The BLS today reported a seasonally adjusted (SA) gain of 88,000 in March nonfarm payrolls. This time economists were too optimistic, a trend reversal from their previous string of overly pessimistic forecasts going back to the middle of last year.
The consensus guess was for an increase of 192,000. The forecasters missed by more than what the BLS says is the statistical margin of error. This shows again that the field of economic forecasting is quackery by quacks, reported by willing fools. Once again, had they paid any attention to the real time withholding tax data published by the Treasury, they would not have missed by this much. No doubt they would have missed, because it’s a fictitious number that’s impossible to guess with regularity, but not by this much. This “miss” just emphasizes what a stupid game this is.
So the market had an immediate knee jerk reaction to the surprise, but predictably the Them turned it into a bullish cause. The clinically insane Fed heads who had been spewing garbage about reducing QE because the economy was improving, suddenly shifted into reverse. They hit the tape shouting QE NOW! QE INDEFINITELY! Insane people are so predictable.
The SA number compared with a gain of 759,000 in the actual, not seasonally adjusted number (NSA). Since this number is not seasonally finagled we must look at past years to judge whether it’s good, so-so, or lousy. Last year the March NSA gain was 901,000 . In 2011, it was 907,000. The 10 year average increase for March 2003 to 2012 was 733,000, pulled down by a negative year in 2009. This year’s number was worse than the last two years, and otherwise blah. A bigger problem was in the number of full time jobs, which I’ll get to below.
The NSA number is not massaged to represent an idealized curve with seasonal tendencies filtered out. As bad as the headline SA number was, the actual data was smack on the trend of the past year. The number of jobs has been growing at virtually the same rate for the past 18 months, around 1.5% per year, give or take a tenth or two. QE 3-4, which was announced in September, with the cash flow starting in November, has not changed the growth rate one iota.
So the truth is that nothing happened this month. There’s nothing profound or new here, and therefore no reason to think that the markets will change course. The selloff today was just another shakeout. The dealers need inventory and they got the news they needed to shake the low hanging fruit from the tree.
Nor is there any reason to think that the Fed will change policy any time soon. The growth in jobs is tracking population growth, therefore there has not been, and there won’t be, much reduction in the unemployment rate, other than the rate change caused by work force dropouts.
Meanwhile, the guessing that the Fed will end QE any time soon is absolute nonsense. It’s just what the Fed wants speculators to be thinking about, lest they go wild driving gold and energy prices higher.
The numbers above come from the BLS the Current Employment Statistics Survey or CES, a survey of business establishments. The BLS also does a survey of households. The household survey or CPS — Current Population Survey– sometimes tells a different story from the establishment survey. It’s also important in that it breaks out full time employment from total employment so that we can analyze that important metric separately.
The actual NSA number in the CPS usually increases in March. This year the number of persons reported as employed in March rose by 470,000 from February. That compares with a rise of 728,000 in March 2012 and 869,000 in March 2011. The average change in March for the previous 10 years was an increase of 560,000. This year was not only worse than the last two years, but also worse than the average.
The year over year gain in total employment under the CPS was 1.29 million or 0.9%. The growth rate has decelerated from 2.2% last October. Slowing employment growth is no longer a flash in the pan. After 6 months, it’s clearly a trend. The growth rates were actually stronger before the Fed started pumping money into the economy than since it settled the first of its QE3 MBS purchases in November.
Full time employment growth is also lagging. Government policies, particularly the Obamacare requirement that employers provide medical insurance for full time employees, are giving employers incentives to cut worker hours. That artificially inflates total employment at the expense of full time employment.
Full time employment in the CPS rose by 605,000 in March, which is typically an up month for full time jobs. Last year full time jobs rose by 1.33 million in March, and in 2011 they rose by 455,000. The 10 year average increase in full time jobs for March was 427,000, pulled down by a big negative number in 2009. Excluding that year, the average would have been 556,000. This year’s gain was better than that average and was better than 7 of those 10 years, but the market did better last year when the Fed was in a QE pause.
The chart above gives some perspective on how far total employment and full time employment fell in the first stage of the 2008-09 depression, and how much they have yet to recover.
Since September 2012, the annual rate of gain in full time jobs has dropped from 2.4% to 0.8%. With QE3 in late 2012, the Fed began adding more fuel to an engine that was running at its natural capacity. Job growth has not responded to the flood of money printing. While house prices and stock prices are rapidly inflating thanks to too many dollars chasing too few assets, job growth has essentially stalled. Full time job growth has fallen below the rate of population growth, which is around 1% per year. The Fed is blowing massive asset bubbles while the economy plods along at the same growth rate it would have had without all the extra cash flooding the system and distorting the financial markets and housing market.
The chart below shows that while the number of jobs is growing, the employment to population ratio has barely budged since the recovery began in 2009. The economy seems to barely be keeping pace with population growth. The full time employment to population ratio bottomed at 46% in January 2010, and it’s at 46.86% today. That compares with 46.96% a year ago. There has been no improvement in the full time jobs ratio in the past year.
The number of unemployed persons is growing right along with the number of people who do have jobs. It is a sad state of affairs for the US, but markets don’t care about that. They respond to the amount of cash in dealer accounts, which, thanks to the Fed, continues to grow. As long as the Fed continues to pump money into the markets, I doubt that slowing employment growth will matter much. In fact, most will see it as an excuse for the Fed to continue blowing a bubble.
[I cover the technical side of the market in the Professional Edition Daily Market Updates.]
Read Headline Claims Data Is Wrong But Actual Data Does Show Some Slowing
Permanent Employment Charts page – More charts and analysis
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