By now you are well aware that the seasonally finagled headline number for May nonfarm payrolls came in at an increase of 280,000, which crushed the Wall Street consensus. I find it mysterious that they were so surprised, considering how strong the withholding tax data was for the reference week as reported here every week, but we seem to be among the few who pay any attention to that.
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The actual, not seasonally adjusted data was also quite strong, coming in at a year to year gain of +2.24% which is right in line with recent months. The May monthly increase was 970,000. That compared with +920,000 in May 2014, and the 10 year average of +783,000 for May. This is the largest increase since the bungee rebound year of May 2010, when 1.1 million jobs were added.
The chart looks impressive. The trend is rising like a Saturn 5 rocket.
There are a few hitches in the story, however. There’s the wage distribution issue and the quality of jobs issue, which David Stockman and Alan Tonelson address admirably. And then there’s the issue of full time jobs. Full time jobs have finally increased past the level they were in 2008, with about 1 million more full time jobs today. But population has grown by 21 million. There’s a disconnect with nonfarm payrolls. Part time jobs have driven the moonshot.
Full time job growth has not kept pace with population growth. While there has been some increase, the ratio of full time jobs to population is still well below the post recession nadir.
Zirp and QE contributed to this by enabling and encouraging the cheap, fast, guaranteed money route of financial engineering and the executive stock option buyback scam. If businessmen had been forced to make rational investment decisions by normal interest rate and credit considerations, perhaps they would have chosen industrial engineering and real investment over financial engineering and corporate looting.
I and other Fed critics have been hammering on this theme for years. With the mainstream media and establishment economists at long last picking up the cudgel, the Fed is finally red faced enough to try and begin the interest rate normalization process. It’s almost certainly too late because the Fed made the financial system so dependent on the drug of free money. But the strong jobs numbers give them an excuse to start on that path. Thanks to the impossible situation the Fed has created, the path ahead is now fraught with peril. Markets addicted to free money and endless liquidity will be destabilized and the jobs quality and pay issue is likely to get far worse before it gets better, if ever.