 40.5% of the total jobs growth. They have accounted for 64% of the new jobs created since February 2009. These are jobs where even two income families could not afford to purchase a house at today’s prices. There’s barely enough income for basic subsistence. It’s hardly the stuff that contributes to a dynamic growth economy.

In contrast with that, high paid technology jobs have risen by less than 400,000 since February 2009, according to BLS data. That is the residual effect of a bubble that ended 15 years ago. The housing industry has seen similar stagnation in jobs growth, a product of the last bubble. Once a bubble blow out, the lack of growth that follows in the bubble sector can last generations. This kind of fallout is probably coming to the oil and gas sectors and the businesses that support it. It’s probably coming also to the boiling bubbling financial services sector. It’s just a matter of time.

Meanwhile we move slowly and silently through a structural degradation that will ultimately result in a system that no longer functions for the majority. By the time that happens, we’ll all be too busy serving our feudal masters, begging for shelter and clothing and foraging for food to do anything about it. We’ll be too downtrodden to look back at history to assess the blame for the mess where it belongs–on the bubble promoting Fed, the plutocrats who benefitted from the money printing and Fed largesse, and the politicians and media PR people who sold their souls.

Sadly, politicians who publicly criticize the Fed today are idiots and clowns with their own narcissistic, self aggrandizing motivations. The establishment will effectively marginalize them just as it marginalizes and punishes its internal critics and whistleblowers, and willfully and successfully ignores its honest and determined critics.

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